Commons Sitting of 12 November 1982

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PETITIONS

  Sheppey General Hospital
  9.35 am
  Mr. Roger Moate: With your permission, Mr. Speaker, I beg to present a humble petition in support of the Sheppey general hospital in the name of Sheppey hospital watch committee and signed by over 7,500 residents of the Isle of Sheppey. It has the support of the Swale borough council and myself. The petition reflects the united determination of the island community to retain locally the widest possible range of hospital services.
  The petitioners pray
  that your Honourable House will request the Secretary of State for Social Services to instruct the Medway district health authority to maintain all existing facilities at Sheppey General Hospital in their present or improved state until the proposed new Swale hospital is completed.
  And, as in duty bound, your Petitioners will ever pray.
  To lie upon the Table.

  Disqualification of Clergy
  9.36 am
  Mr. Philip Whitehead: With your permission, Mr. Speaker, I beg to present a humble petition on behalf of my constituent the Venerable Robert Dell, Archdeacon of Derby. Archdeacon Dell petitions this honourable House to repeal the House of Commons (Clergy Disqualification) Act 1801 which was passed to effect the retrospective disqualification of a Member of this honourable House, the Rev. Horne Tooke, the great radical pamphleteer of those days. Archdeacon Dell draws the attention of the House to the fact that opinion within the Church of England has substantially changed in recent times as shown by a vote in the General Synod. The petitioners pray
  that your honourable House do repeal the House of Commons (Clergy Disqualification) Act 1801 and other relevant Acts and end the injustice of these laws.
  And, as in duty bound, your Petitioners will ever pray.
  To lie upon the Table.

  Adjournment Debates
  9.37 am
  Mr. Nigel Spearing: On a point of order, Mr. Speaker. I wish to draw your attention to matters that affect the rights of Back Benchers and the convention and usage of this House on which our ultimate liberties in this land depend. The motion before the House in a moment will be discussed on the Adjournment. Over the last 10 years there has been considerable discussion and difficulty about matters of order relating to EEC business.
  It had been hoped, following discussions, the changing of Standing Orders and various motions passed by the House, that we had reached a modus vivendi at least on matters of order, if not merit. One feature was that White Papers and Government motions relating to the EEC were almost always discussed on a substantive motion to which Ministers often added comments and which were amendable either by the Opposition or by Back Benchers.
  The motion before the House today was, I understand, tabled only yesterday. It is not amendable. The rights of both the Opposition and Back Benchers are being reduced. It is desirable, I submit to you, Mr. Speaker, that in future we should have not motions for the Adjournment of the House on White Papers but substantive and amendable motions.
  Mr. Speaker: I am much obliged to the hon. Gentleman for the way in which he has submitted his point of order. He will appreciate, as will the House. that this is a matter for the usual channels rather than for me. I have no doubt that what the hon. Gentleman has said will have been noted by those responsible.

BILL PRESENTED
  NATIONAL INSURANCE SURCHARGE
  Mr. Chancellor of the Exchequer, supported by Mr. Secretary Jenkin, Mr. Leon Brittan, Mr. Secretary Tebbit, Mr. Nicholas Ridley, Mr. Barney Hayhoe, Mr. Jock Bruce-Gardyne, Mr. John Wakeham and Mr. Peter Rees, presented a Bill to reduce the surcharge imposed by the National Insurance Surcharge Act 1976; And the same was read the First time and ordered to be read a Second time upon Monday 15 November and to be printed. [Bill 12.]

European Community
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]
9.39 am
The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): It has been customary for the House to have a regular opportunity to debate the developments in the European Community. The Government welcome this opportunity to continue that tradition. As the House is aware, the debate today is on the report that has been presented to the House dealing with developments in the Community in the period from January to June 1982. Most of my remarks will refer to that period, although it is natural that the debate may extend to more recent developments.
The period that the report covers is one of particular significance, especially in political co-operation, because during that period improvements in the machinery for political co-operation introduced during the British presidency were used to very good effect in a way that I am sure the whole House will welcome.
Perhaps the most striking evidence of this was the Community's response to the Falklands crisis. On the day of that crisis, a statement was issued by the Belgian presidency on behalf of the whole Community and of the Foreign Ministers of the Ten condemning the Argentine invasion. On 10 April, the Commission itself repeated that condemnation and thereafter the Community unanimously imposed a ban on Argentine imports and a total arms embargo. It would be difficult to exaggerate the diplomatic significance of that unprecedented response by the Community in those crucial early days of the crisis, and I am sure that the whole House will agree that it made a significant contribution to Britain's negotiating and diplomatic position in the early stages of the crisis. Nor do I believe that that initiative was seriously damaged by the subsequent decision of Italy and Ireland not to reaffirm support for the import bans, as both countries emphasised their determination not to undermine the actions of the Community, a statement which was appreciated by the Community as a whole and certainly by the United Kingdom.
Further important evidence of the value of political cooperation and of British membership of the EEC was seen last week when the United Nations voted on the Falklands issue. With the single exception of Greece, the Community as a whole abstained on the Argentine resolution, at a time when some of our other allies felt unable to do so. That, too, showed the importance of Britain's membership of the Community in terms of the diplomatic initiatives that are occasionally required.
Political co-operation was shown in other spheres, too. For example, the Community issued a co-ordinated response condemning the imposition of martial law in Poland and subsequently agreed on certain economic measures against the Soviet Union as well as on the provision of humanitarian aid which was greatly welcomed by the people of Poland. Clearly, therefore, there have been important developments in political cooperation and I am sure that the House will welcome them.
During the period covered by the report, certain more serious and harmful matters arose from the point of the view of the United Kingdom. I refer particularly to the meeting of the Agriculture Council in May this year at
770
which, contrary to the wishes of the United Kingdom and without unanimity having been achieved, the council voted to increase agricultural prices. The United Kingdom has made no secret of its serious concern about the developments that occurred at that time. My right hon. Friend the Foreign Secretary has left our partners in no doubt about the British view that if any member State considers that important interests are at stake discussion must continue until unanimous agreement is reached.
As the House will recall, at a meeting some time after that decision by the Agriculture Council, not only the United Kingdom but two other member States agreed without any reservation, and two more agreed with only minimal reservations, on the need for what is known as the Luxembourg compromise to continue as the basis on which Community decisions are reached. It is important and useful to remember that when that compromise was first reached in 1966 France was the only member State which sought to ensure that there was unanimity in such decisions. On this occasion, five member States—half the Community—took a position similar to that of the United Kingdom. I am sure that the House will welcome and support that.
At the time when those decisions were taken, a decision was also taken on the United Kingdom refunds for 1982. We may take some satisfaction from the fact that during the three years since the Government came to office there have been some £2,000 million worth of refunds to the United Kingdom as a result of the successful negotiations carried out by my right hon. Friends in a way that has been of substantial benefit to this country and which compares most favourably with the Labour Government's attempts to ensure a proper determination of Britain's contributions to the budget. The sums that have already been received in refunds are quite dramatic and have already made an important contribution towards ameliorating some of the difficulties that have arisen in regard to the Community budget.
Mr. Hugh Dykes: With regard to the Luxembourg compromise and developments in that respect, does my hon. Friend agree that there is a danger of practical and operating contradictions arising that will make life difficult for member States in future? For instance, we are now trying to tell the Danes that they are wrong to resist the fisheries plans that have been promulgated. Does my hon. Friend agree, therefore, that adopting the unanimity principle on major issues is not always in the interests of all member States? Had there been majority voting on the fisheries question, that decision would now be through and would include Denmark.
Mr. Rifkind: My hon. Friend is not yet entitled to put forward that premise as there has been no majority decision on the fisheries dispute. The Community has reached no decision precisely because Denmark has so far felt unable to support the view of the other nine States. The position there is clear. Unfortunately, the Community has been unable to reach a decision and there has been no vote on the matter. If, as we very much hope will not be the case, the Danes find it impossible to support the other member States, the other nine States may have to take their own national measures, but those measures will not apply within Danish territorial waters and a Community vote will not have been taken. Therefore, although one can see

771
certain superficial similarities, the important question of Community decisions being taken by majority vote on issues of crucial importance to an individual member or members does not apply in this instance. It is important to emphasise that.
We are anxious that substantial and early progress should be made in the resolution of the long-term problem of the Community budget. The Commission is expected to table its proposals early next week and the Foreign Ministers will have the opportunity to discuss them at their next meeting, on 22 November. We cannot emphasise too strongly that the health and dynamism of the Community require an early solution to the problem that will be satisfactory not only for the United Kingdom but for all our partners in the Community. It is in the interests of the Community as a whole that the problem be resolved in the very near future if the health of the whole Community is to be ensured in the way that we all wish.
The United Kingdom has never sought to suggest that the Community should be a community of partners in which every State receives back exactly what it puts in. If any general principle of redistribution is to apply, clearly it should be on the basis of redistribution from the more affluent to the less affluent members. That is a point of equity with which few people would disagree.
I mentioned the need to preserve dynamism and capacity for change in the Community. An important aspect of this for the United Kingdom Government and, I am sure, for most other Governments is the accession of Spain and Portugal. Discussions and negotiations have been proceeding on this and it is important that those countries should be able to enter the Community as soon as practicable. That is true not only from the point of view of the health of the Community as a whole but also in order to give whatever support the countries of Europe can provide to strengthen the democratic nature of the Spanish and Portuguese Governments in recent years. Therefore, we believe that their accession to the Community is an important political objective which I hope will commend itself to both sides of the House.
Mr. Nigel Spearing: The Minister touches upon one or two fundamental dichotomies. If either of those territories joins the EEC, it will perhaps openly be giving up some of its sovereignty. If the requirements of the EEC cause internal stresses which by definition cannot be met by those countries' own democratic institutions, will not the result be to weaken rather than to strengthen the institutions of democracy that we are so glad to see, especially in Spain? Would not the EEC therefore be a threat rather than an encouragement to the internal democracy of those new member States?
Mr. Rifkind: That is an interesting theory, but it has not been adopted by the democratic parties of Spain and Portugal, the overwhelming majority of which believe that the democratic roots that have taken such a firm grip would be strengthened and not weakened by their membership of the world's greatest democratic community of nations. It is difficult to understand the logic behind the remarks of the hon. Member for Newham, South (Mr. Spearing). If they are logical, I recall that logic was once defined as the art of being wrong with confidence, and the hon. Gentleman would seem to be living proof of that phenomenon, certainly in this respect. It is in the political as well as the economic interests of Spain and Portugal that their membership should be endorsed.
772
My hon. and learned Friend the Minister for Trade will be replying to the debate, but perhaps I can comment briefly on the Community's trade relations with the outside world. The House will have welcomed the agreement between Europe and the United States of America on the export of steel products. The problem could have seriously damaged the British steel industry and it is a matter of some satisfaction that the agreement not only maintained a market of about £50 million for the British steel industry, but preserved Britain's share of the market in steel products exported to America. That solution to the problem could not always have been taken for granted.
The Community must try in the weeks and months ahead to emphasise the values and virtues of the free trading system that has grown since the end of the Second World War. Some hon. Members, especially in the Labour Party, hanker after protectionism and import controls, not only in specialised areas but as a wider solution to our economic and social problems. However, they should remember that the lurch into protectionism in some countries in the 1930s aggravated, if not seriously damaged, their economic prospects, whereas the liberalisation of trade in the 1950s under the GATT process coexisted with unprecedented prosperity for industrialised countries. If that principle was true in the past, we have no reason to doubt that it will be true in the future. We are anxious to have equal access for Community products in the outside world. There is room for improvement in that area, but the principle of a free trading system throughout the world is essential to our interests and to those of the Community.
As to trade within the Community, for many years free trade in manufactures has grown. It is a central part of the Community's activities. Many in the United Kingdom and elsewhere believe that there is a strong argument for better progress to be made on achieving free trade in the service industries. They are an essential part of our economy and employ almost half our work force. There is no reason why freer movement in services should not be part of the Community's normal activities.
Trade is an essential part of the Community's economic activities, but we should not ignore the important contribution that the Community can make to wider economic issues, including unemployment. Both the social fund and the regional fund have been of considerable benefit to the United Kingdom during the period covered by the report and since British accession. Britain is the second largest recipient of assistance from those funds, which should be welcomed by the House. There is a powerful case for increasing the proportion of Community expenditure in those categories and for widening the range of areas for which application can be made.
There is room for a more European approach to industrial co-operation and in specialisation of the contribution that countries can make towards the needs of industry. Specialisation, where it is appropriate, could ensure a complementary industrial strategy rather than one that is mutually damaging. There has already been progress in the man-made fibres industry and we could make significant progress in the new technological industries.
There is strong agreement on both sides of the House that we must reform the common agricultural policy, both in the interests of the United Kingdom and for the good of the Community. However, we should recognise the

773
progress that has been made since the Government came to office. In 1979, about 80 per cent. of the Community's expenditure was on agriculture. That figure is now 66 per cent., and we hope that the downward trend will continue. The health of the Community depends on it. The common agricultural policy has benefited some sectors. It has been good for the farmers, it has stabilised prices and it has helped us to achieve greater self-sufficiency in some temperate products. However, the structural imbalances with surpluses and the expenditure incurred in their disposal are an unattractive feature of the system. The Commission has said that reform is necessary.
If we consider the range of Community activities, we see an organisation that has retained its health and dynamism but that still has serious problems that must be resolved if its future health is to be ensured. The Government believe that since the Second World War the European Community has been the most stimulating and imaginative development in Western Europe this century. It represents a welcome co-operation among the democratic States of Europe.
Mr. Christopher Brocklebank-Fowler: I note from a rather anodyne report in The Times that the Under-Secretary of State was present at the meeting of the development committee in Brussels last week. What are the Government's initial comments on the Pisani proposals?
Mr. Rifkind: Mr. Pisani has prepared a substantial memorandum that shows his view of the way in which the Community's development policy should proceed. There was a general debate on the proposals. Most member States welcomed some practical proposals and believed that they deserved further detailed study and could lead to significant improvement. There was almost unanimous agreement that the document was unrealistic in its expectation of growth in the sums available for development. The delegations present believed not only that it was not realistic but that we should emphasise the ways in which the existing development policy could be improved by a better appreciation of priorities, especially in our food strategy. However, there was widespread support for some of Mr. Pisani's proposals, which were held to be a significant progress.
The report before the House marks an important period in the development of the Community, especially in political co-operation and budget reforms. It is a sad fact that, as the Community is now co-operating politically in the interests of the Western world, the Opposition should still wish Britain to withdraw. That policy would do untold damage to our economic prospects and to employment.
However, not all Opposition Members feel that way. I notice that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said in Strasbourg earlier this year:
"The consequences of abandoning membership are not being exposed adequately in London … I think Britain's interests are best served by being in the Community. I want to see more debate in the party. If you ask what form of agricultural support we would use if we left, or what would be the loss in jobs you do not get a clear answer".
It would be delightful to hear more speeches like that from the Opposition Front Bench in the House. Perhaps we shall hear such a speech later this morning.
Mr. Austin Mitchell: Will the Minister say what advantage for jobs and industry in this country is provided by a deficit in manufacturing trade last year with the Six of £5½ billion?
Mr. Rifkind: About 2½ million people employed in this country are involved in trade with other Community countries. That represents about 43 per cent. of our overall trade. To suggest that the interests of those 2½ million people employed in manufactures and other products that are traded with the Community would be advanced in some way by our withdrawal from the Community is a most shortsighted approach and contrary to the interests of the hon. Gentleman's constituents.
Mr. Keith Best: Will my hon. Friend invite the hon. Member for Grimsby (Mr. Mitchell) to come to Wales, where he will see the manifestation of the desirability of Britain being within the EEC, not only in the way that my hon. Friend said, but also in inward investment? Many firms, particularly from Japan and America, are there precisely because we are part of the EEC. They make it very clear that, were we not inside the EEC, the desirability of being in Wales would be severely prejudiced.
Mr. Rifkind: My hon. Friend is right. Of the total American international investment in the Community, about 60 per cent. is within the United Kingdom. That would not have happened— nor will it continue to happen—if our market in the rest of the Community were not open. The United States and Japan and others who have invested in the United Kingdom have made it abundantly clear several times that Britain's membership of the Community was one of the major factors in persuading them to come here. The policy enunciated by the hon. Member for Grimsby and his hon. Friends does a great disservice to their constituents. After all, no less a person than the right hon. Member for Sparkbrook clearly shares my view.
The interests of the United Kingdom, as evidenced by developments over the past 12 months and the period covered by the report, continue to point firmly towards Britain's membership of the Community. Successive Governments have pursued that policy, and in my view it is overwhelmingly in the interests of the British public that that policy should be maintained.
10.2 am
Mr. Guy Barnett: First, I apologise for the absence of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), who wished to take part in this debate. He is attending an important meeting in France today, and it is therefore my job to take his place.
First, I thank the Minister for his review of the document before the House as it is seen from the Government's point of view. His review struck me as a bland appreciation of the situation. I shall cover many of the subjects with which he dealt, but I shall take a somewhat different view of some of the issues being debated.
When I spoke in the last European Economic Community debate on 21 July I said that things had gone remarkably quiet on the Luxembourg compromise. The hon. Gentleman mentioned it and gave us the Government's point of view, but to all intents and purposes this quietness continues, and is certainly

775
reflected in the document. Despite what the hon. Gentleman said, six months after 18 May we still do not know what, if anything, the Government intend to do to guarantee the right of veto. It is a much more important matter than the hon. Gentleman made out. Even before we entered the EEC, the Labour Opposition argued strenuously that the right of veto should be guaranteed by law. The Government's chief negotiator at the time, the right hon. and learned Member for Hexham (Mr. Rippon), assured us that that was not necessary, and he was put in an embarrassing position by what happened on 18 May.
The referendum propaganda in 1975 repeated the assurances. They must have convinced many people in this country and helped to secure the majority that was obtained for the "Yes" vote for continued EEC membership. In this connection I refer to a statement by a distinguished lawyer, Lord Wedderburn of Charlton. In The Guardian of 25 May he said:
"A referendum majority obtained on the basis of such misstatements clearly can have no validity, just as a treaty, though concluded with consent, 'is nevertheless not binding if the consent was given in error' ."
The source that he used for that interpretation was Oppenheim's International Law. Do the Government agree with that interpretation? Two trained lawyers are present on the Government Front Bench, and I should be interested to hear their comments on Lord Wedderburn's remarks. This is perhaps a more crucial issue than the Government have implied, either in the document or in the Minister's speech.
The Minister spoke of trade. The House will be aware of the disturbing fact that in the first half of this year—for the first time for centuries, I believe—Britain became a net importer of finished manufactured goods. That is a significant and tragic landmark in the progressive deindustrialisation of our country. Investment in manufacturing industry was 3 per cent. lower than in the previous half-year. In June of this year employment in manufacturing industry was 20 per cent. lower than it had been three years before, soon after the Government came to power. In that period 1·4 million jobs were lost in manufacturing. Some traditional British industries, such as metal manufacturing, have lost as much as one-third of their work force. It is against that background that we should assess our membership of the economic bloc to which we belong.
In table 2, at the back of the document, we see that in the first half of this year we had a deficit of £2·4 billion in trade in manufactured goods with the rest of the EEC. However, the table does not say that in our trade in manufactures with the rest of the world we had a surplus of £2·7 billion. That is what allowed us to keep our head above water in trade in manufactured goods, as opposed to our trade in finished articles, where we slid into deficit. Will the Government face that serious fact and the implications of it? Earlier this year there were signs that they were doing so.
The Financial Times of 30 April, in noting the weakness of the EEC export market for us, said:
"That the overall volumes have remained as they have reflects the diversity of the British export markets. Indeed it was noticable that during his last weeks as Trade Secretary, Mr. John Biffen had begun to argue the case for the maintenance of this diversity, in contrast to the Government's more usual stance of stressing the importance of the EEC market".
If my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) has a certain divergence of
776
view, perhaps the Lord President of the Council has, too. Perhaps the Minister for Trade, who is to reply to the debate, will comment on the accuracy of the reports.
Do the Government recognise that there is little possibility of export growth in the virtually stagnant EEC market? Is the Minister not aware of the facts that I have quoted and their implications for trade policy? Will he clarify the Government's attitude towards the forthcoming GATT negotiations, in which he has been heavily involved?
When the Lord President of the Council replied to the debate on Wednesday, he stressed the importance of trade for Britain. His remarks were reflected by the Minister today. The right hon. Gentleman said that
"an open trading system is good for the general competitive climate in the United Kingdom. It benefits not only the high street consumers, but manufacturers who benefit from access to competitive, well-designed industrial components and supplies."
The Opposition believe, perhaps naively, that it would be better if competitive, well-designed industrial components and supplies were produced in Britain and not abroad.
The Lord President went on to say that
"we should not ignore the wider aspects of this issue. The alternative to open trade is the crippling regionalism of the 1930s, with its fortresses of tariffs and quotas and its downward spiral of trade … We have to make it clear that the open trading system has to be supported on a general and not a highly selective basis."—[Official Report. 10 November 1982; Vol. 31, c. 629.]
Those comments are bizarre. Was the Lord President speaking in code? The phrase "crippling regionalism" could apply to the EEC today. The phrase
"fortresses of tariffs and quotas"
is a brilliant description of the common agricultural policy, which the Government now appear to support enthusiastically. What better description than "downward spiral of trade" is there for Britain's current relationship with the EEC? That is true of the EEC as a whole, which has suffered from a falling trend in its growth rate during the past 20 years and is now near stagnation. I repeat the Lord President's words:
"The open trading system has to be supported on a general and not a highly selective basis."
How, then, do the Government support the CAP, the multi-fibre arrangement, the current deal with the United States on steel and the host of other protective measures carried out on an EEC basis?
Sir Anthony Meyer: Am I right in assuming that the hon. Gentleman is advocating, as the policy of the Labour Party, that Britain should embark upon an autonomous regime of much lower tariffs against the remainder of the world, including the newly industrialised nations, rather than adopt the present common external tariff of the EEC?
Mr. Barnett: I made no such implication. The Government mouth free trade slogans while supporting ad hoc panic measures of protectionism. The Government's policy on trade, which is central to their relationship with the EEC, appears to be an incoherent mess. That protectionism is implemented not by the British Government in the interests of British industry—the Opposition would approve of that—and to protect the British people, but by the EEC at the behest of countries whose industries are doing the most damage to Britain.
The Minister for Trade (Mr. Peter Rees): As I am to reply to the powerful points being raised by the hon.

777
Gentleman, will he clarify one matter? Does he refer to the multi-fibre arrangement as an ad hoc panic measure of protectionism?
Mr. Barnett: No, I do not think so. However, that applies to steel. I suppose one could argue that the CAP is hardly an ad hoc panic measure. However, I am sure that the hon. and learned Gentleman understands my point. Large and broad statements about the value of free trade have been emanating from Government sources, but they are doing something that is far removed from the principles of free trade. That matter should engage the right hon. and learned Gentleman's attention. I am glad that he is to reply to the debate. Perhaps he could elucidate some of the mysteries that I mentioned.
The Minister spoke with warmth about the negotiations on steel. He regards that as one of the achievements of the Community. My hon. Friend the Member for Walton recently pointed out from the Opposition Dispatch Box that 67 per cent. of steel imports come from other EEC countries, which means a massive loss of jobs in Britain. The EEC has no mechanism to correct such an imbalance and will act only on imports from outside the EEC. The crisis in the British steel industry is a reflection of the crisis in British industry as a whole. For every car that British Leyland does not produce, the British Steel Corporation loses a market for one tonne of steel. For every foreign car imported, one tonne of foreign steel comes with it.
The present responses from the EEC and the Government only tinker with the problem. The only alternative is the proposals from the Opposition in their alternative economic strategy. It is the only way to tackle the problems in heavy industries such as steel, and the manufacturing industries. However, those policies cannot be implemented while we are bound by the Treaty of Rome.
The Minister properly mentioned agriculture. The mandate of 30 May 1980 laid down the guidelines for EEC agriculture. It said that the EEC should aim at
"a price policy based on a narrowing of the gap between Community prices and prices applied by its main competitors in the interest of competitiveness and a hierarchy of prices designed to improve the balance of production."
I am sure that I do not need to remind the Minister that that is in line with Conservative policy. The Conservative manifesto of 1979 stated:
"We believe that radical changes in the operation of the common agricultural policy are necessary … We will insist on a freeze in CAP prices for products in structural surplus. This should be maintained until the surpluses are eliminated."
That commitment has clearly long been forgotten.
The Government have pursued a deliberate dear food policy, which has resulted in record surpluses. There is now a growing grain mountain of more than 1 million tonnes. This year the EEC will spend £2·8 billion on subsidising exports, £1·4 billion on disposing of surpluses within the EEC and a further £1 billion on storage and administration.
Some hon. Members may have read the article on 30 October in the journal of the National Farmers Union, Farmer and Stockbreeder, which described the visit of Mr. John Cherrington to a grain silo in Southampton. He watched a ship being filled with grain at the rate of 1,000 tonnes an hour. He said:
"Last year every tonne of wheat exported from the United Kingdom was carrying a subsidy of around £57 … So the
778
5,000-tonne shipload I watched visibly getting lower in the water would be taking away £285,000 of Community money in the shape of export restitutions."
The Government have done their best to hide such facts from the British public. On 15 March The Daily Telegraph stated:
"Already the propaganda campaign has begun to minimise the impact of food prices in the shops of the coming EEC farm price review."
That review, when it was completed, proved to be of record proportions. That condemnation came from The Daily Telegraph, of all newspapers—a newspaper edited by a former Conservative Minister. It highlighted the blatant scandal of the Government's agricultural policy.
With regard to agriculture, the White Paper has two omissions. First, there is no mention of the poultry industry, yet it has been announced that 1,700 jobs in the industry are to be lost at Buxted poultry factories at Hartlepool, Gainsborough and Buxted. The contentious issue of poultry imports into the United Kingdom must have been under continual discussion throughout the first six months of this year. It is not mentioned in the White Paper and I shall be grateful if the Minister of State will refer to it in his reply.
The second omission relates to the first. There is no mention of the plight of agricultural workers in Britain. Despite the Government's enthusiasm for the common agricultural policy and their determination to support an unlimited amount of overproduction and waste, few benefits accrue to the farm workers. Over the last decade farm workers have achieved enormous increases in efficiency and productivity, yet today 40 per cent. of them are down at the poverty level, where they can claim supplementary benefit, and 11,000 farm workers are in receipt of family income supplement. In 1980 the figure was only 6,500. If British agriculture is really doing so well under the EEC, why is that being allowed to happen?
Mr. Brocklebank-Fowler: If the hon. Gentleman has been advocating a return to cheap food policies, which are themselves a reflection—I am sure he will agree—of the inability of the poorest countries to buy the food that they need at the proper price to feed their people, and that he accepts that such policies mean going outside Britain for food, how can he possibly have the gall to speak on behalf of the farm workers, many of whom I represent, and say that his party will play any part whatever in ensuring that they get a better standard of living and increased wages? The two points do not match up with each other and it is wrong of the hon. Gentleman to pretend to represent British farm workers in putting forward that kind of food policy.
Mr. Barnett: The farm workers of Britain did a great deal better under the previous system of agricultural support than they appear to be doing now.
Mr. Brocklebank-Fowler: We are talking of the future.
Mr. Barnett: Yes, and it will probably be the case also in the future. The hon. Gentleman will know that one of the consequences of the common agricultural policy, and the surpluses that it dumps on the world market, is to make it extremely difficult for fanners in the Third world, in which both he and I are interested, to produce at an economic level. That is one of the causes of the difficulty that Third world counties have in producing at sufficiently high levels.
Mr. David Stoddart: Is it not also the case that the common agricultural policy has resulted in a large change in our traditional agricultural base? Is it not the case that the people who are doing extremely well out of the CAP are large grain farmers? That has resulted in much larger farms and in higher land prices, which in turn have made it much more difficult for smaller farmers to thrive—indeed, many of them have gone out of business—and virtually killed the traditional mixed fanning on which our agriculture was based.
Mr. Barnett: I entirely agree with my hon. Friend. One of the consequences of the common agricultural policy has been to distort the pattern of British agriculture in favour of the large-scale grain producer, at the expense of the smaller or medium-sized mixed farm which is traditional in Britain.
Mr. John Major: If the Opposition are so much in favour of encouraging the small farmer, why are their spokesmen so opposed to the agreement between the Country Landowners Association and the National Farmers Union, which might encourage the letting of small farms?
Mr. Barnett: I am afraid that I cannot answer questions of that sort in a debate of this kind. The hon. Gentleman must address his questions to a spokesman on agriculture rather than to a spokesman on the EEC. The hon. Gentleman's question has limited relevance to the subject of the debate.
The Minister mentioned political co-operation, which is clearly a subject close to the Government's heart. Most of the victories that the Government claim for political cooperation have very little substance. The Minister made the best that he could of the Falklands issue. I still find it impossible to see what argument there is for assuming that it was because of our membership of the EEC that other members of the EEC gave us such support as they did. Indeed, he and I know perfectly well that the Government received tremendous support from the Commonwealth, where there is no supranational authority. Indeed, as the Minister knows, the supranational authority of the EEC was irrelevant to any political co-operation that may have taken place at the time of the Falklands conflict.
The Government appear sometimes to flirt with the Genscher-Colombo proposals. In the White Paper we are told that the revised text of Genscher-Colombo
"was still, however, subject to a number of reservations. A number of differences remain to be resolved."
Work is continuing. I shall be grateful if the Minister will tell us about those reservations. What is the balance of opinion within the EEC concerning Genscher-Colombo? Do the Government categorically reject any moves towards creeping federalism, which is characteristic of the Genscher-Colombo proposals and earlier schemes of that sort?
The truth is that the present set-up of the EEC is at odds with true political co-operation. While Europe and the world are confronted by problems of East-West tension, the erosion of detente, the failure of the North-South dialogue, and the prospect of starvation facing hundreds of thousands in the Third world, the EEC continues to argue on budget contributions, farm prices, fisheries, aids to industry, the running down of the steel industries and a host of other problems. Most of those problems would
780
be better settled in a national context, and the waste of time, resources and goodwill under the present system is tragic.
The Labour Party, in committing itself to withdrawal from the EEC, is not proposing that Britain should turn its back on Europe. On the contrary, we in the Labour Party are committed to fulfilling Britain's international obligations to countries throughout Europe and beyond. Free of the European Economic Community, we shall play the fullest possible role in tackling the terrible dilemmas that face the world as a whole.
I was interested to note that last week the French Foreign Minister, Mr. Cheysson, said that if Britain left the EEC France would wish her good luck. We believe that most other EEC countries would take the same mature attitude and welcome the new role that a Labour Government would be able to play in the context of real European co-operation, which would be Europe-wide.
The Minister also dealt with the EEC budget. On the critical question of Britain's contribution to the EEC budget, months of negotiations ended in an unsatisfactory short-term agreement. As many hon. Members know, the Government have recently published an excellent pamphlet called "The Budget Problem". One could make a good contribution to a debate in the House simply by reading out the pamphlet verbatim, since it is rather more forthcoming on the issue than Government spokesmen often tend to be. One reads, for example, that
"The Community Budget results in large transfers of resources between member States, following no justifiable pattern … The transfers are a real cost to the British economy, nearly as large as Britain's total aid programme."
That is not a very good reflection on the EEC or on our aid programme.
As a Government publication, it naturally does its best to be kind to the EEC. It says:
"Today the lion's share of Community expenditure still goes on agricultural support, despite encouraging progress in developing other Community programmes".
That is followed by a graph which spells out that "encouraging progress". The pamphlet says that more than 75 per cent. of the EEC budget goes on agriculture. The cost of administration and collection of own resources funds exceeds the regional fund and social fund combined.
What do the Government intend to do about that? We hear that they are keen that there should be a better distribution of resources, but apparently no action has been taken, because the document says:
"Britain is not challenging the agreed rules of the Community".
It puzzles me. The document adds:
"Britain fully accepts the basic principles of the CAP as laid down in the Treaty."
Reform is wanted, of course, but
"that can certainly be done without altering the fundamentals of the CAP."
After 10 years of EEC membership, most of us have lost any hope of a serious reform of the CAP. The document should have received much less bland treatment from the Under-Secretary.
These debates are important, because there are a host of issues on which our interests find us out of line with the rest of the EEC. That is why, after 10 years of membership, the Labour Party is fully committed to withdrawal from the EEC. It is officially and overwhelmingly committed to withdrawal. It is the policy of the party and it will be carried out by the next Labour Government.
10.31
Mr. John Major: Before dealing with the substantive matters that I wish to raise, I should like to take up some of the points made by the hon. Member for Greenwich (Mr. Barnett) in his accustomed lucid manner.
The hon. Gentleman spoke of the CAP—that perennial whipping boy. It is not my purpose to defend all the intricacies of the policy. No doubt it has many absurdities, but no one can deny that over the past two decades it has fed abundantly and well about 260 million people in Europe and has provided surpluses for those who live beyond Europe.
Mr. Spearing: Is the hon. Gentleman suggesting that we were not at least as well fed under our agriculture system between 1965 and 1973?
Mr. Major: If the hon. Gentleman had waited a moment longer he would have found that I intended to refer to our previous system. I do not accept his premise, at least in terms of people being well fed throughout Europe, as opposed to in the United Kingdom.
It is surely implicit in the Labour Party's policy of withdrawal from Europe—though it is unlikely that the party will ever have the opportunity to put it into practice and even more unlikely that it would do so—that this country would return to a system of deficiency payments. We have had that system before, but what would be the cost of returning to the policy of cheap food, which is so beloved of many hon. Members—though I am not sure that it is a desirable policy in the long term—and sustaining the level of agricultural production that we need?
The Opposition spokesman on agriculture, the hon. Member for Renfrewshire, West (Mr. Buchan), has tried to cost the exercise and his estimate is about £1,000 million a year. Most dispassionate observers who have attempted to cost the exercise have arrived at a figure of about £2,000 million a year. As the representative of a constituency with a large farming interest, I am bound to wonder whether sums of that magnitude would be readily available from a future Labour Chancellor.
I suspect that one corollary of withdrawal from Europe and a return to deficiency payments could be a substantial cut in farm production in a world that, in total, is short of food. I cannot accept that that is a desirable posture for this country.
Mr. Richard Shepherd: Even if we accept my hon. Friend's premise that agricultural support of £2,000 million a year would be necessary to ensure the production levels that we need for security of supply, how does my hon. Friend reconcile that with the statement of our right hon. Friend the Minister of Agriculture, Fisheries and Food earlier in this Parliament that the cost to the British consumer of the present arrangements in Europe is about £3,000 million a year? Would it not be better to have the additional £1,000 million invested in our industry rather than spread around Europe?
Mr. Major: My hon. Friend is taking an excessively nationalistic and short-term view of the prospects for both reform of the CAP and European production.
Mr. Austin Mitchell: Give 'em the money, Barney.
Mr. Major: I understand the worries of the hon. Member for Grimsby (Mr. Mitchell) who has just returned to the Chamber. However, if he listens he may learn something to his advantage.
Mr. Austin Mitchell: Will the hon. Gentleman give way?
Mr. Major: No. Perhaps I will give way to the hon. Gentleman if he stays a little longer.
A curious regular feature of our debates on the EEC has already been illustrated today. They tend to attract only those who are most hostile to the EEC or those who are most warmly in favour of it.
Mr. Richard Shepherd: Some of us are in the middle.
Mr. Major: Contrary to the view that Labour Members may have formed from what I have said so far, I am in neither camp and I may, therefore, infuriate both sides. Emotionally, I am an agnostic on the subject of a united Europe. I have taken that position ever since I first considered the matter deeply. I have no long-term vision of a federal Europe and I do not wish to diminish the languages and cultures of the member States.
Like many other hon. Members, I am an unrepentant nationalist, in the sense that my first instinct is for the British interest in Europe and beyond. I would not willingly shed one particle of our unique traditions and habits to be part of a united Europe. Therefore, I am not by instinct a European, but I am a committed European by logic, because I believe that it is in the interests of the United Kingdom for us to remain a member of the EEC. I take seriously the general economic arguments for membership of the Community and the political arguments that follow that. My hon. Friend the Under-Secretary was right to mention political co-operation.
I have no doubt that the advantages of EEC membership far outweigh the disadvantages. Of course, there are always hon. Members who argue for withdrawal from the Community. We have a small galaxy of them with us today and I have more respect for those who openly advocate withdrawal than for those who do so under the mask of seeking reform.
Of course we could survive if we left the Community.
Mr. Stoddart: We would thrive.
Mr. Major: Of course, we could survive without the huge market that Europe offers us and without the huge investment that we obtain primarily because we are a gateway to the European market. That represents 21 per cent. of all investment in the United Kingdom.
If we left the EEC we would have returned to us the small measure of sovereignty that some of my hon. Friends are so sure that we have surrendered, but what else would we gain? I believe that we would gain no more than an unfettered freedom to move into decline in our own way and at our own pace, but we would move into decline.
The White Paper shows the scale of our trade with Europe, not just in manufactures but in all aspects of our economy. Those who argue for withdrawal must accept that there is no alternative market of the same size as that to which we currently have untrammelled access.
Mr. Stoddart: What about the rest of the world?
Mr. Major: The hon. Member for Swindon (Mr. Stoddart) is impatient. If he waits he may learn something.
We cannot replace our market in Europe. Nowhere else in the world could we find 300 million customers who are

783
so well paid, geographically so well situated and so available to the British trader. The hon. Gentleman asked about the rest of the world. If he cares to look carefully at the figures for our traditional markets in the Far East, Australia and so on, he will realise that those markets were moving away from us 20 to 25 years ago, and have continued to do so. If we cannot compete with the Japanese in our own backyard of Europe, how does he believe that our manufactures can compete with the Japanese in their backyard of the Far East? The reality is that we cannot and for that reason among others the European market is critical for us.
Mr. Guy Barnett: What makes the hon. Gentleman believe that withdrawal from the EEC would result in our ceasing to trade with Europe?
Mr. Major: I do not suggest that. However, I do not believe that we would have the free and uncluttered access to the European market that we have now. We would undoubtedly face a tariff barrier of some sort. As the Opposition so frequently point out, our trade in manufactures with Europe has fallen without facing the impediment of a tariff barrier. If there were to be the further impediment of a tariff barrier, how can the hon. Gentleman suggest that we would retain the substantial part of European markets that we now have? His own arguments disprove that point. It is for that reason, which must be appreciated by the anti-marketeers, that our commitment to the European Community remains so vital.
However, I am not satisfied that all is well within the Community and I believe that there is a great deal to be changed. There are three specific matters to which I wish to refer. In paragraph 1·13 of the document we study this morning, we learn:
"The Community initiated action under GATT Article XXIII aimed at opening the Japanese market further to imports of manufactures."
I welcome that action because I believe that it is long overdue. I wonder whether the action that has been taken is sufficient bearing in mind the nature and underlying reason for the penetration by the Japanese throughout the European Community. In response to pressure from the United Kingdom and the Community the Japanese have offered two things—a reduction in some customs duties on certain industrial and agricultural products, and action to eliminate some of the non-tariff barriers, such as measures to restrict the distribution of European goods in Japan.
Those actions are welcome but they are not sufficient. The reduction in customs duties applies to 8 per cent. only of Japanese imports from the Community. I hope that the Minister will agree that that is a grossly inadequate response when one recognises that the Community trade imbalance with Japan last year was $14,000 million. It is even more grotesque when one realises that two decades earlier that imbalance was a mere $8 million. I am not convinced that paragraph 1.13 is entirely reassuring, and I hope that the Minister will assure us that much more will be done in the future
I should like the Minister to cast his mind forward to the GATT meetings that are to take place in Geneva later this month. I hope that the Japanese penetration of the European market will form a substantial part of those discussions. Will the Minister assure the House that after those discussions are concluded the Commission will be pressing for a further and swift response from the
784
Japanese? I hope that it will, and will continue to do so until we are convinced that Japanese penetration of our market is based on free and fair trade.
I accept, without qualification, the virtues of free trade. There can be little intellectual doubt about it. If free trade is to be respectable, it must be fair. I do not believe that the Japanese penetration of our markets has been achieved by free and fair trade.
I am not interested only in Japanese imports into the Community. There is a second matter relating to trade to which the Under-Secretary referred, and that is the figures relating to free trade in invisibles, not between the Community and an external country, but within the Community. Within its borders the Community should have a special obligation to liberalism and free trade and the removal of artificial barriers that prevent that.
That is not the case when one considers the trade in invisibles between member States of the European Community. I am thinking of banking, insurance, shipping, telecommuncations, tourism, accountancy and many other such service industries. My hon. Friend the Under-Secretary touched upon the problem briefly, and I hope that my hon. and learned Friend the Minister will enlarge upon it. There are immense artificial and well-recognised barriers to free trade in invisibles between Community States. The Minister will have recently received a most interesting report entitled "Liberalisation of Trade in Services", prepared by the liberalisation of trade in services committee on invisible exports chaired by Mr. Malcolm Wilcox. It is a document that is well worth studying. I know that the Minister will give it his assiduous attention.
Mr. Peter Rees: I have done.
Mr. Major: I look forward to my hon. and learned Friend's comments upon it. I hope that he will do more than just give it his attention as it is an underlying problem of great significance. I hope that he will encourage the Council of Ministers to look at it carefully so that the European Commission can examine the difficulties of trade in invisibles.
I understand, and do not underestimate, the difficulties of overcoming national barriers to invisible trade. I believe that the principle of free trade in invisibles is a valuable prize worth fighting to obtain within Europe. If we can liberalise that trade within the European Community, it would be a valuable step towards the liberalisation of trade in invisibles between the Community and countries beyond it. There would be a substantial potential gain for this country with its huge earnings from invisibles if there were such a liberalisation. I repeat—it is a battle well worth fighting.
There is, and we have heard echoes of it this morning, a substantial trend towards protectionism in many parts of the world. I believe that that trend is dangerous and damaging, and the effect that it would have in accelerating the difficult economic circumstances that we all face, and the unemployment that we all recognise, would be substantial. We need to take every opportunity that we can to move towards both fair and free trade.
Mr. Stoddart: In agriculture.
Mr. Major: I hope therefore that the Minister will say something about protectionism when he winds up.
My third point relates to what has been referred to as the Vredeling draft directive on informing and consulting

785
employees. It has had a mixed reception within the United Kingdom and Europe because of the style and nature of its original drafting.
When we returned for the over-spill period at the end of the last Session, there was a House of Lords amendment to the Employment Bill that required directors' reports of larger companies to contain a statement setting out what action has been taken during the preceeding year to further employee participation. There is a substantial tinge of Vredeling about that measure which was inserted into the Employment Act 1982. I shall be grateful if the Minister can set out clearly how the Government now view the Vredeling directive.
I have mentioned three specific areas of criticism of what is happening within the European Community. I reiterate that that does not mean that I criticise and doubt the overwhelming value of our membership of the Community. I regret that the arguments about our membership should continue for so many years after our entry. The hon. Member for Grimsby is looking as dubious as always. He regards Europe as a misogynist regards a lady. If he visited East Anglia he would see the enormous growth in small and medium-sized businesses which has occurred because of the proximity to Europe. He might then begin to understand our arguments.
Mr. Spearing: The same should apply to Kent. I take it that the hon. Gentleman is not referring only to expansion in agriculture, which is a special case.
Mr. Major: Indeed, not. The figures for growth in the various regions show that in almost every sphere except heavy industry East Anglia is growing the fastest. Business men in the area would tell the hon. Gentleman that that is because they have taken advantage of the proximity to Europe to a greater extent than business men elsewhere in the United Kingdom. The geographical proximity to Europe has fuelled the growth of the area.
After the years that we have spent in the EEC, for us to seek to leave would be to deny reality and to fly in the face of our best interests. It would be to permit prejudice to defeat logic. It would be a bad bargain for the United Kingdom and we should not even contemplate it.
10.51 am
Mr. Austin Mitchell: The Minister and the hon. Member for Huntingdonshire (Mr. Major) have both given a long, wheedling apologia for the unjustifiable. This trawl for excuses has become so strenuous that those who make them lose all credibility in the process.
We are told that the Common Market provides a coordinated approach to foreign policy. On the one major foreign policy issue that we faced, the Falklands crisis, we were stabbed in the back by the Common Market. We are told that we have a fishing agreement. It is an agreement that effectively gives the nation providing two thirds of the fishing stocks less than one third of the total catch in EEC waters. We are told that the EEC is the most stimulating development since the war. Essentially, it has reduced us to a continuous series of commercial haggles in which the odds, unlike those for the French, are loaded against us because of the terms on which we went in. We are told that the EEC co-ordinates trade with the outside world, but at the same time the flood of imports from the Common Market destroys our jobs.
786
Most ludicrous of all, the hon. Member for Huntingdonshire tells us of the virtues of free trade and stresses the need to defend it, but the EEC is the agricultural protection society par excellence. Conservatives seem to want one law for agriculture and another for industry. If free trade is a valid argument, it is as valid for agriculture as it is for industry.
We are in a relationship that does not suit us with an institution that does not suit us. The relationship should be ended. We shall never see clearly the fundamental problems facing us as long as they are obscured in the mist of double talk and deceit in which the Common Market's defenders indulge.
We are essentially in the situation of a one-legged man whose friends tell him to join a squash club because the cold showers will be good for his health and will produce new energy and vigour. After 10 years he finds that not only can he not play squash very well but the showers give him pneumonia. He asks the committee for changes in the institution, perhaps a chess room and reduced subscriptions. The committee is entitled to ask him to hop off. He knew the terms and conditions when he entered and the institution cannot be changed for one person.
Our key problem is industrial decline. British industry is suffering from anorexia nervosa. The dwindling decline has become more rapid over the past three years. Because industry is the base on which all else rests, if it declines the economy is locked into a remorseless decline. Since June 1979 1½ million jobs have been lost in manufacturing industry, on top of the long-term loss of about 3 million jobs since the mid-1960s. The workshop of the world has become a net importer of manufactured goods. An increasing share of our market internally has been taken by imported manufactures.
Mr. Russell Johnston: Is there not a general drop in manufacturing employment world-wide, and do we not, for example, employ proportionately about 10 per cent. more people in manufacturing than the United States?
Mr. Mitchell: Other countries are facing difficulties with their manufacturing industries, but several are doing well with the industries that we are losing. No other country has seen our cataclysmic decline in manufacturing, which bids fair to turn us into the world's first undeveloping country. That is the major cause of our rise in unemployment being more rapid than that in any other advanced industrial country. The heart of the economy is in decline when manufacturing declines, as it is the base on which everything rests.
The basic long-term cause of our unemployment is perhaps a simple economic law: we have not grown because we have not grown. Economies that have deliberately planned for expansion of manufacturing industry have achieved economies of scale to which we have never laid claim. They have improved productivity, which is mainly a simple factor of expansion of production. Our economy has been run over the long term for stop-go. The value of the pound sterling has been regarded as more important than the strength of our industrial base. Each time the economy has expanded, the exchange rate has been threatened and the expansion has been slapped back down. Other economies have had steady, remorseless growth; we have had the switchback of stop-go.

787
In the 1970s this fundamental cause of our problems was supplemented by two other equally crippling factors. The first was the Common Market. On entering we took down a higher tariff barrier against the other member States than they did against us. Secondly, it is a well-known principle of economics that it is easier to penetrate a small market from a large market than vice-versa. As the actress might say, we were duly penetrated. The result was a surplus in manufacturing trade in 1970 with the Common Market Six. It is the Six at which we must look, because any benefits should be shown in our trade with the Six and not with Denmark and Ireland, with whom we traded substantially already and where we have since tended to lose.
A surplus in manufacturing trade with the Six in 1970 was converted into a horrendous deficit of £4·6 billion in 1979, £2·8 billion in 1980 and £5·5 billion in 1981. That took away jobs in this country, particularly in the industrial heartland of the Midlands. That has come about because we opened ourselves to that type of import penetration.
Government Members focus on Japan and say that Japan should restrain its trade with Britain. Japan is an industrial power as powerful and effective as West Germany. Surely they do not suggest that we should enter an industrial free trade arrangement with Japan. However they do suggest that we maintain an industrial free trade relationship with West Germany, which is a powerful and competing economy like Japan.
In focusing on Japan hon. Members forget that the Japanese problem is small compared with the Common Market problem. Japanese cars represent 11 per cent. of the British car market. Common Market cars take 35 per cent. or 38 per cent. of our market. All the arguments that apply to restricting trade with Japan apply to restricting trade with our industrial competitor, West Germany.
Mr. Major: The hon. Gentleman clearly did not hear me accurately. I was not referring to the restriction of trade with Japan. I said that I was not satisfied that trade between Japan and the Community was free and fair. That problem does not exist with in the Community. There is a distinct difference. The hon. Gentleman should not pervert my arguments.
Mr. Mitchell: The same argument to show that trade is not free and fair applies to West Germany. The problem is caused by a crippling overvaluation of the pound sterling, which makes Britain extremely attractive to imports, whether from West Germany or Japan. All such imports appear to be dumped on our market because of that overvaluation. It is hypocritical, when complaining about the decline in the British steel industry, to ignore the impact of Common Market steel imports on our domestic industry and the consequent decline in our steel industry. Steel and cars are part of the same problem.
Mr. Dykes: The hon. Gentleman is being unfair and misleading the House, I am sure not deliberately. There is nothing to stop us exporting to West Germany. I agree partly with what he says. The difference is that the Japanese actually stop us exporting to Japan.
Mr. Mitchell: I accept that difference.
The Common Market was the first of those supplementing disasters which added to Britain's long-term problem. A law of market development is that it is
788
easier to serve the periphery, which we now are, from the centre of the golden triangle. In the same way that development has been drained from the North of England, Scotland and Wales by the Midlands and the South-East, so in a larger market development has been drained from Britain to focus on the centre of the Common Market.
The second big problem is the substantial overvaluation of the pound sterling. The IMF annual yearbook contains some figures for the relative rise of manufacturers' normalised unit labour costs, allowing for exchange rate adjustment. Taking the figure for 1977 as 100, the figure for the United Kingdom is now 160. That is largely due to the rise in the real exchange rate because of our higher domestic inflation and because we are an oil power and have pursued deflationary policies. The comparative figure for the Federal Republic of Germany is 90; for France it is under 100, and that will have fallen because of devaluation; the figure for Japan is 90. Only the United States, because it is pursuing similarly insane domestic policies, has a figure which has risen in the same way, and that has risen only to 120.
It is impossible for a country suffering from that degree of overvaluation to compete effectively. In 1976 we bound ourselves to the IMF as part of the agreement to maintain the competitive position of British manufactures at home and abroad. Since then the real value of the pound sterling against the Deutschemark has appreciated by about 57 per cent. The appreciation against Belgium and France, is even bigger, because they have devalued.
I am describing an invisible hand around the neck of British industry which makes it impossible for it to compete effectively. It amounts to a subsidy on imports and a direct penalty on our exports. If labour costs for every finished tonne of steel in Britain are only 29 per cent. of the final cost, it follows—as the Chief Secretary might say, as day follows night—that an overvaluation of 57 per cent. against the Deutschemark cannot be compensated for, even if the workers at British Steel work for nothing and even if they sing glad hosannas to the Prime Minister because they are so grateful to be in jobs. Nothing can prevail against that overvaluation. Industry is being battered by it.
We have accepted two enormous disadvantages and pretended that we can compete effectively while suffering from both together. We cannot. British industry, in its battered state, its decline in production and its loss of jobs, is a living—perhaps a dying— testimony to the fact that we cannot compete with the two disadvantages that hang so heavily around British industry's neck.
Mr. Spearing: I accept that we have had nothing from the Departments of Industry and Trade or from the Treasury to disprove what my hon. Friend says. Does he agree that the Prime Minister's call to British industry to go out and compete is really an urge to British industry to go out and die?
Mr. Mitchell: My hon. Friend is correct. We are in the same position as we were in the 1920s when the coal industry was told to take a penny off the pay and put an hour on the day. Exactly the same solutions are proposed, involving exactly the same piggy-bank economics, except that the problem today is compounded by membership of the Common Market and by our industry being exposed to the gales of competition.
Government Members might be able to argue that we should belong to the Common Market because of the great

789
benefits that it concedes to agriculture, in which they have a vested interest. They can probably argue in favour of involvement with Europe because of the good will that they say prevails there, but they cannot argue the case for overvaluation as well. We cannot sustain the argument for having both liabilities in the blithe, insouciant way that the Government do because that is ruinous. The right hon. Member for Sidcup (Mr. Heath) saw that clearly because the policy on entry involved a rapid devaluation of the pound sterling. It was called floating, but it meant sinking, and it improved our competitive position in the market. That was the only way in which it was feasible to survive industrially in the EEC. To accept on top of that the weight of overvaluation that we now have makes the job absolutely impossible.
My hon. Friends and I would argue that we cannot carry either burden and that we must get rid of both. To argue that we can carry both is to argue for disaster. If a monument to the consequences of the two burdens is required, one has only to look around at British industry, particularly in the Midlands.
Government Members, in their blithe ignorance of economics and industrial realities, are indulging in dangerous double-talk which will take us to industrial disaster at a gallop.
Mr. Brocklebank-Fowler: I may be the only hon. Member who is in danger of being confused by the hon. Gentleman's remarks. I should like to refer to the first of the two points on which he has addressed the House. If jobs depend on expanding manufacturing industry and if expanding manufacturing industry depends on trade, by what process does one increase trade if one takes an action designed to put oneself at a substantial disadvantage in the major market for our manufactured products? Where will the new markets come from—and how quickly will they come—to provide the jobs which the hon. Gentleman, like me, is rightly concerned about? Where will the new jobs come from if one takes action that diminishes substantially the size of the market to which one wishes to sell one's product?
Mr. Mitchell: It is a tragedy to see the Euro fun party converted into the pie-in-the-sky party. The reality is that we are in surplus in manufacturing trade with the rest of the world. That surplus will pay the huge deficits in the Common Market. We are therefore in a better position than other countries, by replacing their exports on our market, to build up our industry. They cannot pose a threat to our market.
Mr. Brocklebank-Fowler rose—
Mr. Mitchell: I am happy to allow the hon. Gentleman to intervene again because he only reveals his ignorance of economics. If we are labouring under massive devaluation any tariff barrier that is imposed under the Common Market external tariff—the average would be only about 7 per cent. or 8 per cent.—is minuscule compared to the scale of devaluation that is necessary to make us competitive anyway. Given a competitive exchange rate, the barrier that the other EC countries imposed against us—and I am sure that the old ratio would remain as our barrier would be higher against
790
them—would be so minuscule that we would be able to overleap it with the competitive exchange rate that we must have anyway if we are to survive.
Mr. Brocklebank-Fowler: If Europeans do not buy our products, what guarantee is there that people in other countries, with whom we already enjoy a surplus, will purchase the products that we are currently selling in Europe?
Mr. Mitchell: A substantial part of our trade with the Common Market is in commodities, which will cross the common external tariff without tariff anyway. We have to send them our oil. We cannot even refine it here, which is a waste of a national resource. Such trade will carry on. We are already doing well enough in our trade with the rest of the world. We can improve our position there. We can improve it still more by replacing EC exports on our market.
It is a fundamental matter of economic common sense that one does not fully expose oneself to the industrial might of West Germany as we have done. To enter into that relationship with a massive machine that has been built up deliberately to compete, which has benefited from economies of scale that our industry has never yet laid claim to, is to invite the ruin that has been perpetrated on our industry. The only way to allow British industry to rebuild is to ease the gales of competition. If that does not happen, the jobs will not be forthcoming from the public sector or on an adequate scale from the service sector. They must come from where they have been lost, which is in manufacturing industry. We must therefore rebuild manufacturing industry. That is the key to survival.
We have added to the burden that we have taken on with the markets the insult to our intelligence that comes from the arguments of agriculturists. They have a peculiarly self-interested view of economics. With regard to agriculture, when we entered the Common Market, it was almost as if we had taken on the Hindu religion and the cow was allowed to wander sacred through the streets of Great Britain—not only the cow but any other beast of the field or crop, apart from those raised in greenhouses, which have been exposed to ruin by the Common Market. Agriculture has been give a semi-religious status. Perhaps it is appropriate that, like churches, it should have rate relief. It is now like a religion taken out of the bounds of normal politics.
This country, which has very little to gain from industrial free trade with West Germany but has a great deal to gain from agricultural free trade because we are net agricultural importers, has been given the exact reverse of what is necessary for its economic well-being. We have been given agricultural protection, when it does not suit us, and industrial free trade, with disastrous consequences.
For all the brave talk of European idealism and international commitment, the Common Market is essentially an institution that spends 66 per cent. of its revenue on agricultural protection and on supporting agriculture. It is nothing more than an agricultural protection society, give it what name or gloss one will. It is all very well to say that that proportion has decreased from 74 per cent. to 66 per cent. However, next year, thanks to the surpluses in the harvest this year, and the expenses of financing it, it will increase again.
That situation sours our relationship with the rest of the world. We cannot have split-level agricultural protection

791
with industrial free trade. It cripples the relationship of the Common Market with developing countries because the burdens that we impose on them through our agricultural protection outweigh all the aid that has been given under the Lome convention. It imposes a burden of high costs on the economy of this country, which we never had before, which is another reason for our competitive disadvantage in the 1970s and it stops us building up reciprocal trade with food suppliers. It is a matter of self-interest for a manufacturing country to trade with its agricultural suppliers but we are prevented from doing so by the requirement to buy their overpriced food.
We are told to wait until the common agricultural policy is changed. There are continuous negotiations and everyone says that he is in favour of the common agricultural policy, but it must be changed. However, it will never change. It is the fundamental tent prop for the institution. It will not change because it is central.
As was shown this year, other countries will break the rules and conventions on which we entered the Common Market sooner than change them. We told our electors that they were the basis on which we entered the Common Market. Rather than change the agricultural protection club in any way, they broke with the majority rule to impose a price increase.
The talk of change is a part of the hypocritical double talk by Conservative Members from farming constituencies. They constantly complain about aid to industry, which is made necessary by the failure of competitiveness that has been imposed through overvaluation, yet the money is pouring into agriculture in ways that Parliament cannot control because the matter has been taken out of the national political arena.
The aid to agriculture must amount to over £6 billion a year. That is not only national aid and freedom from rates, but higher prices and insulation from fluctuation in the exchange rate. That has been obtained with no argument in Parliament. No one has justified it. If any other British industry were in that situation, it would have to argue its case through Parliament, which would be difficult with a Government like the Conservative Government. However, money is almost automatically put in agriculture's back pocket.
There is an enormous problem with the budget, which is bound to be weighted against us because of the terms on which we joined the Common Market and the nature of that institution, which does not suit us. That is the key to the argument because an argument in the Common Market is always carried on on several fronts. If one makes a gain on one front, one has to make concessions on another. The central front on which the Government are fighting is the budget. The Government want to get what the Prime Minister calls "our money" back. However, the arguments about that have meant that we have had to moderate our position on every other issue, particularly one that is vital to my constituency, is fishing.
Who can doubt that had we not been engaged in this budget argument—an argument in which we are bound to he engaged because of the terms under which we went into the Community and because of the nature of our economy—we would have taken a stronger, firmer position on fishing and got a better deal than the farce now being enacted in the Common Market?
The logic which is blithely ignored by Government supporters points to the case for withdrawal from an institution which did not suit us, which does not suit us and
792
which has made the industrial problem at the heart of Britain's decline far worse that it would have been otherwise. All the arguments about job losses and about what is likely to happen to investment are nothing but the smoke screen of fear and doubt to which we have become accustomed and which is largely financed out of our own money. We have to pay for this fifth column of propaganda to be carried on here by the Euro-enthusiasts, by members of the European Assembly and by the propagandists employed here by the Commission to put doubt into our minds about the central objectives of British policy.
All that is an unrealistic smoke screen of fear when all the advantages point to our coming out of the Common Market. In that way we can rebuild our industry and jobs. In that way we can replace the Common Market's exports on our own market and face any tariff barrier that the EEC cares to put up against us simply because we shall have a competitive industry competing on the basis of a competitive exchange rate and freed from the burdens that agriculture imposes on us at present.
We hear a great deal about the flow of investment. Those who make such statements ignore the fact that we export about £4 to the Common Market for investment there, mainly in facilities for industrial production, for every £1 invested here long-term by the Common Market. The "flow of investment" argument falls totally. The country is awash with money. The problem is that the opportunities for investment are not here and will not be here. As a result, we are sending money overseas more rapidly than we have ever done. We have to take our destiny in our own hands and rebuild our industry and our economy on the basis of an independent nation relating to the rest of the world.
11.23 am
Sir Anthony Meyer: Those hon. Members who are still awake will be very grateful to the hon. Member for Grimsby (Mr. Mitchell) for his authoritative lecture on economics, albeit the economics of the madhouse. However, I welcome his support for those hon. Members on both sides of the House who have been urging that we should join the European monetary system as a way of bringing about a more realistic exchange rate between sterling and the European currencies.
I shall not waste the time of the House in going over the arguments for our membership of the European Community. Despite the vagaries of our system of catching the eye of the occupant of the Chair which require supporters and opponents of the EC to be called alternately when there is any substantial number of hon. Members present in the Chamber, there are more supporters of our membership of the EC in the Labour Party than there are opponents on the Conservative Benches.
Mr. Austin Mitchell: Both are away today.
Sir Anthony Meyer: Both are away today. But it remains true that there are no opponents of British membership of the EEC on the Conservative Benches this morning. No Conservative Government will call British membership into question, and there will be no Labour Government to do so.
I want to contrast two developments in the EC during the period that we are discussing. The first is the gradually

793
strengthening political co-operation in the Community evidenced by the support given us by fellow members during the Falklands crisis. The second is the national veto on Community decisions.
It is a great mistake to get emotional about the support that we received from the Community at all stages of the Falklands crisis or about the less consistent support that we have had from the United States of America. I acknowledge freely that we got even firmer support throughout from New Zealand. But what is of abiding importance is that, on the whole, the interests of Community members in matters outside the area of Europe such as Latin America, the Far East or the Middle East are more likely to be similar to or at least consistent with our own than those of the United States or of any other non-European power.
When we add to this natural convergence of national interests the habits of co-operation and the machinery of co-operation that the EC provides, it becomes clear that the EC is the natural foundation on which we can build a structure of political influence. It is equally and dismayingly clear that an American Administration—even one which is so close to the philosophy of our own Government—is bound to be subject to increasingly strong pressures which will cause its actions to conflict more and more frequently with our interests.
I am as anxious as anyone to restore good relations between Great Britain and the United States and between Europe and the United States. Just because there is no natural identity of interests in Latin America or the Middle East, it does not mean that our fundamental identity of interest in the maintenance of political freedom against totalitarianism is diminished. But I note with no surprise that those who have been loudest in denouncing our European partners for even the slightest sign of hesitation in supporting us to the hilt over the Falklands have also been the shrillest in their denunciation of the United States for abandoning us at the United Nations.
Once again we are being treated to mock heroics about the glory of being alone against the world. This is nonsense. There is nothing Churchillian about it. When we were alone after our humiliating defeat at Dunkirk, Churchill's reaction was to find us allies as quickly as he could. Britain needs political co-operation in the EC. We need to get it working as well as we can and to use it to improve our relations with the United States.
I do not suggest that the existence and use of the veto in the EC inhibits political co-operation. But there is a link between the two. Like my hon. Friend the Member for Harrow, East (Mr. Dykes), I am not sure that the regular use of the veto is in the interests of the United Kingdom. As the White Paper points out, on 18 May the Council of Ministers overrode the objections of the United Kingdom in applying the common agricultural policy price regulations. That touched off a great debate on the veto, and United Kingdom Ministers have left our partners in no doubt about the importance which they attach to the Luxembourg compromise, even though it has no legal validity under the Treaty of Rome and is merely a generally accepted convention.
Now the Danish Government are standing out alone against an agreement reached by all the other members after the most agonising debates—and in the nick of time—on a common fisheries policy. Once again those
794
who were loudest in denouncing the overruling of the British veto are demanding, in effect, that the Danish veto—or refusal, which amounts to a veto—be overridden.
The question is very complicated, but it boils down to the fact that a large section of the popular press and all too many hon. Members on both sides of the House take so narrow, so intense and so short-sighted a view of our national interests that they positively welcome the prospect of physical action against Danish fishing vessels, or against imports of French turkeys and UHT milk—or, as some of our farmers did at one stage, against Irish cattle; or, as some might want to take in the future, against Italian washing machines and foreign cars; or, as the French have done already, against Italian and Spanish wines.
It is time to state—
Mr. Austin Mitchell rose—
Sir Anthony Meyer: I prefer not to give way.
It is time to state that no country in the world benefits more from open trading and, still more important, from the maintenance of peaceful regulation of economic disputes, or has more to lose once protectionism spreads or countries start taking the law into their own hands, than the United Kingdom. It is all too easy in this House to get support for a plea to safeguard jobs by banning imports or for demanding that we protect our short-term interests by taking the law into our own hands. It is not really the job of Back Benchers constantly to uphold the general interest against the particular, the long term against the short, or to deplore the use of force, even though I am doing my inadequate best in that respect now. A number of my hon. Friends make this effort from time to time.
It is a pleasant change to have the support which will no doubt be forthcoming from hon. Members representing the Liberal and Social Democratic Parties for this thesis. Hon. Members of those parties are not present for these debates as often as they might be.
The job is one that should be done by Ministers. Although my hon. and learned Friend the Minister for Trade is an honourable exception, some of his colleagues are falling down on the job. All too many of them are content to let the impression get around that, while we continue to bow the knee to the open trading system, we are ready to take whatever action is necessary to protect our national interests, as we showed in the South Atlantic, and that our patience and acceptance of international obligations is not limitless, even when we are defending a particular or secondary national interest, as opposed to a general or vital one, and that, much as we value the great post-war international organisations such as WEU, GATT or NATO, it is no longer unthinkable for us to ignore the rules when they do not suit us. This may not be the impression that Ministers mean to convey but some of them are contriving to do so, not just in what they say but, rather more, in the guidance that they issue to the press.
On Wednesday, in the other place, Lord Cockfield said:
"The world has changed since the original GATT agreements were negotiated 30 years ago. Many privileges conceded and enjoyed in the past are no longer justified. What we need, in the new world into which we are entering, is a new concept of parity of opportunity."—[Official Report, House of Lords, 10 November 1982; Vol. 436, c. 240.]
I see very well what my noble Friend is getting at. I see also how his words can be twisted to justify those who

795
have always wanted to wreck GATT. Lord Soames saw clearly the dangers that are opened up by this kind of remark from the Minister who, above all others, is surely the guardian of the open trading system. Is it really necessary for him to offer so useful a text to those who argue for the imposition of import controls? If there is a case for import controls, it will need, for a nation as dependent on exports as ours, to be an overwhelming one. There can only be a case for controls operated by the EEC as a whole for a strictly limited period to protect industries in structural transition against imports from newly industrialised countries that discriminate unfairly against imports from the EEC. Press accounts of what some Ministers are thinking encourage people to believe in the possibility of purely British controls— clearly wanted by the Labour Party—on all imports, including imports from EEC countries. I am sure that no Minister is thinking on these lines. I just wish that Ministers would make it clear that they are not.
We need all the friends that we can get, especially within the EEC. Was it really necessary or wise for the Chancellor of the Exchequer, at the Conservative Party conference, to cause great offence to our French partners by pointing out with glee the difficulties that they have encountered in recent months under a Socialist Government? After all, the Americans have encountered equally great difficulties under an Administration whose ideology is rather close to that of our Prime Minister. All the Chancellor has done is to upset the French, who stood by us very well, simply to score a party point.
In any case, why do we need to score party points? All the signs are that the Conservative Party is amazingly well placed to win the next election. There is no need for Ministers to go chasing after votes by placating sectional interests if, in the process, they are going to make the job harder for the Conservative Government that will take office with a larger majority after the next election. It is up to Ministers, especially those in the Foreign Office and the Department of Trade, to give a firm lead in this matter as they do in other spheres. It is not unreasonable to look for as clear a lead from the Prime Minister as she gives on pretty well everything else, instead of the sly ambiguities that seep out from time to time from 10 Downing Street by way of press guidance.
There is a job vacancy in Europe. It is a vacancy for the job as leader. The Prime Minister has, and is alone in having, nearly all the qualifications for the job. If she could only persuade our European partners that she has a faith in Europe as intense and as fierce as she has so amply demonstrated to the people of this country, I am sure that the job would be hers for the taking, and we would all greatly benefit.
11.36 am
Mr. Russell Johnston: I shall take up a number of points made by the hon. Member for Flint, East (Sir A. Meyer). I wish also to address myself to some extent to the paper before the House, which has hardly been mentioned. These debates have a certain pattern that cannot be avoided. We get back to the fundamentals of being in or not being in the Common Market.
As one who is very much in favour of membership, I believe that the central problem for the Community is the budget. It is not simply a matter of the British contribution, but a general question of the budget, which the Minister rightly stressed in his opening remarks. I am sorry to say
796
that there is little evidence in this paper or in what we have heard of progress towards a constructive solution to the problem.
The Community budget is at present reducing. We are in a recession. There is less trade and the tariffs are down. The agricultural levy is diminishing. We are left with the 1 per cent. VAT. Simultaneously, people's expectations of what the Community can achieve are rising, contrary to what a number of hon. Members maintain. In a recession, people look round to see who can help. It is, I am sure, the experience of hon. Members in their constituencies that people say "Can the EEC do anything?" as if it were some great external benefactor with lots of money.
The reality is that the Community has, at its own hand, very little money and is not actively in a position to achieve very much. It is admirable that Ivor Richard, the British Commissioner responsible for the social fund, has produced an effective package within the Commission, but there is no money to do what he wants.
I asked the Government about this in the foreign affairs debate, but, as the Treasury Bench is notably lacking in any great inspiration, to ask the Government questions in foreign affairs and indeed European debates is a remarkably futile exercise. Indeed, I often suspect that if I waited until the rising of the House and simply shouted my questions down the dark canyon of Whitehall I should get more answers than I receive from the Government. I asked a very simple question. I asked what was the Government's attitude to the future of the European regional and social funds, but of course there was no answer.
I therefore decided that to obtain a real answer one had to go to the head of the House, and I duly put down a question to the Prime Minister in which I asked
"if she will make a statement about the Government's objectives in the review of the European Community's regional and social funds".
The Prime Minister's reply, which I received today, was as follows:
"The Government's key objectives are that these funds should give greater priority to the current regional and social problems in the Community which particularly affect the UK."
That is typical of the approach that is often misunderstood, but also often correctly analysed, by our European colleagues, that Britain's only real interest in the Community is the direct interest—in other words, the advantage—of the United Kingdom.
The Prime Minister continued:
"The regional fund should concentrate its resources more on the areas of greatest need while remaining flexible in its operational rules and administration; and the social fund could be made more effective in tackling the major employment problems facing the Community, specifically youth unemployment and regions of persistently high unemployment."
That simply cannot be achieved with the money available. Such bland answers are therefore a purely cosmetic exercise. They are meaningless, because there is no money in the Community budget to do any of those things. Even if the whole Community agreed that it was a splendid idea, it has no means of implementing it. It is a well-known political thought that people wish the end but do not will the means. That is precisely what the Government are doing in this case.
If it is possible to obtain any answer from the Government, I hope that when the Minister winds up the debate he will give us some idea whether, at least in principle, at some time when it is thought more

797
appropriate, the Government favour a larger Community budget. I accept that if the budget were increased it would have to take account of the GNP relationships between member States. There is no point in increasing the budget unless the basis for raising the money and the attitudes towards it are redistributive. As many hon. Members have said—indeed, the Minister himself said this in opening the debate—there must be a transfer of resources from the richer to the poorer members. I should have thought that almost any hon. Member who supports the ideal of the European Community would agree with that principle.
Inevitably, much of the debate has concentrated on the now clear, straightforward and official Labour Party policy to withdraw from the Community without a referendum if Labour wins the next election.
I well remember the arguments about the absolute necessity for a referendum that were advanced in the House between 1973 and 1975 by Labour Members and, indeed, by anti-Market Conservative Members. The Labour Party's rejection of that view now is a shameful shift in attitude and a total volte face. It is certainly not based on their previous much-repeated argument that such a great constitutional matter could not be properly distinguished in a general election and must therefore be the subject of a further direct appeal to the people. Those who said that, of course, assumed that the people would agree with them. Unfortunately for them, but fortunately for us, the people did not agree.
The Labour Party spokesman today, the hon. Member for Greenwich (Mr. Barnett), therefore produced a most extraordinary view, based on Oppenheim's International Law—the argument of a recondite professor that because the people did not understand the question before them in the referendum they gave the wrong answer and therefore the exercise was invalid. I have not heard such utter gobbledegook for a long time. Politicians of various kinds sometimes claim that the people do not really understand the estimable views that politicians put forward, but to put forward as a principle of law, based on assumptions that are not scientifically demonstrable, the idea that the result of a democratic process is invalid because the people did not understand what it was about is a very strange attitude indeed.
Mr. Austin Mitchell: If, as will almost certainly be the case, at the next general election the people return a Labour Government committed to taking this country out of the Common Market, it will be a clear, straightforward choice. If they wish, they can vote for a party that will beat the drum against the Common Market, but ultimately submit to it. They can vote for the Euro-toadies of the alliance. Ultimately, there is a straight choice. If, following the election of a Labour Government who are committed to withdrawal from the Common Market, a referendum is held on a central part of that Government's strategy for economic and industrial reconstruction, a ludicrous constitutional situation will be created in which a subsequent referendum could invalidate a central part of the mandate given at the general election.
Mr. Johnston: With great respect, I see no necessity for the hon. Gentleman's rhetoric about "Euro-toadies". We disagree on the matter. Let us face that. What would be the position, however, of a voter who held the views of the hon. Member for Northampton, North (Mr.
798
Marlow), of the hon. Member for Southend, East (Mr. Taylor) or of the right hon. Member for Down, South (Mr. Powell), none of whom is present, but all of whom are united in their opposition to the European Community? The only way to achieve that in a general election would be to vote for the Labour Party and thus for a whole package of Left-wing measures which they reject entirely. The nonsense of that is transparent.
Sir Anthony Meyer: It is not true that my hon. Friends the Members for Southend, East (Mr. Taylor) and for Northampton, North (Mr. Marlow) favour withdrawal from the Community, as they have made clear many times.
Mr. Johnston: As the old saying goes, "You could have fooled me".
The economic assumptions are that if we came out of the Common Market we could somehow continue to enjoy the benefits of the European market. As has been said, that market now accounts for about 43 per cent. of our trade, although I appreciate that that includes oil. That argument is based on a fallacy. I have read the Labour Party's national executive committee document on this. The view is taken that we should be in a very strong negotiating position in withdrawing from the Common Market, because, first, we have oil which the Community countries would wish to buy, secondly, because we have our own markets, and, thirdly, because we import a good deal of food, so the Community would want a good negotiation with us.
There is certainly another side to the argument. First, such a separation could not take place other than in an atmosphere of recrimination, anger and disillusionment. There is no pretending otherwise. As other members of the Community have twice gone out of their way to change the terms of Britain's membership, such a situation would inevitably result in recriminations.
As Labour Members have confirmed today, the Labour Party's clear objective in seeking to withdraw from the Common Market is to limit the import of manufactured goods from the Community. The negotiations would therefore have to take that into account. They would also have to take account of the Labour Party's statement that it would seek to buy food on the cheapest markets that it could find. Britain must export oil, just as Europe must buy it.
The idea that we would remain in our present advantageous position is without foundation. We would have to surmount the common external tariff barrier, which at present we have no need to surmount, which would severely damage British industry, especially the more successful parts such as high technology. The general run of manufacturing industries might have some advantages in the short term, but they would not benefit in the long term.
The hon. Member for Greenwich said that it takes one tonne of steel to build a motor car. The idea that the exclusion of German cars, which the hon. Member for Grimsby (Mr. Mitchell) mentioned frequently, either in the long term or the medium term, will improve the competitiveness and technical efficiency of the British motor car industry is suspect. The textile industry exports about 50 per cent. of its products to the European Community. Will it obtain alternative markets in America, Canada or the Third world? I believe not.

799
The argument of the hon. Member for Grimsby—who has just left the Chamber—is that we sell to the rest of the world at a profit, but that within Europe we make a loss. His argument seems to be that we should exclude imports from the European Community and that we should supply the domestic market, which will mean a double benefit. It is a specious argument. We cannot blame the European Community for our unemployment. Our structural and industrial problems have grown over a long period and are largely of our own making.
There are also problems with the common agricultural policy. It is strange to hear Left-wing Members of the Labour Party talking about cheap food. We are told constantly that enormous amounts of cheap food will be available, apparently on a regular and assured basis. That means that we shall require imports of grains, meats and milk products, which would not only place us in competition with Russia, Japan and Brazil, but would make us dependent on markets over which we have little control in supply or price. What effect would that have on our farmers? I wonder whether the hon. Member for Greenwich has asked the National Farmers Union for its views. That organisation said recently that we are nearly 80 per cent. self-sufficient in temperate food products. What is its view of the proposal that we should scour the world for cheap food, taking advantage of countries that should obtain fairer and better commodity prices?
In conclusion, I shall turn away from the negative side and look forward a little. What about the European monetary system? We have a Minister experienced in financial matters sitting on the Government Front Bench. The European monetary system was not mentioned by the Under-Secretary of State. In the White Paper we find another esoteric fact in paragraph 5·4:
"In addition to the Finance Council's discussions on developing the system"
—that is a European monetary system—
"Ministers met on 21 February and 12 June to agree realignments of central rates within the EMS. At the first of these meetings at which the Chancellor of the Exchequer was in the Chair …"
The Chancellor of the Exchequer chaired a meeting on the European monetary system, in which Britain does not participate. It is about time that the Government told us of their intentions in the matter and of the time scale that they envisage.
Britain is not keen on institutions. When I am asked "Are you not depressed by the fact that the European Parliament is not popular in Britain?", I say "Not in the least. The Westminster Parliament is not popular. My local council is enormously unpopular and has been so for years." The idea that the European Parliament will instantly achieve the affection of the British population is to misunderstand the nature of that population. However, we wish to know the Government's views on the future of the European Parliament.
During a foreign affairs debate I asked about the views that the Government were putting forward within the working group of the Foreign Affairs Council, which, according to paragraph 10·1, was set up on 26 April. I received no answer. How often has the group met and what view are the Government putting forward on the proposal that there should be a uniform electoral system during the elections to the European Parliament in June 1984? It is about time that the Government told us what they are trying to do, what their views are and how their views compare with those of other member States.
800
Debates on the EEC are depressing—I have taken part in many—because, although the intention of the House is to provide a dialogue between people of different views, in such debates it is like a dialogue between Protestants and Catholics in Northern Ireland. There is no meeting of minds.
For me the issue is simple and clear. Both I and the hon. Member for Harrow, East (Mr. Dykes) are wearing the Flanders poppy. On Sunday we shall attend the Remembrance Day parade, as will many hon. Members. The European Community is about the end of war, although not of argument. It is a hopeful working together and it would be a tragedy if it were brought to an end.
11.57 am
Mr. Richard Shepherd: I listened carefully and with respect to the hon. Member for Inverness (Mr. Johnston), because he speaks with sincerity. That genuineness was shown especially in his final remarks.
One matter always causes me difficulty in relation to the options that confront Britain in a serious consideration of withdrawal from the Community or the terms of our membership. The argument advanced is that Britain does not have an option. As 43 per cent. of our trade is conducted with the Community and many people are employed in the manufacturing industries, were we to withdraw we should lose access to those markets. That is difficult to swallow because, in my experience, if one is a large source of other people's business, they are keen to continue doing business with one.
Government figures show that the European Community exports a surplus of manufactured goods to us. The figure was some £4,500 million in the 12 month to the end of August. France enjoys a balance of manufactured trade in its favour of about £510 million, West Germany of £3,130 million and Italy of £741 million. Are we seriously suggesting that in any discussion of our membership of the Community those countries which are also suffering grave economic and employment problems would put at risk their export surpluses with this country? I find it difficult to accept that. Were Britain to decide to withdraw from the structure that was set up in the Treaty of Rome—the structure of the Community and the Commission—trade would continue much along the present lines, because that would be in the interests of the nations concerned, and not least ourselves.
I shall not follow the Labour Party's arguments for restriction on free trade. Basically, I believe in free trade. The difficulty is that that does not seem to be the Community's underlying principle. I believe in world free trade, and Europe is a regional limitation of trading—with, also, the abnegation of free. trade in the form of the common agricultural policy.
I more particularly want to consider what the past six months have done to our relationships with countries which are in my view more important to the long-term and continuing interests of our people. I have grown up as a member of an English speaking world. Fundamental to the survival of that United Kingdom during the past 40 years has been the intimacy of its relationship with the members of that great union—those who share our language, and, in part, our heritage and in particular the United States. Now, because of the policy that makes us look towards Europe in a way that our interests would not otherwise have dictated, I am anxious that we are turning our backs

801
on friends and relationships that are fundamental to our security and future well-being. I realise that this is not necessarily popular, either to my hon. Friends or to Opposition Members, but I believe that the linchpin of the freedoms that we have enjoyed over the past 30 years and of much of our freedom of action in the world today has been our association with and reliance on the United States.
I start with the premise that membership of international organisations is, by and large, a good thing. We enter those relationships because we deem them to be in the interests of our people. We are members of the United Nations and rightly so. We do not always agree with what happens there. Indeed, often we feel moments of great tension about what happens there. We are members of NATO. We do not always agree with its views, but we deem our membership to be in our long-term interests. We are a member of the Commonwealth—one of the most extraordinary and inspiring relationships of peoples of all colours and races that has taken place in the twentieth century, much more inspiring than the association of European States within a Commission in Brussels.
When I look at the community that I come from, the West Midlands, the United Kingdom, I see a general acceptance that the relationships that we have entered into with the United Nations, NATO and the Commonwealth are in our interests. However, why, 10 years after membership, and seven years after the referendum—in which, I may say, I voted for membership of the Community—are the British people still anxious about that membership? It is obvious. We have now had three years' discussions on the inequality of the budget. I was somewhat heartened to see that the Foreign Office had issued a document called "The Budget Problem". That was in 1982, not 1979, 1980 or 1981.
At the beginning, the document says:
"The budget problem was foreseen in Britain's accession negotiations".
It goes on:
"The facts are that the British receive the least benefit per head from the Community budget."
That is no secret. It has been a matter of discussion and concern for all right hon. and hon. Members, whether for or against the Community.
The document makes a further observation:
"though they"
—that is us, the British—
"are not among the most prosperous".
That matter has caused great tension to people in this country. In fact, the budget arrangements are absurd. Not only are they absurd; they are ridiculous. Most people would say that to become members of a grouping is, by and large, a good thing. Any association of States which has the object of reducing or diminishing tension must be good. That is not in question. However, we have been asked to be one of the two net contributors, and to distort our own domestic markets by the import of foods at price levels which were previously unthinkable here.
The hon. Member for Inverness spoke with great reasonableness, as did my hon. Friend the Member for Huntingdonshire (Mr. Major), about the supply of food to the United Kingdom market. I am now 40 years old, my father is 72 years old, and, despite the interruptions of war,
802
neither of us can remember a time when the food supplies of this country—except, as I said, in time of war—were in doubt.
What do the CAP food prices mean? In some instances, they mean that we are paying substantially above world prices. The Common Market food taxes that are charged on food coming into Britain are the highest ever, with levies of over 80p per pound on beef, over 50p per pound on butter, 57p per pound on cheese, over 10p per pound on sugar, over 15p per pound on bacon, and over 7p per pound on poultry. I say that because many of my constituents do not realise how much the prices of important domestic food items are made up of taxes and tariffs, and how much these unnecessary prices diminish their standard of living.
When I hear my right hon. and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Prime Minister say that we need an abatement of wages and salaries, I am conscious that part of the original upsurge in wage demands was to accommodate increases in food prices. That was not in our interests. It created quite a different structural approach to British industry which, in my view, was damaging.
The most important of our world relationships is the one that we have in the English-speaking world. During the past year or so I have felt considerable concern, even alarm, at the way in which we seem to be turning away from the United States, which, after all, contributes to and guarantees our defence. I now hear suggestions in this counry that one of the merits of the Treaty of Rome and membership of the Common Market is that it diminishes the likelihood of conflict on the Continent of Europe and helps to advance our defence interests. That is a reading, but it is not one that is implied in the Treaty of Rome, nor is it factually so. NATO is the defence organisation to which we look. That is where we secure our independence.
With respect to my right hon. and hon. Friends, it is important to continue to emphasise the American connection. The history of this country shows us as an outward-looking people. We have sought our prosperity and place in the world by trade links and by setting up colonies in the old sense of the world—the Greek sense—implantings of Englishmen, Scotsmen and Welshmen who sought a life elsewhere. Those links were solid links. They stood us in good stead for many years. They now seem belittled, as if they were less consequential than the new extraordinary organisation centred in Brussels. That I do not want.
Even in view of the original lack of direction and cogency, which I regret, on the part of the American Administration in thinking out their policy on the European pipeline, I believe that they were right in arguing that it was not in Western interests to provide cheap finance and readily available manufactures to the Soviet Union and at the same time increase European dependence on the Soviet Union. I accept that the policy may originally have been badly articulated by the American Administration, but there is an underlying concern that Europe, by linking up and providing cheap credits to the Soviet Union, has strengthened the Soviet Union's ability to respond aggressively in Poland, Czechoslovakia, Afghanistan or wherever it deems it necessary through its own policy imperatives. That, in my view, must be wrong.
Moreover, how can it be right to subsidise the standard of living of Russians or enable them to divert resources from the feeding of their own people to investment in

803
armaments? We see an extraordinary disequilibrium in arms now between the West and East. That is not in our interests. Nevertheless, the basis of the Community seems to be the disposal of heavily subsidised surpluses that it has gathered, against the interests of the British people, to the Soviet Union, thus releasing funds from the Soviets' necessary expenditure on domestic consumption to aggressive imperialistic overseas adventures.
The developments within the Community during the past six months have given us great cause to pause and think of what the Community is about. We entered it almost in a spirit of defeat. The policy initiatives of the 1950s had come to an end. We did not know where we were going as a people. We were retreating from the Empire, but were not confident about the Commonwealth. We were not certain of our role in the world. There was a hesitancy within ourselves. Often, when we find a new policy objective, we oversell it. We married ourselves to the Community in a way that diminishes us. There is not the necessary objectivity and distancing from the decisions taken within the Community, and I deeply regret that.
I look to a British Government to consider their first interest as being that of Britain. All Governments claim that that is what they are doing, but the constant propaganda import from the Community makes me nervous. Why is it necessary to devote so many resources to selling Europe? We can judge the merits of each case as it arises.
I do not like the pipeline arrangements, and I shall be interested to hear what my hon. and learned Friend the Minister for Trade has to say. I do not like the sale of cheap butter and food to Soviet citizens, when our citizens could and should benefit on an unlimited scale. Food prices should fall significantly, but when that is suggested it is immediately countered by the argument of farm incomes. Yet there could be a cheap food policy together with high income support for farmers. The two are not incompatible. That point was never understood by the former Conservative Member, the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler), who bolted across the Floor of the House. Farm income support need not be dependent on the pricing mechanism in the home market. The two are distinct, and were once treated as such. Now we tax people covertly.
The common agricultural policy disguises what consumers pay to support agriculture. That is not a noble objective. When we distribute income and wealth within our own nation and within the community it should be a matter of discussion to ensure that we arrive at the best decision in the interests of those we represent. I am conscious that we represent the citizens of Britain. We are members of an English-speaking world. Our interest is overseas—in the larger world, and not solely inwards to a Europe currently in decline. I hope that that trend is reversed. I wish Europe well, as I am sure most Britons do, but our interests are fundamentally elsewhere. They are being distorted by the constant looking towards the Community as though it were the alternative to the role of an independent Britain within an inter-related English-speaking world.
12.13 pm
Mr. David Stoddart: The Under-Secretary of State said that this was one of the most important and relevant periods of the EC, and that Britain had recently been its President. So why on earth did the Government
804
arrange the debate for a Friday morning, and around a motion for the Adjournment? Bearing in mind all that has happened during the past six months—there have been some important developments—surely the Government should have arranged the debate for any other day, when most Members would be in the House rather than in their constituencies. They should have tabled a motion that was not only debatable, but amendable. One can only assume that the Government are so worried about the adverse developments of the past six months that they wanted to sweep the debate under the carpet.
This has been a significant period. We lost the veto on farm prices—not only on that occasion, but for ever. The House should not make a mistake about that—having lost it, we shall never retrieve it. The assurances given in the White Paper on the future use of the veto and the standing of the Luxembourg compromise will cut no ice. While we have been in the Common Market we have seen one erosion of our sovereignty after another. The loss of the veto on farm prices was another erosion. From now on, our power to have a real effect on the increase in farm prices year by year is over, or at the very least considerably weakened.
The assurances in the White Paper cut no more ice today than they did during the time of the referendum, when the then Government—who were Labour—with their pro-Market allies assured us that Britain's national interests would be protected by the veto and the so-called Luxembourg compromise. Yet there has been a further sell-out to the supra-nationalists in the veto on farm prices.
It is even worse than that. We have tried to undermine Denmark's veto on fishing limits. We told Denmark that it either agreed to the policy agreed by nine members or the other EC countries would implement it and impose it, if necessary by force, on Denmark. If anyone doubts that, he should have listened to the Minister of Agriculture, Fisheries and Food on the programme "World at One", when he made it absolutely clear that the Government would if necessary take forcible action against the Danes if they did not comply with the arrangement.
Hon. Members often tell us and the country that through membership of the EC we can build good relationships with other countries which are our European allies and partners. Is the way to do that by threatening them with force unless they adhere to an agreement reached by nine of the 10 partners? It is not. Far from assisting good relationships with other countries, membership of the EC undermines them. We quarrel not about great world affairs, but about small nitty-gritty items that offend one or another of us. If we are not quarrelling about fishing, we are quarrelling about finance. It is a continuing quarrel that undermines our decent and good relationships with the Community on world-wide common interests.
In the same period the EC, as my hon. Friend the Member for Grimsby (Mr. Mitchell) said, stabbed us in the back. I do not think that I can improve on that expression. The EC stabbed us in the back at a most crucial point in the Falklands war. Indeed, the EC's decision to renew sanctions for only a very limited period towards the end of that war could have resulted in the loss of further British lives and could have affected the possibility of a negotiated settlement. So there is no question but that the equivocation of our so-called partners in the EC during the Falklands war did injury to Britain and its people.

805
Even worse, some of our so-called European partners attempted to use the tragedy of the Falklands war to gain concessions from Britain in their own national interests. Those are not the actions of allies and friends. They are the actions of small-minded people who are out for their own personal gain, irrespective of the harm it can do to other people.
I hope that the Government took note of those actions during the Falklands crisis. I hope that they also took due note of the absolute commitment of New Zealand, Australia, Canada and other Commonwealth countries to our cause during the Falklands war. There was no backsliding by them. There was no stabbing in the back by them. They came to our aid and comfort at the earliest possible stage, they remained with us throughout and they remain with us today. The British people noted and greatly appreciated their commitment, even if the Government did not.
Before we joined the EC we were assured that the interests of New Zealand, in particular, would be protected. We have seen how those interests have been protected. New Zealand has lost access for its cheese, and its butter exports have fallen from 150,000 tonnes a year to 87,000 tonnes a year under the new agreement, but even the 87,000 tonnes are at risk.
The French Government have always disliked the continued importation of New Zealand butter into the United Kingdom, and they are now saying to us "Unless you abandon your principles concerning the export of cheap butter to the USSR, we shall block the importation of New Zealand butter into Britain." That is a blackmailing tactic. We are being called upon to abandon a principle which, rightly or wrongly, the British Government—supported, I believe, by the British people—have enunciated and upheld.
The New Zealand economy is at constant risk, and with it the jobs of many of my constituents who work at the Anchor butter packing factory in Swindon. If there is no further access for New Zealand butter, there will be no need to pack it in Swindon and my constituents will be out of a job.
The interests of New Zealand must be absolutely upheld by the Government, and absolute assurances must be given that there will be continued entry of New Zealand butter into Britain, not only for a number of years but for all time.
Mr. Dykes: Would it be possible for the hon. Gentleman's constituents to package British butter as well?
Mr. Stoddart: No doubt they could, but at present British butter is packed elsewhere, and I doubt whether the capacity available to Anchor would be needed by British butter packers. There are 200 jobs at stake but, even more important, the total economy of one of our Commonwealth countries may very well be at stake. Its future depends on the British Government holding absolutely firm in this matter.
I do not know whether people in Britain realise it, but if we were not in the Common Market we could be buying New Zealand butter at 48p per pound less than we pay for it now. The present high cost is due to the huge levy that is placed on the importation of New Zealand butter. People in Britain—never mind the cheap butter scheme that will be introduced over the Christmas period—could be buying
806
New Zealand butter permanently at 48p per pound less than they have to pay for it in the shops. As the hon. Member for Aldridge-Brownhills (Mr. Shepherd) said, the British people could buy a wide range of food commodities much more cheaply if it were not for our menbership of the EC.
Another important point—the hon. Gentleman touched on it in his speech—is that, apart from our net contribution through taxes to the EC, the British consumer pays a very high price in personal terms. As we heard earlier in the debate, the additional cost of food to the consumer because of our membership of the EC is £3 billion a year. That represents £60 in additional food costs for every man, woman and child in Britain. The cost for an average family is £240 a year—almost £5 a week and much more than the wage rise that the Government have offered workers in the NHS. That is how much British consumers pay in the Common Market.
Our membership of the EC has altered our farming system. Instead of engaging in the mixed farming on which our agriculture was built, we are farming wheat, oats, barley and maize on large tracts of grade 2 land which is unsuitable for those crops. Hedges have been removed, our environment and wildlife have been affected, and many farmers have been forced out of business by the CAP.
The White Paper refers to the European Assembly as the European Parliament. I remind hon. Members that the House passed the European Assembly Elections Act 1978 and I wish that the Government would pay attention to legislation and describe bodies properly.
If Euro-Assembly persons do nothing else, they always vote themselves extravagant expenses. Their secretarial allowance is more than twice that of hon. Members, even though Euro-Assembly persons have virtually no constituency work, whereas we have a great deal. The European Assembly is extravagant and there is not much that we can do about it.
Mr. Guy Barnett: My hon. Friend says that Members of the European Assembly have little constituency work. I am sure that he has noted paragraph 10.1 of the White Paper which refers to proposals for
"a regional list system of proportional representation".
If that ever came about Members of the Assembly would have no constituency work.
Mr. Stoddart: My hon. Friend is right and that is one reason why he and I, along, I hope, with most other hon. Members, will vote against such a system. It would be against the best traditions of parliamentary democracy and would not help the constituents of Euro-Assembly persons.
I think that the public knows that extravagant expenses are paid by the Assembly, but less well known is the lax method of control over Assembly funds and expenses. I am sure that the Government have noted the Court of Auditors' special report on the members' cash office. It is not possible to examine the report in detail, but the court found that £33 million was paid in advance expenses without justification. It does not cost much more than £33 million to run this Parliament, yet the European cash office advanced that sum for expenses without justification.
Advances were given to cover secretarial expenses. Those were clearly unwarranted, because secretarial salaries are paid direct to secretaries. What is going on? The Court of Auditors criticised bookkeeping generally,

807
the issuing of blank cheques and the lack of information on cheque stubs which, it said, made the proper auditing of accounts impossible.
What are the British Government doing about that sorry state of affairs? I should have thought that they would be most anxious about it. The funds available to the European Assembly seem to constitute a bottomless goldmine into which Assembly persons can dip their fingers ad lib and without proper control. I make no allegations against individual members of the European Assembly. I am sure that they are perfectly honest and do what they can within the system.
A Government so determined to claw back a pound or so from British pensioners should be worried about an accounting system that allows millions of pounds to be drawn without being properly accounted for. I trust that that matter will receive the Government's attention and that a report will be included in the next six-monthly White Paper.
Our trading position has been mentioned by many hon. Members this morning. It is amazing that we can take so lightly a frightening deficit in manufactures of £2·4 billion in a six-monthly period. On an annual basis that means £4·8 billion. The deficit is still rising, and represents the loss of about half a million jobs in this country. It is no use saying that that deficit is offset by our oil exports. We would have been selling oil to the EC whether or not we were a member of that organisation. Any fool can sell oil anywhere in the world at the moment. The Minister knows that the export-import ratio has fallen from 131 per cent. in 1970 to 75 per cent. in 1982. That spells disaster for our manufacturing industry.
Imports are flooding into this country, to the detriment of our manufacturing industry. It is not just Japan, as has been noted, which is smashing Great Britain as an industrial nation; it is the EC. There is an argument that we cannot withdraw from the EC because we do 37 per cent. of our non-oil trade with it. That argument is not only fallacious but downright dishonest, because those who use it know that withdrawal from the EC does not mean that we cease to trade with it. It is more in its interests to trade with us than ours to trade with it.
The idea that there will be a great deal of acrimony and resentment is frankly nonsense. Europeans know that they need our market. When a future Labour Government withdraw from the EC it will be done on an orderly basis and to the country's advantage.
A great deal is made of the fact that 37 per cent. of our trade is with the EC, but it is dangerous to put too many eggs into one basket. It is dangerous for the country and manufacturing industry to increase trade with a comparatively small part of the world to the detriment of our trade with the wider world. Our trade with the rest of the world is well in surplus. From October 1981 to March 1982 our surplus was no less than £3,297 million. Without that surplus our balance of payments would be in catastrophic deficit and our standard of living would be very much lower. The EC is a huge millstone around Britain's neck, pulling us down into an abyss of industrial desolation and, after North Sea oil runs out, into a period of absolute poverty.
Government spokesmen and other Euro-fanatics in the House try to represent as nutters and cranks those who wish to end the rape of British industry by the EC. The most recent opinion public polls show that there are 24 million of us in the country. Our accusers are the real
808
nutters. Who in his right mind would continue to bleat about the benefits of membership when the facts, day after day, week after week and year after year, show otherwise? A gadarene madness has come over them. No facts, no arguments, not even the evidence of their eyes and intellect, can divert them from the path to the precipice.
These debates are useful. They show the Government and the country that there will be continuing dispute over our membership. They enable us to show people the detriments of our membership. But I look forward to the day when the debates will not be necessary, because we shall have withdrawn from the EC, to our great benefit.
12.42 pm
Mr. Hugh Dykes: A speaker once told an audience that he did not mind if people occasionally looked at their watches as long as they did not take them off and shake them to make sure that they were still working. That is what my hon. Friend the Member for Flint, West (Sir A. Meyer) was doing when the hon. Member for Swindon (Mr. Stoddart) was concluding his remarks.
I agree with the hon. Member for Inverness (Mr. Johnston), who is unfortunately out of the Chamber, that it is depressing that EEC debates always turn into a ritual argument about our membership. The hon. Member for Swindon took almost the same time and used almost the same text as in his previous speeches on the subject. He hardly dealt with the White Paper. I do not wish to make the same mistake. It is a disservice to the nation to keep on with the fundamental and misleading argument about our membership. The matter is, appropriately, to be debated in other forums and not in what should be functional and practical debates about items of EEC policy.
My hon. Friend the Member for Flint, West and I can be extremely enthusiastic members of the Community while having many detailed individual criticisms of aspects of its policy. That is normal and occurs in the other member States. On a recent visit to the French National Assembly EC delegation—their nearest equivalent to our EC Scrutiny Committee—
again and again Deputies assailed me with the unanswerable question of why the question of our membership remains so controversial when membership is no longer controversial in the other member States, with the possible marginal exception of some people in Denmark. It is sad and depressing that I cannot answer except to say that it is due to the hysterical outpourings of an absurd and outdated Labour Party which has wrongly decided that the issue is a vote winner.
The British public are well aware of the intrinsic arguments against leaving the Community. They have much more wisdom than the hon. Member for Swindon. They know, too, that if by accident the Labour Party won the next election—an impossibility of course; I am speaking theoretically—and became the Government it would change its mind, as it has done on previous occasions. The Labour Party once said that it was the Commonwealth party and would never let its kith and kin down, but the moment it took office it became enthusiastically in favour of the Community. The Labour Party's stance is a charade based on its internal weaknesses, for which we have enormous sympathy, but it does not take us any further.
The dilemmas are encapsulated in the White Paper and the following sums up the position:

809
"As a Community we exert far more influence than we could do as individual countries. The recent EC/US steel agreement is an example of the fruits of that unity."
It is interesting to note that the United States has an enormous trade surplus with the Community. The quotation continues:
"The member States of the Community represent the largest world trading bloc, with about a third of all world trade. And this trading strength has brought new responsibilities in a world haunted by the spectre of protectionism. Europe's position is complicated by the fact that we combine a philosophical belief in a liberal trading system with policies of support and regulation in particular areas. Those policies are defensible, given the immense structural problems we face in traditional industries such as steel, shipbuilding or textiles, and given the need to protect and regulate European agriculture. But we must not let these exceptions come to dominate our general commitment to open trade."
That was said by the Minister of State, Foreign and Commonwealth Office in Edinburgh on 5 November 1982. It is a summary of the dilemma described in the White Paper that faces the Community and the whole of the Western world. It is related to what the right hon. Member for Battersea, North (Mr. Jay) said in a striking letter to The Times in the late summer, when he stressed the need for the Western world to revive itself through deliberate policies of renewed economic expansion and assistance to get it going again.
The same dilemma faces the European Community. It is in decline in a recession which threatens to become a total depression. Unless the Community, the Western world and our own nation grasp the challenges, the outlook will be so bleak as to make almost irrelevant some of the secondary arguments that will face us at the next general election. The challenge can be grasped only by reinforcing the cohesion and strength of the Community and working together.
The steel agreement is a striking example of the co-operation that can be achieved, aided and abetted by the anxieties of steel producers in the member States. That is the only way to survive for the moment. Steel producers can return to a more liberal regime only when the Western world expands again, if it does. Some people wonder whether it ever will.
That is a reinforcement of the detailed arguments for our membership of the Community. We need that as an extra and an engine for economic revival, even more than we did when we were not confronted with the terrifying and deep-seated problems involved in the lack of economic growth and the looming depression in the Western world.
British Ministers have certain priorities within the Community. They are referred to in the White Paper and one or two have been mentioned today. I cite, for instance, the references to the need to expand the European regional development fund and to concentrate Community aid on unemployment blackspots. That is not, for once, a controversial issue between the two sides of the House.
We have heard how woefully inadequate are the funds at the disposal of the Community for dealing with such problems. Funds can be used more rationally and scientifically on a European basis than can the differential payments and support systems operated by each member State, although they, too, remain valid and necessary.
We must face the reality of the need for a larger Community budget becoming bigger each day. It is a
810
convenient way of continuing to reduce the agricultural ratio of the total budget. British Ministers and other members of the Council of Ministers increasingly have to face the challenge of increasing the size of the Community budget.
We have been let off the hook in the past few years. We have been surprised that the 1 per cent. ceiling threshold has not been breached, partly because of the complicated extra expansion of monetary receipts into the budget, and partly as a result of extra inflation, which was more than was expected in a high inflationary period. However, that will not go on for ever.
I ask my hon. and learned Friend the Minister for Trade to think again about the need for a larger Community budget. Important things should be done in the Community that are not being done now, such as industrial regeneration and more anti-unemployment schemes on a bigger scale in the member States, bearing in mind that the decline that has taken place in the outer areas of the member States, not only in Great Britain, has been sharper because of the ferocity of the recession. That means that rescue by detailed outlays or detailed schemes will be more difficult than we had expected.
I should welcome a larger Community budget. There is nothing sacred about the 1 per cent. ceiling. There is a curious dichotomy among Labour Members that public spending in Britain in domestic terms is wonderful, sacred, heroic and religious, yet public spending in European terms is wicked and immoral. They think that foreigners have horns and tails and that they are doing down the heroic British. That is not so. A Community that is to add to its future coherence and economic strength will wish to have a much larger budget that deals with more non-agricultural things.
That being so, we come inevitably to whether the Community budget should develop other sources of revenue than those that we have at present, which we think of as the VAT equivalent resources, Customs duties and levies. Should we think of an oil energy levy? That is a difficult matter to develop through Community channels, because of the attitude of the other member States. However, it would benefit this country overnight. Do we consider— to me it is not a terrifying prospect, but a rational one—the idea of the Community developing its own debt ratio in the budget going beyond the existing Ortoli facility and the much more marginal activities encapsulated in the European Investment Bank?
There is another vital area, not only for this country, but for the whole Community. It is all very well to have a so-called Common Market and a free market in industrial products, which we discussed earlier, but how slow is the liberalisation of services in the Common Market? Insurance has been mentioned in the debate. The non-life insurance directive is bogged down in the Community channels of debate and decision making. It is a scandal that vested interests in certain member States have prevented a European-wide expansion of the insurance industry. That strikes at British interests. I am the first to mention that, because the British insurance industry is the best in Europe.
I hope that the Government will cease to be bland and will become aggressive about the need to expand the insurance industry in the rest of the European countries. If they reassure the weaker insurance companies and industries in the member States, the free market and

811
private enterprise system will introduce all sorts of co-operative arrangements. There may be mergers between companies, which will reassure those who in the other countries wish to see a greater expansion of the insurance business than now. At present there are restrictive habits in those countries.
It is a matter not only of companies and private activity, but of different legal systems and a different traditional Government protective and control system in other member States. That enormous area must be covered energetically by the Department of Trade so that a free regime can be started. However long it takes, we should make much more energetic moves.
Air transport should not just be left to the brave, private efforts of my colleague Lord Bethell, who is the Member of the European Parliament representing my area. He has taken his own initiatives and risked his own resources to take his case through the courts as a private individual. Official action is needed, not only to obtain harmonisation of air transport arrangements on a larger scale, which includes the inter-regional air services directive, but to lower air fares.
As for the common agricultural policy, I note that the White Paper refers to the need to eliminate existing structural surpluses and to achieve a greater balance between livestock and cereal prices and so on, all of which have become familiar themes in debates in the House. More energetic moves are being made to control annual price increases. I should still like to see the Council of Finance Ministers involved in the final stages of those discussions in the Community, but I am afraid that that is not to be, and we now have the threshold quota system beginning. But more than that will be needed in the future, and I should like to see a return to the old idea of an automatic price reduction system once items went into surplus. The more automatic that it was, the better it would be in reducing the controversial effects and arguments between member States when surpluses started to accumulate. Members of the Labour Party are right to regard these matters very seriously.
In paragraph 10.1 of the White Paper there is a reference to the European Parliament. I shall not continue the malicious attack by the hon. Member for Swindon against Members' expenses. In this country they have very large constituencies, and they must have proper expenses if they are to serve the public in their areas. It is untrue to say that European Members do not receive a great many letters from their constituents. Admittedly they are dealing with much bigger regional problems, and so on, than we are as national Members of Parliament with our local problems and with constituents, but it is wrong to give the impression that Members of the European Parliament get expenses for doing no work. Their work is building up as the public gradually get to know some of the mysteries of the European Parliament and what it means.
Mr. Spearing: Mysteries?
Mr. Dykes: They are mysteries, because no one here explains them properly. The European Members do, but it is a big job and they have very large constituencies. They are mysteries, but they should decline as the public take more interest in the European Parliament as its strength, cohesion and functions develop.
There is a important statement in the second part of the paragraph. It says that
812
"Member States should give their nationals the right to stand and to vote irrespective of their place of residence in the Community."
This is a vital subject for people in this country who are looking at it sympathetically from the point of view of British residents in other member States, but for those directly affected, in whatever capacity they work, it is a matter of burning, passionate interest that they get justice as soon as possible.
It is not only the electoral system next time that will be of vital importance. I agree that there should be a change to a proportional system as soon as possible, and I voted for the regional list system in the last European Parliament elections legislation. It is essential that the British subject residing anywhere in the Common Market be given the right to vote as soon as possible. A campaign is developing by British residents in member States which will build up and which is gaining enormous sympathy among hon. Members who spare the time to give it any thought.
It is terrifying to think that the mother of democracy and the country that prides itself on having a pristine system of elections and public representation is almost the only member State that does not allow its nationals who are resident anywhere abroad to vote in its elections. But even if we cannot give the vote to British residents elsewhere in the world, let us at least get the Home Office and the Foreign Office to work together on a plan to allow the vote to British residents in EC member States. It was a depressing experience when last we had a major debate on the subject, because it was obvious that Home Office bureaucrats had fed their Ministers with the usual stock replies about it being far too difficult to organise and very complicated.
At the same time, the Spaniards, in their first elections for 40 years, allowed up to 3·5 million of their countrymen living overseas to vote without any difficulty through a system based on registration with consulates and sub-consulates. The spoilt ballot papers could be counted on a couple of fingers of a couple of sets of hands. It is depressing if we, as the ancient democracy of Europe, cannot organise a system for the next set of elections in 1984. Like other hon. Members, I shall become increasingly angry unless justice is done to a large number of people who should have the right to vote. They are disfranchised unfairly and unjustly. This may seem a small point, but it is a big issue for those affected and for hon. Members.
1.1 pm
Mr. Christopher Brocklebank-Fowler: Not for the first time, and, I hope. not for the last, I find myself in considerable agreement with the hon. Member for Harrow, East (Mr. Dykes). His sympathy for the Community and his understanding of the way in which a living community works are an example to many hon. Members who appear not to have the faintest idea of the great opportunities that lie ahead if only the people of Western Europe can co-operate in a more constructive way. I agree with the hon. Gentleman that one feature of these debates is the depressing certainty of hearing those who hold opposing views.
It is also depressing that we should consider the budget in the light of an assumption by the Government that the world recession has nothing to do with us but has been forced upon us by events beyond our control. I take some encouragement from being reminded by the hon. Member

813
for Harrow, East that the Community accounts for about one third of the world's trade. The House should consider carefully whether a trading group with that proportion of the world's trade should be playing a much more positive and significant part in taking the world out of depression.
I suspect that far too many people in this country and perhaps throughout the rest of Western Europe have grown accustomed to the idea that the United States economy has traditionally led the world out of depression. Many people misunderstand the changed position of the United States. It is now a substantial importer of raw materials and has become to a far greater extent a competitor of Western European countries for exports. It is therefore less able to play it's former part in helping the world out of recession. The Government should consider much more carefully than appears evident from a reading of the White Paper the possibility of leading a movement in Europe and out into the world that would play a substantial part in expanding the world economy.
I should like to refer to some of the details in the White Paper and express reservations and concern about some aspects of policy. The first relates to enlargement. I should be doing less than proper duty to my constituents if I did not remind the House of the considerable concern that exists among those engaged in British horticulture, particularly the salad crop sector, if there were not to be sufficiently long transitional periods for the applicant countries, particularly Spain and Portugal, to enable the British industry to adjust to the substantially changed conditions that will undoubtedly exist following their accession.
On trade in general, I was pleased to note the Government's commitment to stand out against protectionism in the preparatory meeting of GATT. Further to the view that I have already expressed, I stress the importance of recognising that simply stopping protectionism will not take us out of the slump. The international community will have to consider the international debt and liquidity problems which are substantial barriers to the expansion of trade. I genuinely believe that Britain, through her membership of the Community and of the Commonwealth and her special and oft-proclaimed relationship with the United States, has a particular role to play as a catalyst in getting the international community to deal with these important problems.
Only last month, I visited Nigeria and I was struck by the fact that that great, oil-rich country, with substantial resources, cannot develop as a customer for us because of its short-term debt and liquidity problems. Unless that country can reschedule its international debt and raise new loans in the short term, considerable damage may be done to the volume of our trade. There will thus be consequential effects on employment in this country if Nigeria cannot sustain the level of imports necessary to its development that it has sustained in the past.
I welcome the Minister's brief exposition of the new Community proposals on aid and development. He told the House that the Government were inclined to consider the new proposals fairly seriously, but he did not feel constrained actually to tell us the Government's view. Do the Government accept the main principle of the new proposals that aid from the Community to the developing countries should in future have as its highest priority the
814
development of food production throughout the developing world to enable the developing countries to sustain themselves and their growing populations in the future? Do we share that commitment to play a part in international agricultural development?
On funding, the Minister said that he did not think that the Government would be able to go along with the Commission's proposal that 0·1 per cent. of the Community's budget should be earmarked for aid and that the whole of the Community aid programme, both the currently budgeted part and that which is at present outside the budget, should be put together in the budget and increased on an annual basis to 0·1 per cent. of the budget. What is our position on that?
I note from recent statistics that, whereas the British contribution to the European development fund EDF IV in the years 1976–80 was 18·7 per cent. of that fund, our contribution to EDF V for the years 1981–85 will be only 17·6 per cent. The Minister said in opening the debate that he thought it unlikely that our contributions would increase, but he did not say that he thought that they would decrease. May we have confirmation of that?
Mr. Spearing: The hon. Member for Harrow, East (Mr. Dykes) said that the European development fund should be brought more to the centre of the budget. As the SDP is wholly enthusiastic about the European Community, is it equally enthusiastic about the European development fund or does it have some reservations about it?
Mr. Brocklebank-Fowler: We have some reservations about the working of the fund, but the Pisani proposals show that the Community may be reconsidering the efficiency of its aid programme. If the new proposals were endorsed by member States, the SDP would have far fewer reservations about the working of the fund.
Mr. Pisani's proposals envisage a reduction in food aid and, perhaps just as important—I hope that the Minister can reply to this either now or in writing later—where food aid is believed to be inappropriate in some countries, that the cost of the food aid could be given to support alternative projects. Do the Government support the idea of increasing funds at the same time as reducing food aid? It must concern the House that, of the £158 million that the United Kingdom gave to the European Community in 1981, about £72 million was for food aid.
As Mr. Pisani said in his excellent report, food aid benefits countries only when it is used to overcome short-term disasters. However, if food aid becomes simply a convenient way to dump European surpluses on alien populations, it could cause immense harm to their native agriculture and they will develop a dependence on imported food, which is a major disincentive to them to grow the food that they have traditionally used, in the quantity that they require. I hope that the Government will consider the food aid element of our contribution and that they are as anxious as I am to see food aid reduced and replaced by equivalent amounts to enable developing countries to improve their agriculture and food supply.
I say to Labour Members that the pursuit of a cheap food policy is wholly at variance with retaining the standard of living in our rural areas. In my constituency about 19 per cent. of the work force is employed on the land. Only this week we discussed how the standard of living of the agricultural workers, many of whom I

815
represent, has fallen behind that of industrial workers, while at the same time there has been a substantial loss of agricultural jobs. The national figure has fallen from 3·2 per cent. to about 2·8 per cent. That is a significantly lower proportion of the work force than in other member States, in some of which more than 10 per cent. of the work force is employed in agriculture.
Before we embark on a cheap food policy, we must consider not only the impact of increased rural unemployment but the price and constant availability of food. Since the Second World War we have taken for granted the availability of food at a price that we are prepared to pay. Once one starts to play the international food market and relies on buying cheap surpluses from other countries, the constancy of supply is at risk. The House will recall that a few years ago there was not enough sugar on the world markets to meet the demand in Britain and many supermarket shelves were empty. In its enthusiasm for cheap food, the Labour Party must consider the fact that it may put at risk the continuity of supply.
That is particularly likely at a stage in the world's development when world population is increasing as rapidly as it is. In Nigeria, for example, the population is now 75 million to 80 million, and it will be over 100 million by the end of the century, in 18 years' time. Populations are growing significantly in developing countries, and there is a falling capacity for the time being to supply food from their own resources. For that reason, it would be foolhardy of any British Government—Labour, Conservative or Liberal-SDP alliance—to go for a cheap food policy which puts at risk the possibility of continuing food supplies.
Regional industrial affairs were mentioned by the hon. Member for Harrow, East. The United Kingdom has been less than successful, for example, in using funds from the European Investment Bank. I hope that the Minister and his colleagues will consider carefully whether there is a case for opening up the application of those funds to areas outside assisted areas.
Again, I should like to make a constituency point. In West Norfolk, unemployment in the northern part of my constituency is about 20 per cent. In other words, one person in five is out of work. We are not an assisted area. I believe that the European Investment Bank could play a major part in opening up the Wash shell fisheries, making them a source of both home-produced protein and home employment. Both public and private interests are involved in that industry, and it should be possible to take a scheme to the European Investment Bank, even though the area is not an assisted area.
I see in the current circular of the European Investment Bank that, although Britain has 21·875 per cent. of the capital in that institution, the amount borrowed by the United Kingdom last year, 1981, at 252·7 million units of account, was equivalent to only 7·5 per cent. of the borrowings. We are a 21·8 per cent. shareholder, and yet we enjoy only 7·5 per cent. of the borrowings. Italy on the other hand, which has a smaller share of the equity at 17·5 per cent., enjoyed over 50 per cent. of the borrowing from the European Investment Bank. We should look into the matter carefully, and ensure that Britain gets its share.
I wish to contribute to the debate that we detect between various members of the Labour Party by replying to what was said by the hon. Member for Grimsby (Mr. Mitchell), who accused all of us of being rotten economists. I should like to read an extract from a paper, the authorship of which I shall disclose in a moment:
816
"Britain will survive and prosper in the long run as an exporting country, not just by controlling the rate of growth of imports. We are concerned that the next Labour Government's policies might result in increased tariffs and other obstacles confronting our exporters".
It says further on:
"in our judgment the process of withdrawal would be longer, more complex and more prejudicial to the position of Britain in the world than the Labour Party at home seems to believe … we firmly reject that substantial benefit would accrue to Britain from leaving the Community. There is no guarantee that we could negotiate favourable trading arrangements to replace the Community market and as a result we would be more economically vulnerable than the NEC foresees."
Those remarks are not from a Conservative, Liberal or SDP member. As some colleagues will know, they were made by the British Labour group in Brussels, and put out in a policy document earlier this year. When comparing the document with the latest offering from the Labour Common Market safeguards committee, it appears to me that the Labour group in Brussels is significantly better informed about the detail of the Community and the benefit that it confers—not only on them but on our country—than the Bennites from Hampstead, or wherever they come from, who have written a rather trivial document.
Members of the Labour Party, in advocating withdrawal from the Community, advocate a substantial increase in unemployment in Britain. There is absolutely no way in which they can gainsay that charge. If when they go to the country they put forward withdrawal from the Community as a major plank of their election manifesto, they deserve to lose—as I believe they will.
1.21 pm
Mr. Nigel Spearing: The hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) referred to some unnamed document as being prepared by the Bennites from Hampstead. Had he given the title, we might have identified some of its authors. I suspect that they include my right hon. Friend the Member for Battersea, North (Mr. Jay).
The hon. Member for Harrow, East (Mr. Dykes), in a suitably and characteristically smooth contribution, lambasted my hon. Friend the Member for Swindon (Mr. Stoddart) without in any way attempting to meet any of his arguments. I conclude, in the tradition of the law, "no argument—say nothing". I am sorry that the hon. Gentleman is not present to hear me say that.
However, the Under-Secretary of State is here. It would have been better for him and everyone had he moved the motion to take note of Cmnd. 8669—the White Paper referred to by several hon. Members. It is a six-monthly report. I hope that when I raised a point of order at the beginning of the debate I showed why it would have been better to do that, rather than hide these matters in an Adjournment motion.
That the Minister had something to hide was shown by his immediate rush to the Falklands factor, almost in his opening sentence. In reviewing events in the EC, he rushed to the South Atlantic, which was rather telling—
Mr. Rifkind: It is not surprising that my first comments related to the European Community's response to the Falklands crisis. If the hon. Gentleman had read the document, he would know that it was the first matter that it covered.
Mr. Spearing: That may well be. Paragraph 1.2 deals with the Argentine and the Falklands. However, the title

817
of the White Paper is "Developments in the European Community". No institutional or financial development resulted from the European support—indeed, there may have been a reverse. I recall that at one time the EC extended its sanctions by just one week—or was it two? It was rather like a judge giving damages to the applicant of a halfpenny. That was the impression created by the support given at that time. There might, particularly in the case of Italy, have been understandable reasons for some of that country's reservations.
I wish to concentrate on three matters—the so-called veto, the budget prospects that we face, and the problem of "capping the CAP", but before doing so I want to refer briefly to trade, and I hope that my question and challenge will be taken up by the Minister of Trade.
We all remember—although some may wish to forget—that the White Paper of the right hon. Member for Sidcup (Mr. Heath) in 1971 claimed that our balance of trade with the EC after we had joined would be positive and substantial. It has been substantial but in respect of manufactured goods—the El Dorado that was held out to us—it has been negative to the extent of £5 billion a year. My hon. Friends have spoken about that.
Any responsible Government—I am not saying that it is the responsibility of the Foreign Office or the Department of Trade, but it is certainly the responsibility of the Department of Industry—should analyse the extent to which the imbalance of trade is destroying certain sections of our industry. In an intervention when my hon. Friend the Member for Grimsby (Mr. Mitchell) was speaking, I suggested that it was not just a matter of unemployment but conceivably of industrial death.
Recently I met an industrialist who had a very successful line in export electronics, and he complained that he could not get any British manufacturer to supply large quantities of simple relays. He said that in the last few years the range of manufacturers of that product had been reduced and that he could now get it only from Italy. The Government should undertake a survey to find out where fundamental and widely demanded items of manufacturing are being destroyed in Britain. There must surely be a connection between that and the imports, particularly from West Germany, in manufactured goods, which, as we heard earlier, amount to £3 billion of the imbalance of £5 billion.
The veto is mentioned on page 24 of the White Paper. The apparent disappearance of the Luxembourg compromise—disagreement would perhaps be a better word—illustrates the hollowness of what was said at the time of our entry and also at the time of the referendum. Enormous emphasis was placed on the Luxembourg compromise and the Government, understandably, still place great emphasis upon it. No one in this House—with the possible exception of the hon. Member for Harrow, East and the right hon. Member for Glasgow, Hillhead (Mr. Jenkins)—would disagree that we should hang on to it, but where is it now? It is in the depths of the Genscher-Colombo proposals.
Those proposals we unveiled some time ago under the heading of a document entitled "Towards European Union". I understand that proposals for entrenching the Luxembourg compromise—or Luxembourg disagreement—in some measure are being discussed in relation to that document, but the problem is that the
818
document has as its aim further integration and European union. We read in the six-monthly report that there are still matters to be discussed in disagreement about it. No wonder, for when it appears we shall no doubt be asked to proceed further along the road to European union if we are to retain the veto in certain circumstances.
It is very likely, because it has been publicly mooted, that when the veto comes back, not in treaty form but in terms of an arrangement or convention—the sort of thing that we understand very well in this House—it will be in the form of requiring the nation State concerned to give reasons. However, this country may have to pay a price to hold even that. That is a constant feature of the EC. It is not just our budget contributions; it is a much bigger price in terms of jobs, industry, bankruptcies and, perhaps, a loss of power of the House and the nation.
I do not believe that sovereignty is absolute. There are various matters over which we do not have absolute power, but membership of the EC gives us less choice than we would otherwise have. That is the key to the reason why many of us object on constitutional grounds, let alone other grounds, to our continued membership.
The status of the European currency unit and the function of the European monetary system may be matters for debate in the next few months. Much has been said about a European initiative for reflation. The ECU is not an international currency. An attempt may be made to make it such a currency, in order, it will be said, to boost trade and employment, but if that happens the mechanism of the EMS will become much more important and the system will become a more important international monetary mechanism.
In those circumstances, the pressure on us to join the EMS would be much greater and our subservience to the authorities of the system, whether the central banks at Basle or the Bundesbank in Germany, would also be greater.
Who is to say that we could resist such pressures? We have to get a budget refund and it is likely that the Prime Minister will use strong-arm methods to try to get it. However, if we are to get a refund we may have to pay a price either in terms of the Genscher-Colombo proposals or in a requirement to join the EMS, with further reductions in the powers of this Parliament and of Britain as a self-determining State.
Even apart from the United Kingdom's requirement for a refund from the budget, all is not well. If there is to be an enlargement of the EC, where is the money to come from? It is unlikely that all the legislature of the EC will agree to a 1 per cent. increase in VAT. Some might, but I would expect a lively debate in the House and considerable doubts in the Conservative Party if the Government changed their policy. There would have to be some big changes in exchange for that.
It is much more likely that, as suggested in the speeches of some Commissioners a year ago, there will be attempts to produce a new source of revenue, perhaps involving oil or energy as a whole. That would obviate the necessity of going to each member State for permission to increase the direct taxation limit. If that happened, it would show yet again the lack of power of those legislatures.
Even if that course were adopted, there would still be great pressures on the Community budget. Let me list them. First, there is the onward march of the CAP. Secondly, there is our proper requirement for an

819
adjustment of our budget contribution. Thirdly, there is the agreed and considerable net requirement for Spain and Portugal.
Nobody believes that Spain and Portugal would be net contributors to the Community. The amount of their net deficit and the extent to which the rest of the Community will have to help them cannot be quantified because Mediterranean agricultural products such as olive oil and wine and some form of regime for them will be highly controversial and expensive. It is yet another charge on the future of the EC budget. West Germany, which is the largest net contributor after ourselves, has finally awoken to the fact that it is having to pay an even greater proportion to the budget. West Germany has elections in March. We all know the effect of territorial elections upon member States and their attitudes to the EC.
Although there are those who advocate increasing the EC budget—the hon. Member for Harrow, East is foremost among them—the difficulties in raising the wind will be considerable. The demands on that budget will be inexorable. It will produce a great deal of disagreement on the lines outlined by my hon. Friend the Member for Swindon against the interests of what we regard as a real community. We say that the EC is not a community. In a community ones gives and takes without regard to the finer aspects of money. The EC is always arguing about money and its finer aspects to the detriment of good international relations.
One of the ideas proposed to solve this apparently intractable dilemma is to spend more on projects other than agriculture. That assumes that the money will be available to do so. The problem that then arises is as to what that money will be spent on. The hon. Member for Norfolk, North-West suggested regional aid. If there were to be regional aids, we know that they would be distributed in different parts of the Community. Just as we have arguments in the House about Ireland, the North-East, the South-West and London and so on, nobody will approve additional expenditure unless they think that they will get a reasonable cut of that regional aid. It is most unlikely that West Germany will benefit from that.
Even if those regional aids are made, the power to decide where they shall fall will not rest with individual States; it will be with the Commission and the Council. If there is agreement to spend more on social, regional, industrial or scientific projects, there will be further argument about where that money shall be spent. In the end that decision will be made not by those who contribute the money but by the centralised bureaucracy and Council of the EC.
I do not believe that hon. Members, the public or our agricultural lobby have realised the trouble that we are in with the CAP. On 19 July, in a written answer, the Minister of Agriculture, Fisheries and Food said that we exported nearly 3 million tonnes of cereals in 1981. The cost of supporting our intervention facilities in the United Kingdom was £630 million last year. We have had a good harvest this year, and I suspect that that will increase the calls on that expenditure and mean that more ships will leave Southampton or the east coast ports loaded to the gunwales with grain and each subsidised by £70 or £80 of public money. The hon. Member for Huntingdonshire (Mr. Major) referred to things going well in East Anglia and of taking advantage of what the EC has to offer. I notice that the hon. Member for Eye (Mr. Gummer) is nodding his head. It would be interesting to know. If it is
820
related, it is at the expense of the CAP and the taxpayer; in the end it is at the expense of a corrupt and rotten system.
The hon. Member for Norfolk, North-West says that we should consider the workers. I doubt whether agricultural workers have seen much of the apparent prosperity. British agriculture's prosperity is only skin deep. As my hon. Friend the Member for Swindon said, our agricultural structure is being increasingly distorted by the wrong policies of the CAP, one of which is the high export subsidy on grain. The CAP does not promote the balance that we had under the previous Williams Acts. The NFU is one of our most effective unions and it is just waking up to that fact. I would gladly debate at an NFU branch meeting the motion that the CAP is unfitted to the British consumer and to British agriculture. I represent an urban constituency but I have the long-term interests of a balanced British agriculture at heart.
The CAP produces real prosperity for neither farmers nor farm workers. It has produced an increasing imbalance in our agriculture. The Halvergate controversy is an example of that. The Ministry of Agriculture, Fisheries and Food still pours large sums into drainage and improvement schemes, sometimes even without the permission of the local agricultural authority. That is an example of how unsuitable agriculture is pressing on natural resources.
The EC is well aware of the difficulties with the CAP, but no effective means has been adopted to cap the CAP. The issue was evaded when the British Government had the opportunity to take action. In the famous 30 May mandate debates when the Prime Minister tried to get the money back, the final agreement specifically excluded fundamental changes to the CAP, although the Government persistently pretend that such changes are being effected.
The key is in the Treaty of Rome. Article 39 lists as an objective of the CAP "to stabilise markets". Article 40 mentions
"measures required to attain the objectives set out in Article 39, in particular regulation of prices".
The CAP is entrenched not only in the mouths of Ministers but in the Treaty. It will be difficult to cap the CAP in a meaningful way. Without that, considerable difficulties will remain. The CAP was one of the main reasons for founding the EEC. Far-seeing people say that it might even destroy it. It is the modern equivalent of the land overflowing with milk and honey, if we substitute sugar for honey. It is obscene to have that situation in a world where there are so many needs.
The CAP is a legal racket. It gives legality to what is morally indefensible. If the policy can be morally defended in Germany and France, it certainly cannot in the United Kingdom. The EC is not a community any more than our so-called partners are partners. We are not partners under the treaty, but competitors. The CAP harms our basic agriculture and leads to the destruction of some of our most fundamental industries and the skills and employment that go with them.
For the reasons that I have described, the requirements of the Treaty of Rome are increasingly damaging to Britain, particularly to the initiatives and overseas co-operation which we need in a world that should be internationalist. The sooner we detach ourselves from the Treaty and maintain real friendship and co-operation with our European neighbours outside the EC, the better.
1.45 pm
Mr. Guy Barnett: With your permission, and that of the House, Mr. Deputy Speaker, I should like to add a few remarks. It is always a pleasure to follow my hon. Friend the Member for Newham, South (Mr. Spearing) who has devoted himself to this subject for many years.
Several hon. Members expressed depression about the debate. I do not share their depression. The document relates to subjects such as the budget, the CAP, steel imports, the problems of trade and many other issues. All those topics have been justifiably discussed today. They are contentious and are of concern to hon. Members and their constituents.
I referred earlier to the Luxembourg compromise. That is a greater issue than some hon. Members admit. The Under-Secretary of State did not appear to think it as important as it is. My argument was misunderstood by the hon. Member for Inverness (Mr. Johnston). I did not say that people misunderstood the deal at the time of the referendum. I said that they were actively misled by the Government and the pro-marketeers' propaganda into believing that the British people would have a cast iron veto. We have been told that there was nothing legal in that. That was why the Labour Party said that the Luxembourg compromise should be written into the legislation and form part of the Treaty. That did not happen. The compromise was overturned by what happened on 18 May. That is of major importance because it removes the legitimacy from the acceptance of the referendum result and the decision to remain members of the European Community.
Mr. Russell Johnston: One cannot demonstrate what proportion of those who voted "Yes" did so because of that. The hon. Gentleman proves nothing.
Mr. Barnett: We could continue the argument. I am describing an offer which subsequently was found to be based upon an untruth. I am not making any assertion about the proportion of people who may have voted in favour of joining, regardless. Perhaps the majority at the time would have wished to enter the Community even though the Luxembourg compromise was bound to be overturned. We do not know the answer to that, but the people were sold something under false pretences.
There have been many debates on the common agricultural policy and many points have been made on the issue. One is the absurd idea that if we came out of the common agricultural policy suddenly we would find it impossible to obtain one form of food, and we would not be able to rely upon sources of supply in the long term if we relied on the purchase of cheap food. Those who say that are right in a sense. It would be silly for a future Government who took Britain out of the EC not to make long-term commodity agreements with certain countries, as the Labour Government did from 1945 onwards and as successive Governments did after that until we began to become involved in the common agricultural policy. Obviously it would be a great mistake for us to do that.
We are not talking in terms of a cheap food policy in the sense that we shall go round the world buying up surpluses to save us from starvation. We know what we are talking about. I do not understand hon. Members' difficulties in contemplating the possibility of ceasing to be part of the common agricultural policy when we have 20 or more years' experience of deficiency payments,
822
which did an immense amount of good for the British farmer, farm worker and consumer. That enabled us to take advantage of sources of supply outside that were relatively cheap compared with the prices that we are now having to pay for food that we have to import. At the same time British agriculture progressed to become one of the most successful agricultural industries of the EC or Europe.
One issue to which I wish to draw the House's attention which was mentioned many times in the debate is one with which I know the Minister will wish to deal at greater length than me because he is the Minister for Trade. I repeat a point that I have made previously in the House. I was interested in the speech that was made by my hon. Friend the Member for Grimsby (Mr. Mitchell), who has given his apologies for leaving early as he has a prearranged meeting. He referred, as I did, to the double talk that prevents us from understanding our real interests. I sometimes feel that some hon. Members who speak on such issues are refusing to face up to the country's real interests because they say one thing and do another. I tried to underline that point in my speech.
Traditionally this country has found it convenient, because we are dependent on food and raw materials from other countries, to operate on the basis of being able to purchase such food and raw materials from anywhere in the world where we reckon that we can buy the products at a good price and where we can get a reasonably reliable product. At the same time we have found it convenient to sell goods to countries for which it is an advantage to buy manufactures from us rather than to make them themselves. The trouble with our membership of the EC is that the countries with which we have joined do not fall into either of those categories. Serious problems have arisen as a result of our joining the EEC. That is one of the main reasons why it would be an advantage to this country to leave.
The Labour Party's policy with regard to the referendum has been raised. I repeat what has been said over and over again. We are committed as a party to the opportunity of making a decision in a referendum or a general election. The point that must be made clear is that it would be absurd for the Labour Party to present the country with a manifesto that stated that we wish to put into operation a certain economic policy—what we can call the alternative economic strategy—and that we do not believe that it is possible to bring that policy into operation unless Britain ceases to be a member of the EEC. It would be absurd to ask constituents to elect us and then to ask whether they wished us to take Britain out of the EEC having made it clear that we believed that there was no possibility of our being able to carry out the economic policies that we proposed if a factor in that policy was still in some doubt.
I know that the House wishes to listen to the answers that the Minister for Trade will give to the many issues raised with him. I am glad that so many hon. Members have raised matters concerned with trade, because they are fundamental to many of the anxieties of many hon. Members about Britain's membership of the European Community.
1.55 pm
The Minister for Trade (Mr. Peter Rees): There is common ground between me and the hon.
Member for Greenwich (Mr. Barnett) on one matter at least, in that I

823
have not been depressed by the debate as, sadly, apparently was the hon. Member for Inverness (Mr. Johnston). It would be slightly less than the truth if I said that I had been exhilarated by the debate, but it has served a useful purpose. It is right that the House should return with a degree of regularity to the great issues which concern us both inside and outside the European Community. I had the pleasure and privilege to wind up the debate in July when we considered the earlier report on our role in and contribution to the European Community as a whole.
I move straight away to the important constitutional matters raised by the hon. Member for Greenwich about the referendum and the Luxembourg compromise. I shall not repeat what my hon. Friend the Minister of State, Foreign and Commonwealth Office said about the Luxembourg compromise, because it would be a refinement in less felicitous language of what he said so comprehensively. I am sure that the House will have noted what he said and, in any event, hon. Members will be able to study it in Hansard on Monday.
I deal first with the essential point made by the hon. Member for Greenwich about the referendum. He said that the result had been obtained by false pretences, and he cited certain observations by Lord Wedderburn. The hon. Gentleman rather confused what the noble Lord said about various legal issues with some more political pronouncements. What the noble Lord says on legal issues we shall consider and perhaps listen to with respect. What he says on political issues we shall listen to with slightly less respect.
The logic of the position of the hon. Member for Greenwich on the referendum is that if he feels that the last verdict, which was obtained in such striking measure after a full and thorough debate in which right hon. and hon. Members from both sides of the House took part, was obtained under false pretences, the answer is that if, against my hope and expectation, the Labour Party should form the next Government, right hon. and hon. Members should put the matter to the people again before attempting to withdraw the country from the European Community.
I challenge the hon. Member for Greenwich to say why the Labour Party is shy of having another referendum. The hon. Gentleman may say that it will be put plainly in the manifesto, but we all know that that is a constitutional fiction, and the hon. Gentleman must know that the electorate do not read more than a tiny part of our manifestos. That does not mean that we should not apply ourselves to the arduous and, I hope, rewarding exercise of constructing them. But the idea that the electorate take on board and accept all that we say in our manifestos is moonshine. So I challenge the hon. Gentleman. The Labour Party has given this clear commitment to withdraw the country from the European Community. Why does the Labour Party not promise a referendum before the ultimate decision is taken?
Mr. Guy Barnett: I had not realised that the hon. and learned Gentleman was such a keen advocate of the principle of the referendum. I do not understand why he attaches such enormous importance to a referendum on this issue. The referendum last time was held because the Conservative Party gained power in 1970 with no commitment to take the country into the Community and proceeded to do it despite the fact that the British people had never been consulted.
824
Our constitutional tradition and practice is that Governments come into power with commitments that they have made to the electorate, and they are judged on their success or otherwise in carrying out those policies. It was because the right hon. Member for Sidcup (Mr. Heath) made his decision without consulting the British people at the election that we undertook to hold a referendum or to see that a test of public opinion took place in a general election to decide whether our membership of the EC should continue.
Mr. Rees: The House and the country—if it pays any attention to our debates—
will note the constitutional purity of the hon. Gentleman's position. With that observation, I should perhaps move on to other questions.
The general economic thrust of the contribution of the hon. Member for Greenwich, echoed by his hon. Friend the Member for Newham, South (Mr. Spearing), was on the imbalance in our trade. It surprises me that Opposition Members, and occasionally my hon. Friends, concentrate exclusively on the manufacturing element. They disregard, in an impractical and unrealistic way, the massive contribution of our service industries, to which my hon. Friend the Member for Huntingdonshire (Mr. Major) drew attention.
In 1980 we had a balance of payments surplus with the rest of the Community of £1,182 million, and in 1981 of £610 million. We are again in surplus in the first nine months of this year. This demonstrates, as the Government anticipated and, I am sure, as the right hon. Member for Huyton (Sir H. Wilson) and his right hon. Friends anticipated, that there would be solid economic benefits for this country from our relationship with the Community.
Mr. Spearing: The hon. and learned Gentleman uses the word "solid". Does he agree that services might produce quite a large amount of overseas revenue, but not all that great an amount of employment, which might, in any case, be transient? If one exports 1,000 tons of oil, the employment hours are minuscule compared to those involved in exporting 1,000 tons of manufactures. Is that not true?
Mr. Rees: The hon. Gentleman, as I have long suspected, is remote from the world of industry and commerce. He overlooks the fact that service industries are, to a considerable degree, labour intensive. Three out of every five people employed in this country work in service industries. I hope that I have persuaded the House to take no account of the hon. Gentleman's absurd intervention.
I shall come in a moment to the important issue of the GATT negotiations, to which the hon. Member for Greenwich and other hon. Members rightly drew attention. I wish, however, to reassure my hon. Friend the Member for Huntingdonshire that the application of article 23 of the GATT will be pressed rigorously by the Commission in regard to Japan. The Government, in co-operation, I hope, with other countries of the European Community and the Commission, will continue to press the Japanese to open further their market to our exports.
We attach considerable importance to invisible trade, which will feature, we hope, in the GATT ministerial conference. I pay tribute to the extremely useful contribution made by Lotis, which will provide valuable

825
ammunition to those who believe that the principles of the GATT should be extended as far as is appropriate to service industries.
The Vredeling report was considerably criticised in the European Parliament. It has, I understand, been withdrawn for further consideration by the Commission. It will no doubt be submitted again for debate in the European Parliament. The Government had considerable reservations about the report when it first emerged. Hon. Members have drawn attention to the possibility of voluntary consultation. That is something that we shall contemplate. On that basis, an amendment was accepted to the Employment Bill, which was recently considered in the other place and in this House.
The hon. Member for Grimsby (Mr. Mitchell) made a long speech larded with statistics, for which he has a voracious appetite, as I can testify from the number of questions that my Department receives from him. The hon. Gentleman had the courtesy to tell me that he could not stay for the winding-up speeches, so I shall merely say that I am not sure that his mastery of statistics is as great as he would have us believe. Certainly he drew a number of misleading conclusions, but as he is not present to hear my strictures I shall leave the matter there.
My hon. Friend the Member for Flint, West (Sir A. Meyer) also had the courtesy to inform me that he would not be here for the winding-up speeches. I should make it clear to him, to the House and to the country that the Government are acutely aware of our obligations under the Treaty of Accession to the European Community and under the GATT. We are also acutely aware of the advantages of membership. We would therefore not wish to prejudice either.
The hon. Member for Inverness (Mr. Johnston) made a powerful contribution, raising a wide range of subjects. Unfortunately, I cannot deal with all of them in the time available. He asked what was the Government's view of the regional development fund. We view this as an important element in the whole Community structure. I remind the House that last year the United Kingdom was the second largest recipient of payments from the fund. It will certainly be our aim and object so far as we legitimately can to encourage institutions, local authorities and individuals to take full advantage of the opportunities offered by that fund.
My hon. Friend for Aldridge-Brownhills (Mr. Shepherd) made an interesting contribution, but as he is not here I do not propose to deal with it.
Mr. Russell Johnston: The point that I made, which was also raised by the hon. Member for Harrow, East (Mr. Dykes), is that one cannot do anything with the regional development fund unless the money is available. Will the Minister therefore tell us what is the Government's view in principle on the enlargement of the European budget?
Mr. Rees: In a period of financial stringency, in which there has rightly been the most rigorous scrutiny of our internal expenditure, I think that it would be wrong to press for an overall enlargement of the European budget. Having said that, however, I go on to say that we would certainly favour a rearrangement of emphasis within the European budget, which might well cover the hon. Gentleman's point.
826
The hon. Member for Swindon (Mr. Stoddart), to whose contributions on European matters we all listen with relish and appreciation even if we do not often find ourselves in harmony with him, is to be congratulated on the vivid imagery of his contribution. I understand from his remarks today that we are Gadarene swine with millstones round our necks rejoicing in the rape of British industry. That is an interesting concept, and I take the tenor of the hon. Gentleman's remarks, but I hope that he will understand from the general thrust of my own that, alas, he and I start from different premises on this.
The hon. Member for Newham, South has shown a remarkable consistency of form in his contributions over the years. I shall certainly make it my business to pass on his interesting challenge to the Newham branch of the National Farmers Union. I shall also point out that in almost the same breath the hon. Gentleman told us that our agricultural prosperity was only skin deep and that we were living in a land of milk and honey. I leave it to others who are better equipped—perhaps my hon. Friend the Member for Southgate (Mr. Berry) who is representing the Patronage Secretary on this occasion—to debate with the hon. Gentleman the moral dimensions of the common agricultural policy, which I am bound to say that I have not so far detected.
Mr. Spearing: There are none. That is the point.
Mr. Rees: I am sure that, where possible, we should seek morality in all our actions, public or private, but I am afraid that on this occasion it defeats my intellectual agility.
As the point has been raised by the hon. Member for Greenwich and by my hon. Friends the Members for Flint, West and for Huntingdonshire, I shall deal with the preparations for the GATT ministerial convention in Geneva in two weeks' time. The European Community preparations are contained in paragraph 3.12 of the White Paper. During a world recession the pressure for protectionist measures is acute, even from those who are not devotees of the Cambridge school. A great trading nation such as the United Kingdom, which exports 30 per cent. of its gross domestic product, has a clear interest in perpetuating and strengthening open trade. No country in isolation can hope to solve its economic problems. The GATT ministerial conference, which will be the first since the Tokyo conference that set off the Tokyo round, the European Community's contribution to it and the United Kingdom's role in the Community are of crucial importance. We must continue to consider the problems of interdependence.
Several hon. Members have rightly stressed the fact that the European Community is the world's largest trading bloc—an important concentration of developing nations that disposes of 25 per cent of world trade. That is why I appreciate the sensitivities of the hon. Member for Norfolk, North-West (Mr. Brocklebank-Fowler) about the Community's connections with the developing world, which are considerable. I emphasise the fact, not vaingloriously, that the European Community disposes of a far greater proportion of world trade than either America or Japan. Therefore, it has special responsibilities far beyond that of an individual member State.
At Geneva, the European Community must reaffirm and strengthen its commitment to the open trading system that has served us so well since the Second World War.

827
I do not wish to strike an apocalyptic note, but that open trading is threatened with collapse. The European Community must lead a debate as to how far in a recession it is legitimate to offer protection to industries that have undergone the painful process of restructuring. The Community must reaffirm that, as the largest bloc of developed nations, it has obligations, but it also has rights. We must initiate the debate on how far the principles of the GATT are relevant to such matters as the trade in services. We must consider how far the procedure for the resolution of disputes can be improved so that the existing GATT provisions can be given fresh vigour.
Even if all those questions can be resolved satisfactorily, and I must question whether in three and a half autumnal days in Geneva everything can be completed, although I hope that much may be initiated—I do not assert that the millenium has arrived—I hope that the conference will stem the rising tide of unthinking protectionism to which the United Kingdom would be especially vulnerable. Britain will make a more significant contribution to the conference, as was stressed by my hon. Friends the Members for Flint, West and for Harrow, East (Mr. Dykes), as part of the European Community than it could as a lone voice. The idea that the United Kingdom could go it alone, although that may sound admirably patriotic, is unrealistic. Unconsidered unilateral action in trade can all too often lead to retaliation and could damage seriously the multilateral trading system on which we depend.
Mr. Brocklebank-Fowler: Having satisfied the House on the defence aspect—the Government's commitment to protect free trade at the GATT talks—will the Minister comment on the constructive role that the Community should play in improving international liquidity and the relief of international debt, which are such constraints on the expansion of trade? Will he and his colleagues argue for Europe to play a more positive role?
Mr. Rees: Europe plays a positive role in a range of financial institutions. However, I have to strike a note of caution, because it is vital to have a clear understanding of what is involved. Several of the financial institutions in the West are heavily over-exposed in rather delicate markets. The concept was prevalent in mid-1975 that we should recycle the surplus oil revenues into the developing world. We understand that, but it should be subject to the limitations of financial and commercial prudence. Fundamentally, however, I do not believe that much separates me from the hon. Member for Norfolk, North-West on the aid programme. Perhaps it would help if I wrote to him on the matter.
The idea that the United Kingdom will fare better if we withdraw from the European Community seems to move the debate into a world of pure fantasy. The Opposition Front Bench, at varying times and with varying emphasis and irrationality, proposes withdrawal—whether before or after negotiation is unclear to me. We have heard contradictory statements. If the hon. Member for Greenwich can clear up that important issue I shall willingly give way to him—or perhaps his party has not fully re-thought its policy on the matter. If so, we shall be happy to assist it to clarify its views—as, no doubt, will the Liberal-Social Democratic alliance. As I understand it,
828
the Labour Party proposes that the United Kingdom should withdraw from our fastest growing export market. That is factually accurate. [HON. MEMBERS: "Come off it."] I do not want to come off it. I prefer to stay with it. As I said, the proposal is to withdraw from a free trade bloc of 270 million people, with whom over 40 per cent. of our trade is now done, and where last year we achieved a balance of payments surplus of more than £600 million.
What terms does the Labour Party believe could be negotiated to preserve our great exporting industries, both manufacturing and service, and the jobs of the people who work in them—or, indeed, the standard of living of this country as a whole? The Labour Party has never convincingly explained what it would hope to achieve and how it would do it. The right hon. Member for Huyton explained on 7 April 1975—I do not often quote from his speeches; it shows how utterly impartial and detached I am on this occasion—before the referendum, when his judgment and that of many of my right hon. and hon. Friend was strikingly endorsed by the British people:
"My judgment on an assessment of all that has been achieved and all that has changed"
—this was after the renegotiation in 1975, which was such a key element in the programme of the Labour Government—
"is that to remain in the Community is best for Britain, best for Europe, for the Commonwealth, for the Third world, and for the wider world".
I could not have put it better myself.
The White Paper that we are debating covers the six months from January 1982 to June of this year. It records moments of high drama—the Falklands conflict—and moments of disagreement—the Luxembourg compromise, the budget and fisheries sagas. However, it also records a solid, if unromantic, story of continuing and patient co-operation between the historic countries of Western and Southern Europe, which is the staple justification for Community life. On that basis, I commend it to the House.
Mr. Anthony Berry: I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.

ENERGY
Ordered,
That Mr. Michael Latham be discharged from the Energy Committe and Mr. Michael Morris be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

FOREIGN AFFAIRS
Ordered,
That Sir Peter Mills and Sir Anthony Royle be discharged from the Foreign Affairs Committee and Mr. Cyril D. Townsend and Mr. Robert Banks be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

SOCIAL SERVICES
Ordered,
That Mr. Tom Benyon be discharged from the Social Services Committee and Mr. Timothy Smith be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

Improvement Grants (Edinburgh)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]
2.20 pm
Mr. Robin F. Cook: I am grateful for the opportunity to initiate an Adjournment debate on the subject of the payment of improvement grants to speculative developers. It enables me to raise a matter that threatens to be a major financial scandal unless action is taken in the near future to bring the position under control.
The topic to which I wish to address the mind of the House is a problem throughout the whole of Scotland, but it is especially acute in Edinburgh. It has particular relevance to my constituency, which covers the inner city area containing a high proportion of unimproved properties on which improvment grants can be obtained. It is an especially acute problem in Edinburgh because the aversion of Edinburgh district council to investing in its housing stock is balanced by a passion for shovelling public sector money into the private sector. Edinburgh has now achieved the unique distinction among the Scottish housing authorities of investing more public money in private sector housing stock.
When I refer to the extravagant generosity of that local authority towards speculative developers, I hope that the House will bear in mind the background. During the past year, that local authority did not start one new council house. It has now decided that the logical conclusion of that neglect of investment is to wind up its architect's department, and leave our capital city of Scotland without a public architectural service.
The problem stems from section 34 of the Local Government (Miscellaneous Provisions) (Scotland) Act 1981. The section repealed a section in the 1974 Act that permitted local authorities to impose a condition on improvement grants that the house to which the grant related should not be sold for up to five years after payment of the grant. It was a permissive, not a mandatory power. It is testimony to its good sense that virtually every housing authority exercised that permissive power, including Edinburgh.
The case made for the removal of the permissive power was that it was being applied unreasonably in some cases to couples who had to move within five years of improving their homes. Having been involved in the matter for a decade before the 1981 Act, I can say that, although a number of people found that they had to move—for good reasons such as job promotion—within five years of obtaining the improvement grant, there were few cases where it could had unreasonably withheld permission for them to sell their homes.
The effect of denying to local authorities that very sensible precaution has been to trigger an avalanche of applications for improvement grants from speculative developers who can now obtain improvement grants for an unimproved flat, improve it and sell it the day after completing the improvements.
The applications have not related only to single flats. There have been applications for whole tenements and, indeed, for blocks of tenements. There were 57 flats restored in Buccleuch Street, with improvement grants in excess of £300,000. There was a recent application for improvement grants for 32 apartments at Commercial
830
Wharf and 33 flats in St. Patrick's Square. A further development is pending at the Ade1phi hotel in Cockburn Street. We are talking about significant developments involving large sums of public money.
Those examples are the most visible because they are the largest. In addition to the large-scale developments in whole tenements, there has been a tendency for the speculative developer to vacuum clean the market in unimproved flats. For the past year it has been common to find in the Evening News up to half a dozen advertisements from developers touting for an unimproved flat for sale in order that they may improve it. Some of the advertisements have been of dubious propriety. There was one advertisement, which appeared for several months in the Evening News on a nightly basis, which read as follows:
"Help us. Young couple desperately need flat with view to modernisation. Up to £10,000 cash available".
It is not my usual experience of desperate young couples in my constituency that they have up to £10,000 instant cash available. It is noticeable that the telephone number in that advertisement now appears regularly in the Evening News together with a straightforward advertisement from a property development company.
I hope that the whole House would agree in condemning as in extremely poor taste any attempt to play on the public sympathy for desperate young couples in order to obtain property to improve at a profit with the use of public funds.
There is another measure of the extent to which the abolition of the condition in the 1981 Act has triggered off a surge of applications from the speculative developers. It is provided by the very large increase in the number of applications for improvement grants. I concede at once that since the last Budget, which made much more generous provision for repair grants, there has been a substantial increase in the rate of applications of genuine owner-occupiers and landlords seeking repair grants, but it was noticeable that within Edinburgh, even before the spring Budget, there had been a marked increase in the rate of applications as a result of the change in the 1981 Act which took effect in June of last year.
In 1980, the last full year before the change took effect, on average there were only 28 applications per week in Edinburgh for improvement grants. In 1981, half of that year fell after the change in the law, there were 52 applications per week. Up to mid-1982—that is to say, up to the point where applications for repair grants became dominant after the Budget—the rate of application was running at an average of 76 per week. The remarkable increase from 28 in 1980 to 52 in 1981 to 76 in the first half of this year largely reflects the change in the law in 1981 which opened the door to speculative developers to come in and obtain improvement grants to do up property and sell at a profit.
The surplus in applications from the speculative sector has several undesirable social consequences. First, it deepens the plight of the genuine desperate young couple. As a result of the availability of improvement grants and the increased interest of developers in unimproved property, property prices of unimproved flats in central Edinburgh have risen far faster than property prices generally. Indeed, there has been a dramatic upward movement within the market. The result has been to price out of the market those desperage young couples who would usually have looked to an unimproved flat to

831
provide them with the first rung on the housing ladder, yet those are precisely the people whom the present Government purport to assist through their housing policy.
Secondly, the position of housing associations has been made much more difficult as a result of the increased interest from the development sector. Edinburgh district council recently offered for sale an unimproved tenement which it was making available for other agencies to improve. There were 20 bids for the tenement, of which 19 came from speculative developers. One of the bids came from a recognised and registered housing association in my constituency. Its bid came fourteenth out of the 20 tenders for the property. It is no longer in a position to compete for unimproved property in the city centre, and I am sorry to say that that is a generalised problem throughout the major conurbations of Scotland. Indeed, the research officer of the Scottish Federation of Housing Associations, Mr. David Clark, has commented on the fact that housing associations find it difficult to obtain property that they can do up and let at a reasonable rent. He said:
"People who want to live in the inner city and can't afford to buy are being elbowed out."
The third social consequence of the change is that there is distressing evidence of growing and direct pressure being brought on tenants of unimproved property to get out and make room for the improvement and sale of their flats.
It being half-past Two o'clock, the motion for the Adjournment of the House, lapsed without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]
Mr. Cook: That development need not surprise us if we recall the upsurge of the Rachman-like tactics of the late 1950s and early 1960s, because they followed the Rent Act 1957, which provided landlords with a clear financial incentive to winkle out sitting tenants. The 1981 change conferred an even greater financial incentive on the landlord and developer to winkle out sitting tenants, and a councillor in my constituency knows of a number of distressing cases of elderly tenants being approached by a developer and offered sums of up to £2,000 to quit a flat so that he could apply for an improvement grant and put the property on sale as a modernised flat.
I hope that the Under-Secretary and all parties in the House will join me in condemning that tactic and will share my worry that a change in the law has allowed that type of practice to emerge. For the first time, it has a clear financial incentive.
The issue of social concern that should trouble us most is that we have clear evidence that private profits are being made on the back of public funds through the improvement grant system. It was never intended that improvement grants should serve that purpose. The grants have had bipartisan support over the past two decades and it would be regrettable if that were lost. They were instituted to help the owner-occupier do up his own house and to help landlords improve the quality of accommodation for their tenants. It was never intended that improvement grants should assist the speculator in transforming his balance sheet. This is a free country and a private developer is entitled to ply his trade and to seek to make a fair return on his investment, but it is doubtful whether he is entitled to 50 per cent. or 75 per cent. improvement grants for the development that he is carrying out.
One particularly distressing example does not arise as a result of the change in the law last year, because the
832
developer concerned proposes to lease properties rather than sell them, but it is a striking example of the extent to which the attitude of Edinburgh district council towards applications from speculative developers have become very relaxed. One might even say that they have become completely "laid back".
The example, which is familiar to the Under-Secretary, is that of Brown of the Mound, which was purchased by Pentland Securities, with a view to development. The company originally applied for planning permission to create offices in the tenement. Permission was refused. The company then sought and obtained improvement grants to create one-apartment flats in the tenement. That application was approved by Edinburgh district council.
During the work on the tenement costs escalated in a way that is familiar to anyone who has been involved in the renovation of old property in the city centre, and the company applied for an increase in its improvement grant. The district council applied to the Scottish Office for approval to pay an improvement grant above the standard tariff. That approval was given by the Scottish Office. There is a clear Scottish Office involvement in the case.
The marketing material produced by Pentland Securities on completion of its project is available. While the development of Brown of The Mound may he many things, it is patently not private dwelling houses. The luxurious literature produced in association with the development describes the property as comprising executive suites. Later in the text it is described as a good gentlemen's club with the added benefits that such accommodation also doubles as first-rate office space. Although I said earlier that planning permission to convert the building for office use had been refused. We learn from the brochure that each flat will have a fold-away bed which can be ignored if it is wished to use the property as an office. It will have a management on the premises who will do everything from booking theatre tickets to providing secretarial services, and it will even provide a telex facility. We learn that the target market for the development is those companies with regular executive traffic through Edinburgh. Mr. Wallace Mercer, the sole shareholder in the company, states:
"It costs an average of £45 to £50 a night to stay in a four-star hotel in Edinburgh. What we are saying is that a suite is cost efficient for companies with people staying in town for more than two nights a week."
This is a free country, and if Mr. Mercer perceived that there was a gap in the market that could be filled by such a development it was open to him to fill that gap, and good luck to him. It is fair to say that in difficult circumstances the company has rescued an historic building. It would be equally fair to add that for that reason it has received support from the Historic Buildings Council. It is open to doubt whether the development could conceivably justify the receipt of improvement grants on the basis that it was
improving the housing stock.
I must put specific questions to the Minister, as his office has been involved in approving the improvement grants for the property. If the Minister has mastered the brief with which he has been supplied, I shall put my questions. How does he reconcile the development of the executive suites and the gentlemen's club with section 9(2) of the Housing (Scotland) Act 1974 which provides that improvement grants can be paid only on a private dwelling house? Secondly, how does the Minister reconcile the statement of the operator of the project that his target is

833
those people who spend two nights a week in town with the provision in section 9(3) of the 1974 Act that improvement grants can be paid only to those dwelling houses that provide the main residence of the occupier?
If the Minister cannot, as I cannot, reconcile the payment of improvement grants in this case with those provisions of the 1974 Act, how did his office approve the payment of improvement grants in those circumstances?
Change of principle is involved in the Local Government (Miscellaneous Provisions) (Scotland) Act 1981. I have consulted the Standing Committee debate when the change was made. It was made on the basis that it would assist those couples who found that they had to sell their houses after receiving an improvement grant. The then Minister, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), said:
"If having received a grant, the person then sells his house, it seems unreasonable that the grant should have to be repaid simply because the person has chosen to sell. That is all that the amendment would achieve, and on that basis I commend it to the Committee."-[Official Report; First Scottish Standing Committee, 24 February 1981; c. 655.]
From our experience in Edinburgh over the past 12 months it is plain that that is not all that the amendment has achieved. It has opened the door to speculative developers to pile in to an unimproved sector and do it up on the back of public funds. Did the Government appreciate that last year when they presented the amendment to the Committee? If so, why did they not tell the Committee that that would be one effect of the amendment? If they did not appreciate it when they moved the amendment, what do they now propose to do when the evidence is only too abundant that speculative developers are ripping off improvement grants to improve properties which are being priced beyond the reach of the desperate young couples who come to my surgery every Friday in search of accommodation in the central area?
2.40 pm
The Under-Secretary of State for Scotland (Mr. Allan Stewart): I congratulate the hon. Member for Edinburgh, Central (Mr. Cook) on his good fortune in obtaining this debate and on his choice of subject. His zeal as a constituency Member is undiminished despite the recommendations of the Boundary Commission for Scotland. He has a great deal of experience and expertise in housing policy and I listened to him with great care. As he said, the issue has been subject to press comment.
In principle, the Government see nothing improper in involving property developers in improving or rehabilitating houses, with grants to assist where required. Behind some of the opposition I suspect that there is a philosophical dislike of the principle that profit should be made out of housing. Progress must be made in building houses and renovating old houses. It can be made if the private sector, as individuals, financial institutions and entrepreneurs, can be fully involved.
As the hon. Gentleman said, the Housing (Scotland) Act 1974, as originally enacted, contained a provision in section 9(3) which effectively made it a condition of grant that the house should be kept in use in one or other of the ways for which the grant was given. A breach of the condition occurred automatically if the house was sold and
834
occupied by the purchaser, in which event the purchaser rendered himself liable to pay back all or part of the grant, according to how much of the five-year period remained.
The provision was introduced on a discretionary basis. It was not intended that local authorities should demand repayment on every occasion. We found cases in which local authorities demanded repayment of grant even when the original applicant had a compelling reason to sell his house-one obvious reason being a change of job. In some cases, repayment was automatically required. The practice contrasted with the guidance given to local authorities by the previous Government that they should take due account of reasonable grounds for a house being sold before requiring repayment.
There was another factor in the Government's thinking. It was that the threat of possible repayment was likely to be an important factor in deterring applicants from seeking improvement grants which would have undesirable consequences for progress in improving substandard housing. It is interesting that in the last complete financial year before the repeal of section 9(3) about £850,000 was recovered by local authorities from owner-occupiers.
We were convinced of the important contribution which the payment of improvement and repairs grants can make to progress in improving substandard and otherwise unsatisfactory houses. We recognise that house owners must have a clear inducement to undertake improvement work, not one which can be taken away from them without their prior knowledge of the circumstances.
The repeal of section 9(3) was undertaken for fairness to the applicant and the need for a clear inducement to ensure the best possible progress in the reduction of the number of houses below tolerable standard in Scotland.
Suggestions were made at the time that speculative development might result from the change in the law. We have always taken the view that private sector investment is of fundamental importance to the housing sector as a whole. I accept that it is necessary to distinguish between the legitimate investment of risk capital to obtain a reasonable profit, and what might be described as profiteering.
I emphasise to the hon. Gentleman that if a local authority detects an element of undue financial speculation in any proposal it can withhold grant. The housing subconvener of the Glasgow district-hardly a stronghold of unreconstructed capitalism-has made it clear that he does not see any difficulty in local authorities ensuring that they can differentiate between a reasonable and a speculative profit. There is no question of local authorities not having the power to act in that way.
A fundamental principle was accepted on behalf of the Opposition by the hon. Member for Glasgow, Garscadden (Mr. Dewar) during the Committee stage of the Local Government (Miscellaneous Provisions) (Scotland) Bill, when he said:
"I accept that the reason for an improvement grant is to improve a house. In a sense the fact that the house is sold does not alter the basis on which the grant was given…Society has decided that we wish to improve houses…I do not object to the general line of the Minister's argument."-[Official Report, First Scottish Standing Committee, 24 February 1981; c. 653.]
I could not put that much better.
Mr. Cook: My hon. Friend made that observation in the context of a debate solely in relation to owner-occupiers who subsequently found that they had to sell.
Mr. Stewart: I accept that. Local authorities still have the powers to refuse particular applications if they think that there is an element of undue financial speculation. The principle of the change was accepted by the Opposition when it was considered in Committee.
The hon. Member for Edinburgh, Central concentrated on the development at the Mound. The prospects of developing that building had been turned down by Edinurgh university, the district council and housing associations because of the inherently high costs of undertaking such a development. The details of that development are known to the Department because the district council decided to seek a special increase in the maximum approved expense on which grant at 50 per cent. normally would have been calculated. Therefore, the Department decided to give the increase to enable the scheme to be viable. As the hon. Gentleman said, an additional grant of £40,000 was given by the Historic Buildings Council on account of the special historic and architectural features of the building. I have no reason whatever to doubt the assurance that was given by the district council that grant assistance on the scale provided was necessary in the circumstances.
The hon. Gentleman referred to excessive profits as a result of the development. However, he will recognise that no income has yet been received from the sale or letting of the houses, so it is absurd to talk, as some people in the press have done, about excessive profits from that development. People have said that excessive profits will be or are being made at another development that has attracted attention. Not one house has been let there and only a proportion of those improved for sale has been sold. Previously the property was vacant for 10 years. That puts such criticisms into context.
The general role of the Secretary of State is that he is not directly involved in the decisions of local authorities to approve improvement or repairs grants for projects unless there is an application for an additional grant above the usual level, as was the case in the Mound project and in another project in Edinburgh, which was a building of particular architectural importance, which otherwise would have been subject to a demolition order. That underlies the basic principle of our approach. The key consideration is rehabilitation and to ensure the improvement of properties that are below tolerable standards.
The hon. Gentleman made specific criticisms on social grounds.
Mr. Cook: The Minister has referred to two cases. At least there is no dispute about the other building, that private dwellings have been created. Is the Minister telling the House that he is satisfied that private dwellings have been created in the Mound as a result of the improvement grant that has been made available for that development?
Mr. Stewart: The hon. Gentleman suggested that that development was office space. If it is, it will contravene the planning conditions under which it has been
836
developed. If there is any question of the planning conditions having been contravened, I have no doubt that the planning authority will take appropriate action.
The hon. Gentleman made the general criticism that what was happening was undermining the prospects of young couples in Edinburgh who wanted to buy unimproved property and take the first step on the housing ladder. I wish to make three points. First, in the seven years from 1974, private owners did not make a great impact in dealing with the problem of housing that was below tolerable standard. Secondly, the logic of the hon. Gentleman's argument is that, because improvement affects the prices of other properties in a market, which is always likely, we should in some way hold back improvement. That is an absurd argument.
Then there is the fact that there are 20,000 houses in Edinburgh below a tolerable standard, and it is hard to believe that development companies will affect every corner of that market.
The hon. Gentleman said that the housing associations were being undermined. I believe that there is plenty of scope for development by housing associations. They continue to have plans for such development.
Then the hon. Gentleman alleged tactics of intimidation by developers. If that is happening, it will be deplored by everyone. I hope that any such allegations will be passed to the police as the appropriate authority to deal with them.
I do not think that the hon. Gentleman has made a case which undermines our confidence in the correctness of the change in the law that we brought about last year. We are anxious to ensure that there is no profiteering as it is commonly understood. I make it clear that local authorities have the powers necessary not to approve grant applications if they are fearful of that.
I return to the statements made by the other major housing authority—that in Glasgow, which is in the control of the hon. Gentleman's party. But we have to see the overall picture as well and the dramatic progress being made in dealing with the problems of less than tolerable housing in Scotland. In Edinburgh, there was a reduction in 1981–82 of 12·9 per cent. in such housing. I believe that the greater freedom now available to persons wishing to improve unsatisfactory houses is making an important contribution to this progress.
I assure the hon. Gentleman that we shall keep the use of improvement grants generally under continuous review as part of the process of monitoring our housing policies. If CoSLA wishes to make a submission on this subject with reference to section 9(3), the Secretary of State has made it clear that he will welcome it.
I thank the hon. Gentleman for airing the subject in the way that he has and for giving me the opportunity to explain the Government's position. I must tell him that I believe that the system is working well and is making a dramatic impact on the real problem of improving Scotland's substandard housing.
Question put and agreed to.
Adjourned accordingly at three minutes to Three o' clock.