HC Deb 23 June 1983 vol 44 cc145-54 2.35 pm
The Prime Minister (Mrs. Margaret Thatcher)

I attended the European Council in Stuttgart on 17 to 19 June, accompanied by my right hon. learned Friend the Foreign and Commonwealth Secretary.

The main questions discussed were, first, the future financing of the Community and a more equitable basis for sharing the burden of member states' contributions to its budget; secondly, the 1983 budget refund for the United Kingdom; thirdly, the declaration on European union proposed earlier by the Foreign Ministers. of the Federal Republic of Germany and Italy, Herr Genscher and Signor Colombo; and, fourthly, economic recovery with particular concern for youth unemployment.

The Council's conclusions and the text of the declaration have been placed in the Library of the House.

I shall deal with these matters in order.

As regards the future financing of the Community, it was our objective to achieve clear directions on the detailed issues to be resolved, together with a tight timetable and an effective procedure for discussion during the autumn. The Council's conclusions meet this objective and provide that negotiations will be started under an urgent procedure in which special meetings of Foreign and Finance Ministers will take place, and that the result of the negotiations will be submitted to the next European Council in Athens on 6 December 1983.

The main issues for discussion on that occasion will be measures to ensure greater budgetary discipline and effective control of agricultural and other Community expenditure, measures to avoid the constantly recurring problems of certain member states and to assure a more equitable sharing of the burden of financing the Community budget, and the Community's requirements in terms of own resources, taking into account the accession of Spain and Portugal and future Community action in other fields. Decisions will be taken in common on all these issues at the end. I made it clear that we remained to be convinced that there is a case for increasing the future resources of the Community.

The second matter concerned the 1983 British refund. Aggrement was also reached on a 1983 budget refund for the United Kingdom of 750 million ecu—about £437 million net. Consequently, the United Kingdom will have received, for the four-year period 1980 to 1983, budget refunds of more than £2,500 million — roughly two-thirds of our unadjusted net contribution. This was the intended proportion in the 1980 and 1981 settlements, and the 1982 settlement was to be on similar lines and was so settled. A series of undertakings to find a solution for 1983 had been given, but by the time of the Stuttgart Council no arrangements had been made.

Nevertheless, as the conclusions of the Council state, a net refund of 750 million ecu was agreed and a consequential figure will be incorporated in the draft Community budget for 1984". The third matter that we discussed was the declaration on European union. Together with other members of the Council, I signed the declaration on European union. We strongly support the objectives of greater political cooperation which are set out in this declaration, and we welcome the reaffirmation of the wider objectives of the European Community.

On other matters, the European Council welcomed the decision of the Council of Ministers on the reform of the European social fund which will give high priority to the fight against youth unemployment. It called for completion of the internal common market and continued work to remove various forms of distortion, including trade barriers caused by differences in national standards, and distortion in the services sector. It stressed the need for action to combat the pollution of the environment, in particular protection of forests, reduction of the amount of lead in the environment and progress towards the use of leadless petrol.

Finally, the European Council discussed a number of international political questions, including Poland, the Madrid conference, the Middle East and Central America, The Presidency's conclusions on these matters have been placed in the Library of the House.

This was a critical meeting of the Council. At the outset, no figures of any kind had been proposed for the British refund. Some member States had said that they would refuse to negotiate any refund at all. Had that view prevailed, I should have had to make a very different statement today.

Thanks to the efforts of the German Presidency and of a number of other countries, we not only achieved a settlement of the British refund for this year but also made encouraging progress towards a long-term settlement of the financing problems which have for so long bedevilled Community discussion.

Mr. Michael Foot (Blaenau Gwent)

Does the right hon. Lady agree, first, that the best way to describe the outcome of the Stuttgart Council in general is that, like the increase in the mortgage interest rate, it is extremely disappointing? Certainly it is disappointing for the country.

Will the Prime Minister say how far the £437 million that she has negotiated falls short not only of the estimates made in the public expenditure White Paper by her Government only a few weeks ago but of the figure that she has often mentioned before?

Does the right hon. Lady's acceptance of this amount now and the result of previous negotiations mean that she has finally abandoned the principles laid down in the resolutions accepted unanimously by the House on 16 July and 22 November 1979, when it was agreed that Britain's contribution to the budget should be no greater than receipts? That is the principle laid down by the House. Will the right hon. Lady confirm how far she has fallen short of securing that aim?

Will the right hon. Lady also clear up the matter that she failed to deal with properly yesterday by giving the House an absolute assurance that there will be no increase in Britain's VAT contribution to the European Community? She said that she remains to be convinced. Does that mean that she is now contemplating an increase in the contribution that we make, despite the wholly unjust contribution that Britain has had to make over the years?

The Prime Minister

There has never been any agreement that our contribution should not be greater than our receipts. That is a juste retour that has always been totally and utterly rejected. In the settlement, which I have in my hand, on 30 May 1980 we agreed arrangements for the years 1980 and 1981 which amounted to 65.9 per cent. It was expected that by the end of that time there would be long-term arrangements. In the absence of long-term arrangements, it was agreed that the arrangements for 1982 should be along the lines of the 1980 and 1981 solution. Those lines were 65.9 per cent., but the formula was so geared that the actual amount that we received back in 1980 was 77 per cent. and in 1981 it was 99.4 per cent. When it came to 1982 to be settled along the same lines, which had been expected to be 65.9 per cent., we naturally had to take into account the overpayments on 1980 and 1981. By the time that we came to 1983 there were no arrangements for refunds at all.

The amounts which we have secured give us an average of 65.4 per cent. over the four years. I remind the right hon. Gentleman that the Labour Government left us with no arrangements for refunds of any kind. After renegotiation, there were no arrangements. Despite that, over the four years we have secured £2,500 million in refunds. That is a reasonable arrangement for Britain.

As regards own resources, all the decisions on the long-term budget are to be made after all the discussions. When we started the discussions on own resources— [Hon. MEMBERS: "Too long."] It is too long because it sets out the facts. I was faced with two proposed clauses. One, the end result of the negotiations, will be the decision on the extent and timing of an increase in the Community's own resources. That is no longer in the statement because we would not have it. It committed us to an increase in own resources, and we could not be committed to that.

I was also faced with a commitment not only to an increase in own resources, which we fought out, but to a method which meant that an increase in own resources would take the form of a decision on a new ceiling, which of course is a VAT ceiling.

Both those clauses have gone, so we are not committed to any increase in own resources, even in the face of the accession of Spain and Portugal. We are committed to considering it provided there is a more equitable arrangement for burden sharing of the contributions and strict budgetary control of agricultural and other expenditure.

Mr. Foot

The right hon. Lady's statement makes the position even more unsatisfactory than it was before. Will she now tell us exactly what is the figure that she has agreed to pay this year? Will she also tell us how she thinks that there will be any progress with the timetable over this period? Does she really think that the other members of the Community will agree to the fundamental change in the common agricultural policy of which she talks? Will the right hon. Lady give an absolute undertaking that she will not agree to the proposition about increasing the VAT contribution to the EC? She says that she is not committed to favouring it, but will she give a proper undertaking to the House?

Why has the right hon. Lady flouted the resolution passed in the House? If she was not prepared to work and fight for it, why did she not put up a Minister to speak against it in the House of Commons? This House has authority in these matters. We are prepared to debate the matter on the same resolution as we had before, for which the Government voted at the time.

The Prime Minister

The 750 million ecu this year was calculated on a reference figure of 1,900 million ecu for our unadjusted contributions this year — [Interruption.] It is about 0.6 if that is how the right hon. Member for Bethnal Green and Stepney (Mr. Shore) chooses to do the calculations— [Interruption.] I am sorry. One never knows what the budget is until the end of the year. That is why for the years—[Interruption.] Of course, but if the right hon. Member for Bethnal Green and Stepney thinks that, in the middle of the year one knows the precise budget, he is mistaken. This is how we got the overpayment of refunds in 1980 and 1981. I know that the right hon. Gentleman wishes us to come out of Europe. I think that it is reasonable to pay what we are paying, which is 65.4 per cent. over four years, for some 2 million jobs which would be put at risk if we came out of Europe.

Sir Brandon Rhys Williams (Kensington)

May we congratulate my right hon. Friend on bringing back from Stuttgart an extremely reasonable settlement on current account? But does she recognise that for the future of the Community, the way our resources are spent on capital account is of probably much great significance in the long run? Will the British Government therefore pay attention to the way in which funds will be disbursed under the terms of the new Ortoli facility and by the European Investment Bank? Will my right hon. Friend pledge this Government to work for a united European market for capital?

The Prime Minister

My hon. Friend goes a good deal further than we went, although at Lancaster House last year we agreed to increase the amount available for the Ortoli facility. I think that it would be most unwise to go any further at the moment. The long-term budget is trying to consider methods of effective control of expenditure, both for the agricultural budget and other budgets. Without effective control and a more equitable and fair distribution of the burden of contributions, we could not possibly consider agreeing to an increase in own resources.

Mr. J. Enoch Powell (Down, South)

To what extent will the implementation of any of these financial arrangements depend upon the willingness of the European assembly to approve the budget?

The Prime Minister

I believe that it has to go before the European assembly towards the end of the year. The importance of Stuttgart was that we had to get the amount entered into the draft budget for next year, and the first significant draft budget is the one in July. That is why this Council was so critical. It is considered by the European assembly towards the end of the year. The European assembly likewise wants a better long-term financial arrangement for the Community budget. So far we have not got one. Until we get one, we shall have to try to seek a special arrangement for Britain, but it has to go through the European assembly.

Mr. David Harris (St. Ives)

Is my right hon. Friend aware that those of us in the European Parliament will do our utmost to get the budget through? My right hon. Friend referred to the European social fund, but was there no discussion about the future of the European regional development fund, because decisions on that have been long outstanding and are causing concern in the regions of this country?

The Prime Minister

No. A great deal of the time was spent on getting a full agenda and directions for discussing the long-term budget and on the strenous negotiations for our own short-term refund. We reaffirmed the decision by the Council of Employment Ministers that 75 per cent. of the European social fund should go to combating youth unemployment, which is defined as people aged 25 and under. We were not able to get on further to regional matters.

Mr. Nigel Spearing (Newham, South)

Will the Prime Minister say what her electoral mark ate or any other mandate was for putting her signature to a document which affirmed the desirability of European union? Will that document be debated in the House? In her view, does it come under the terms of the Ponsonby rules?

The Prime Minister

The Genscher-Colombo document has been in draft since 15 January 1982. European union is many different things to many different people. I must make it quite clear that I do not in any way believe in a federated Europe. Nor does that document. The original proposals were deposited in our Parliament on 15 January 1982. Our Scrutiny Committee recommended the proposals for debate, and the debate took place on 17 June 1982 on the basis of the revised text of the proposals that had been deposited seven days previously. The present document is substantially the same. It has a few minor changes, but it is not materially different from the one that was debated.

Mr. Tony Marlow (Northampton, North)

Will my right hon. Friend confirm that the excellent rebate that she negotiated on behalf of the United Kingdom will be available whether or not there is an agreement over the long-term finances of the Community later this year? Does she agree that an increase in own resources would mean an increase in policies over which the European Community had competence and therefore a loss of sovereignty by this House? What deduction would my right hon. Friend make from that?

The Prime Minister

The arrangement that we reached on this year's refund is separate from the long-term arrangement. It depended only upon our getting agreement on the document which directed the Foreign and Finance Ministers as to which matters they should discuss in coming to conclusions on the long-term budget. We agreed that document, so the two are now free-standing.

There are many ways in which own resources could be increased, but if my hon. Friend looks at that document he will see that certain of our German friends have in mind particularly the accession of Spain and Portugal as being an occasion that may require an increase in own resources. It is not a foregone conclusion. I think that one of the main purposes of the European Community is not so much economic as establishing an area of democratic stability in Europe. It would be to the advantage of all of us if we were to extend that area of democratic stability to include Spain and Portugal. The extra price that we may pay for that will be worthwhile.

Mr. Jack Straw (Blackburn)

Is the Prime Minister aware that her extraordinary and unprecedented refusal to give an estimate of the net contribution by this country suggests that that net contribution will be a great deal more than her spokesmen were suggesting at the weekend briefing? If that is not so, as the Minister of State indicates, will she say whether, during the negotiations, she had an estimate in front of her of the net contribution, as she must have done? If she did have that figure in front of her, will she now tell the House what is the Government's estimate of our contribution this year?

The Prime Minister

I already have done. The hon. Gentleman has all the figures for elementary mathematics. I have told him that the estimated budget for the year is 1,900 million ecu, and that the refund is 750 million ecu. He will therefore see that 1,900 million ecu is the estimated budget. As I said, the refund is 750 million ecu. The hon. Gentleman will see, therefore, that the refund amounts to about 40 per cent. of what would otherwise be our net contribution to Europe this year.

Rev. Ian Paisley (Antrim, North)

It was widely reported that when the right hon. Lady visited the Council she had a discussion with the Premier of the Irish Republic. Will she inform the House whether the Premier of the Irish Republic raised the matter of the new Ireland forum? Can the right hon. Lady give an assurance to the House and to the people of Northern Ireland that she made it clear to the Premier of the Irish Republic that the constitutional position of Northern Ireland is a matter for this House and the people of Northern Ireland. not for some self-appointed foreign body meeting in Dublin?

The Prime Minister

The hon. Gentleman is correct. I had brief talks in the margins of the European Council with the Taoiseach. I do not think that anything that was said would have troubled the hon. Gentleman. We did not discuss the new Ireland forum, and I am constantly making it clear, as it is clear at all times, that the constitutional position of Northern Ireland is for the people of Northern Ireland and for this Parliament. I reaffirm that gladly.

Mr. D. N. Campbell-Savours (Workington)

Is the Prime Minister aware that many steel closure areas, such as Workington, have suffered immeasurably by the pointblank refusal of the European Commission to pay over our due, that being non-quota regional development aid, to help us secure our future? When the right hon. Lady goes back to Europe on the next occasion, will she ask the European bureaucrats to re-examine the strict, unjust and unfair criteria which discriminate against constituencies such as mine.

The Prime Minister

We had a very brief discussion on steel which, as the hon. Gentleman knows, is dealt with by the Council of Industrial Ministers. As the hon. Gentleman also knows, if we were not members of the Community, and had agreed quotas, we should be in a very much more difficult position than we are now with steel, because we would have to negotiate wholly on our own. We tried to negotiate on our own with the United States, but we were not able to do so. We had to negotiate through the European Coal and Steel community. We get a better deal there than we would alone. The question of steel quotas will come up. Naturally, we all want to have as big a quota as possible. The difficulties arise from overproduction and shortage of orders. We shall do battle to obtain a reasonable arrangement for Britain.

Mr. Anthony Nelson (Chichester)

Does my right hon. Friend detect a distinct whiff of sour grapes in the Opposition's attitude, although they never managed to strike such a good deal in their time in office? I put it to my right hon. Friend that if we are to be persuaded to increase our resources contribution, we should, as a precondition, be pressing those agricultural surplus-producing countries within the Community to be co-financing a greater proportion of the surpluses that they produce. As, in recent years, the Mediterranean countries have been mainly responsible for that, surely that would be to our advantage.

The Prime Minister

Yes. How to control agriculture expenditure and how to deal with the surpluses is one of the matters that will have to be discussed between now and December.

We asked for an equitable refund from the Community. There is an old legal saying that he who seeks equity must act in an equitable manner. Therefore, as we had larger refunds than were expected in the past it would be reasonable that we should put in refunds of the kind that we expected to get from 1980 onwards. He who seeks equity must act in an equitable manner, and that was the principle that guided us.

Mr. Dennis Skinner (Bolsover)

Instead of getting excited and testy about the figures and the percentages based upon the number of years that the Government have been in power negotiating the finances, why does not the right hon. Lady admit that the total net contribution in the past 10 years from the United Kingdom is £3,911 million, £2,476 million of which has been paid over to the Common Market from Britain since 1979? Therefore, although she talks about getting out as much as is paid in, she has failed considerably. As the Court of Auditors admitted that £700 million went missing, what guarantee did she get from the other people at this so-called summit that the money that Britain will be handing over in future will not go missing, as it did on the previous occasion?

The Prime Minister

The hon. Gentleman used the word "testy". He should not see in others his own characteristics. That is a grave mistake. Yes, we do pay a contribution to the Community. Yes, we do get back a large number of jobs. If we were ever to consider coming out of the EC the dislocation in Britain and in almost every constituency of every hon. Member of this House would be enormous. We should be prepared to pay a reasonable amount for that privilege and for the stability that we get from an area of democracy in Europe. I shall take note of the fact that the hon. Gentleman does not want any European aid to go to any factory or firm in his constituency at any time in the future.

Several Hon. Members

rose—

Mr. Speaker

Order. This is an important statement which interests the House a great deal. I ask for short questions. Otherwise, we shall never finish.

Mr. James Hill (Southampton, Test)

My right hon. Friend has rightly mentioned financing and refunds, which are two important matters. However, will she say a few words on the Euro-union and youth employment? The House would benefit from hearing some of the statements that were made in Stuttgart on those two matters.

The Prime Minister

The Genscher-Colombo statement has been placed in full before the House. It deals mainly with greater political co-operation and how decisions are taken in the EC, but it does not make many changes. Our position under the Luxembourg compromise is dealt with in an appendix to that document, as is that of several other countries. It is a reaffirmation of the ideals that led to the setting up of the Community. Those ideals are as valid today as they were when the Community was set up and when we joined.

Mr. Joan Evans (Cynon Valley)

Will the Prime Minister be frank with the House and admit that the Stuttgart summit was a dismal failure for Britain? Are not Britain and Germany the main contributors? While the right hon. Lady might have gone with the great expectation of £1,200 million, she came back not with the £800 million or £600 million that she was talking about in the press, but with only £400 million. Have we not lost out as a nation from the deficit on manufacturing of over £4,000 million with the EC? If we did not have that deficit there would be many more jobs in Britain than there are.

The Prime Minister

I wholly disagree with the hon. Gentleman about jobs. Many companies have geared their production and products to export to Europe. Without that market we would lose a great many jobs. Yes, we do pay a modest contribution to Europe, but Germany pays a much bigger contribution. As a result of the 750 million ecu—about £437 million—which we are to receive as refunds this year, Germany will pay an even bigger contribution. I repeat that it is worth paying something for the democratic stability that we get from Europe, for the advantage of negotiating as a member of the biggest trading bloc in the world and for being able to negotiate on steel at a time of great difficulty through the union.

Mr. Barry Porter (Wirral, South)

Like others, I am encouraged by the short-term settlement that we have had this year, but I am a little puzzled, to say the least, about the encouragement that my right hon. Friend finds in the long-term financial arrangements. I am sure that I have missed something somewhere. Where does that feeling of encouragement come from? It seems to me that we are in exactly the same position as we were in last year and the year before.

The Prime Minister

The EC is coming to a year when its income will be insufficient to meet its present policies and expenditures. One of the reasons for that is the lack of proper and effective control over the common agricultural policy, or, indeed, proper policies. If the EC goes on as it is, it will run out of money. That means that for the first time it must consider different measures for controlling agriculture expenditure. We expected to reach that position about three years ago but we did not. It is now coming near to that time and we hope that the EC will consider new methods of controlling expenditure.

The arrangements in the treaty and the renegotiations on the other side took little account of the resulting burden of contributions on the 10 member countries. We are asking—indeed, insisting—this time that the method of contribution should take into account the final burden on each of the countries so that we are not left in the position where Germany mainly, and Britain in second position a long way behind, finances the Community while the other countries mostly take out.

Mr. Ron Leighton (Newham, North-East)

Does the Prime Minister accept that this is a further dismal failure and defeat in dealing with the Common Market and that we in this House have lost count of the number of times that we have heard empty chatter about a more equitable financial arrangement and about restraining agriculture expenditure? This year the refund is the smallest ever and the right hon. Lady has not even got the half a loaf that she refused so contemptuously on a previous occasion. Is she aware that the language that she has used this afternoon shows that she is giving way on the point of not increasing the 1 per cent. level of VAT when she should be doing the opposite and remaining firm?

The Prime Minister

If the hon. Gentleman looks at the communiqué he will see that I specifically did not agree to an increase in own resources. He will see from what I have said that we fought out two clauses which would have committed us to that. I have agreed to consider it, provided that certain other points are met. The accession of Spain and Portugal is rather important and we must consider it against that background.

If the hon. Gentleman refers to the document of 30 May 1980, he will see from the calculations that we expected to get a refund each year of 66 per cent. of our net contributions. In the first year we received 77 per cent. and in the second year 99 per cent. It is not surprising that, when we came to negotiate the 1982 percentage, our partners should say that, as we had received considerable overpayments, it would be fair to take those into account. In seeking fairness, one must be fair in the view that one takes. If we take the average during the four years, including this year. the figure is 65.4 per cent. which is virtually what we expected to get on 30 May 1980.

Mr. Harry Greenway (Ealing, North)

Is my right hon. Friend aware that the House welcomes the decision to devote 75 per cent. of the European social fund to the fight against youth unemployment? Will she say how the Government will set about this important task?

The Prime Minister

I am unable to add anything to what my hon. Friend already knows. We are all very keen to have effective training schemes and to take advantage of the new and latest technologies so that we may have the jobs attached to those technologies, thereby working together to further Europe's interest in technology.

Unfortunately, during the past 10 years many electronic goods have been made in far eastern countries, and the Community has lost much business. The Community is trying to get back some of that business by projects and extra training. Whan Opposition Members consider unemployment figures in Europe compared with Britain, especially youth unemployment, perhaps they will remember that almost every country, with the exception of Ireland, has a period of one year's conscription.

Mr. Tam Dalyell (Linlithgow)

When the European Ministers were indelicate enough to ask about their former colleague, the previous Foreign Secretary, did the Prime Minister explain why, when he was negotiating peace in Washington with Al Haig, she failed to consult him before asking Northwood to sink the Belgrano?

The Prime Minister

I am familiar with the ingenuity of the hon. Member for Linlithgow (Mr. Dalyell), but I have to disappoint him. Nothing of what he said was discussed.

Mr. Edward Heath (Old Bexley and Sidcup)

Is my right hon. Friend aware—

Mr. Dalyell

You ask her, Ted. You know a lot about it.

Mr. Heath

I propose to devote myself to the present subject.

Is my right hon. Friend aware that those who examine the position in the European Community and Britain's position will recognise that the budget settlement at Stuttgart is reasonable? I am glad that my right hon. Friend is not apologising, because there is absolutely nothing to apologise for. Is she also aware that, despite the Opposition's obsession with the common agricultural policy, the counter to that argument is help for our industries, because we are more an industrial country than the other members of the Community? When the Labour party was in government it flatly refused to accept that fact, and it refused to accept anything from the development fund that was set up in 1972. Does my right hon. Friend accept that the more Britain shows itself to be in support of the communiqué on European union, the better deal we shall receive not only on the budget but on every other matter?

The Prime Minister

I am grateful to my right hon. Friend. Had Britain been acting under the renegotiation terms arranged by the Opposition and not taken any further action, we would today be £2,500 million poorer than we are under the arrangements that we have made.

Mr. Michael Foot

Will the right hon. Lady confirm that the figure that Britain must pay, which she was so reticent in giving before, is £700 million?

The Prime Minister

The answer depends on the exchange rate, but if that is the right hon. Gentleman's calculation I shall not dissent from it.