HC Deb 23 June 1993 vol 227 cc309-25

4 pm

The Prime Minister (Mr. John Major)

With permission, Madam Speaker. I will make a statement about the European Council Copehagen, which I attended with my right hon. Friend the Foreign Secretary.

The principal issue before the Council was how to promote economic growth throughout the Community. Although Britain is now emerging from recession, a number of European countries are still seeing their economies shrink—five are expected to be in recession during this year. Unemployment has grown throughout the Community and now totals 18 million—in most countries it is still rising, and in some it is rising quite sharply. Against that background, the President of the Commission presented options for economic revival in the medium term. That document has been placed in the Library of the House, together with the conclusions of the Council.

I largely agreed with the diagnosis set out by the President of the Commission, although not with all his proposed remedies. In the subsequent debate, I was encouraged by the wide recognition that the Community had to improve Europe's overall competitive position and to address the trend of rising unemployment throughout all of the past 20 years.

The Council agreed a number of practical measures to improve Europe's economic prospects. We stressed the importance of low inflation, specifically in order to improve cost competitiveness and achieve sustainable growth; we reaffirmed the priority given at the Edinburgh Council in December to growth and investment in our public expenditure programmes; we decided to expand the temporary lending facility of the European Investment Bank from 5 billion to 8 billion ecu, with a particular emphasis on helping small and medium-sized companies; we agreed that it was vital to reduce fiscal deficits—without that, much of Europe will not be in a position to reduce its interest rates.

The argument that the Community had to keep down costs in order to improve competitiveness and create new jobs was widely supported at the Council. It was felt that, unless that was achieved, we would find ourselves increasingly uncompetitive against, not only the Pacific countries, but also our primary competitors in the United States and Japan. It was also recognised that all Europe, without exception, had to face the problem of the rising costs of social provision, brought about by demographic and other changes.

The European Commission has been invited to present a White Paper on a medium-term strategy for growth, competitiveness and employment for discussion at the European Council in December. Member states will be submitting proposals for the White Paper. I believe that that will enable the Community to build on the European Council's new emphasis on competitiveness. Over the next six months, we shall press for reforms to increase flexibility in the labour markets and reduce unemployment. I hope that that will lead to a genuinely radical report at the December Council.

Following earlier Council discussions of subsidiarity, the European Commission has now produced a first list of items on which it has decided not to propose legislation. I will place that list in the Library. At the next Council, the Commission will produce a further list, showing existing legislation that will be either repealed or amended. Subsidiarity was a controversial provision in the Maastricht treaty some time ago, but we now have strong support for our position from a number of member states. Subsidiarity is becoming a central element in the Community's decision making.

There was a substantial discussion of the Community's external policy. I would draw attention to only four specific items. First was the importance of urgent progress in the Uruguay round. I am in no doubt that a general agreement on tariffs and trade will benefit all Community members without exception, but there is a long way to go in a short time if a satisfactory agreement is to be reached during this calendar year.

Secondly, the Council was keen to see rapid progress in the enlargement negotiations with Austria, Finland, Norway and Sweden. We set 1 January 1995 as the target date for their entry—earlier than previously expected. Their membership, in my judgment, will strengthen the Community.

Thirdly, looking to the longer term, the Council agreed that the six associated countries of central and eastern Europe should be invited to join the Community in due course. It will, of course, take some time until they are ready. In the meantime, we will help them by increasing the Community's political links and by opening our markets more rapidly to their goods. A package to that effect was agreed.

Fourthly, the Council acknowledged the need to recognise Russia's international status, and agreed to my proposal to offer summits between the Community and Russia twice a year.

The deteriorating situation in Bosnia was discussed both by Foreign Ministers and by Heads of Government. Those discussions included the possibility of lifting the arms embargo. We agreed that the Community should encourage the efforts of Lord Owen and Mr. Stoltenberg to promote a fair and viable settlement. This view was widely shared, and is reflected in the Council's declaration on Bosnia-Herzegovina.

I argued that lifting the arms embargo would jeopardise the humanitarian operation and provoke a bloodier and perhaps wider war, with perilous consequences. We agreed after discussion that it was better to seek a peaceful settlement acceptable to all sides. But, as the Council made clear, this cannot be a solution dictated by the Serbs and Croats and at the expense of the Muslims.

The Council also agreed that the Community should support the efforts of the United Nations Secretary-General to secure additional troops and funds to implement the safe areas resolution. The United Kingdom is, of course, as the House is well aware, already making a full contribution.

This was a practical Council. It addressed directly the concerns of the peoples both east and west. It put in hand work on a new economic approach to make Europe more competitive and increase growth and employment. We will return to those matters at Brussels in December.

Mr. John Smith (Monklands, East)

I thank the right hon. Gentleman for his statement. I should like first of all to welcome some aspects of the Council's deliberations and conclusions.

On enlargement, it is gratifying that the Council agreed that the objective should be to have the accession of Austria, Finland, Sweden and Norway agreed by 1 January 1995, arid that a positive approach has been taken to the associated countries of eastern and central Europe. I welcome also the positive statement on racism and xenophobia in Europe, which is timely and constructive. I hope that the Prime Minister will find it possible to do the same.

On the need for growth in the Community's economies and the vital importance of reducing unemployment, I welcome the increase in funds available to the European Investment Bank, which I hope will be of advantage to British enterprises. I also welcome the recognition in the communique that the recovery must be investment led.

However, there are some issues covered in the Council's discussions which must be a cause for concern to the House. The first of those concerns the grave and deteriorating situation in Bosnia-Herzegovina. It was important that the Council did not agree to the lifting of the arms embargo, which would have made a bad situation even worse. However, does not the Prime Minister recognise that such proposals gain currency because of the total failure to achieve the previously agreed policies in a number of crucial areas?

First, is it not the case that the designated safe areas are not in fact safe and that extra troops are required to make them more secure? The Secretary-General has asked for an extra commitment of 7,500 personnel. What is the United Kingdom Government's response to that request? Should not the Government follow the French example by agreeing to augment the British provision?

Secondly, is it not the case that the borders of Bosnia-Herzegovina have not been sealed? Why do the Government still rule out the use of limited air strikes to help achieve that objective?

Thirdly, is it not the case that sanctions are still wholly inadequately enforced'? Should not they now be extended to include Croatia in view of the recent deplorable activities of the Croats towards their Muslim neighbours?

Fourthly, is it. not obvious that there is a lack of any clear political objective since the Washington agreement effectively torpedoed the Vance-Owen plan? What is the point of making declarations about not accepting a territorial solution dictated by Serbs and Croats at the expense of the Muslims if they are not made effective?

On economic recovery, I note with interest that the United Kingdom Government are party to a communiqué which invites consultations to be encouraged among the social partners. Would it not be helpful if the Government accepted the need for such a dialogue here in the United Kingdom?

Do the Government not appreciate that the importance of public investment in the economic infrastructure arid in skills development, which the Council has recognised in its conclusions, is just as relevant to the United Kingdom economy? Is it riot the lack of such investment over the past 14 years which has caused Britain to be ranked 19 out of 22 in terms of economic strength by the World Economic Forum, below Spain, Portugal and Finland?

Surely the Government are not in a strong position to give advice or a lead to our partner nations when the same survey showed that, after 14 years of Conservative government, Britain was rated 21st out of 22 in the funding of research and development, and bottom—22nd out of 22—in industrial production.

Instead of seeking to turn the clock back by opposing social progress in Europe, should not the Government have as their objective the creation of a high-productivity, high-skill and high-wage economy in Britain and in the Community, instead of seeking to compete on the basis of low costs and low skills, with all the adverse consequences that that would have for the people of this country?

The Prime Minister

The right hon. and learned Gentleman raises a number of points that I will deal with in turn. I am grateful for his welcome to the agreement on enlargement for the European Free Trade Association countries and our further approach to the eventual arrival in the Community of the central and east Europeans. That is the right way forward.

There was no dissent whatever on the racism and xenophobia proposals that were made and agreed in the conclusions of the Council. It is precisely for that reason that I did not mention them, but I welcome them; they were partly inspired by British initiatives, and I am delighted that they were generally agreed.

As for growth and the European Investment Bank the extra funds for the European Investment Bank are more modest than we ourselves would have accepted. We would have accepted a larger increase in the European Investment Bank funds, and that may yet come about when the matter is discussed in ECOFIN over the next few weeks.

On the subject of Bosnia, I am grateful for the right hon. and learned Gentleman's support for the position that we have taken on the arms embargo. I know that it is not shared universally in the United Kingdom, but I believe passionately that it is the right position for the United Kingdom Government to take at the moment.

As for safe areas, the Secretary-General has indeed called for an extra 7,500 troops, and I understand this afternoon that the French Government have agreed to send an extra 800 towards that particular contingent. I understand that some other European Governments—in some cases, perhaps, some who have no troops there—may also consider sending further troops. I do not immediately have that in mind, but we are sending 12 Jaguars to assist with other elements of operations in and around Bosnia, and they will depart very shortly.

On sanctions, their extension to Croatia may indeed be necessary. We do not judge it necessary at the moment, but it is certainly not something that I would wish to rule out. We may wish to go down that path.

As for the political objective, it is really the most straightforward of all political objectives. We want first and foremost to stop the fighting and stop the killing. That is why we have made such a substantial contribution to the humanitarian effort, and also the diplomatic effort, over recent months.

On the various points on economic recovery that the right hon. and learned Gentleman mentioned, despite his criticisms of the position in the United Kingdom, we are now clearly coming out of recession. Five of our European partners are now heading into recession. A number of our European partners now have unemployment on a very sharply rising trend, whereas ours is on a downward trend. In addition, we now have rising exports, in sharp contrast with a number of our European partners.

As for the low-wage, low-cost economy, I have to remind the right hon. and learned Gentleman of some underlying realities in terms of job creation and prosperity right across Europe. It is to address those realities that we have raised the question of competitiveness and of social costs.

Taking the Community as a whole, labour costs in manufacturing—dear, I know, to the hearts of Opposition Members—rose by 4 per cent. a year throughout the 1980s. The increase in the United States was 1 per cent. a year, and in Japan there was no increase. That trend cannot continue unless we wish to see rising unemployment in this country.

Average labour costs were 20 per cent. higher in the Community than in the United States and Japan, and non-wage labour costs—predominantly social on-costswere almost twice as high on average in the Community as in the United States. That is not a coincidence, given the rising level of unemployment over the 20-year period.

I shall illustrate that point for the benefit of the right hon. and learned Gentleman. In Europe, growth achieves far fewer jobs than in the United States and elsewhere. I say that with no pleasure. However, in recent years, four times as many new jobs have been created in the United States as in Europe, from the same amount of economic growth. That suggests that dramatic changes are needed if we are to attack the problem of the 17 million people in Europe who are unemployed.

I understand the attraction of improving the terms and conditions of people in work. I should have thought that people would also be concerned with bringing back into work the 17 million people who are out of work. That is why we have raised the question of competitiveness and the need to look carefully at social costs.

Mr. David Howell (Guildford)

Is not the sheer common sense of my right hon. Friend's emphasis on competitiveness and minimising overheads—thus maximising the growth of private sector jobs—becoming more obvious as time goes by? Does he agree that those who took a different line at Copenhagen and urged that social overheads be increased were paving the way not only to fewer jobs in Europe but also to protection, which would in turn lead to still fewer jobs and still less prosperity in Europe?

The Prime Minister

I agree with my right hon. Friend, particularly about the dangers of going down the route that would lead ultimately to protection. That would be the only way in which an uncompetitive industry could be safeguarded within the EC.

There has been a sharp change in the attitudes of a number of our European partners to competitiveness and social costs—a change not just in their oratory but in what they are doing in their countries. For example, the German Government are proposing to cut the levels of unemployment and other benefits because they believe that to be necessary. In Holland, cuts are planned in social security benefits and child allowances. The Italian Government plan to raise pension ages and introduce new health service charges.

That is not because, ideologically, those countries wish to do that, but because they must recognise that there is a limited amount that can be afforded unless all our industry is to be priced out of business. We would then have unemployment on a scale that would be unimaginable. [ Interruption.] At that point, the hon. Members who sit below the Gangway would blame the politicians who did not take action in time.

Mr. Paddy Ashdown (Yeovil)

The Council's emphasis on unemployment was welcome. The Prime Minister may have found it odd. that the Council was dominated by the question of unemployment and of getting people back to work, whereas the Chancellor, in his Mansion house speech, could scarcely bring himself to utter the word "unemployment".

In my judgment, the Prime Minister is absolutely right to say that the challenge to Europe is how competitiveness can be maintained and improved while the social cohesion of our nations is maintained.

The Prime Minister talked about underlying reality. He should visit one of our most successful employers such as Toyota, where I was on Monday. The company will tell him of the underlying reality of maintaining competitiveness. It will tell him that that underlying reality lies in investing in the work force. It lies in investing in training. It lies in valuing one's work force and in providing them with the necessary social benefits. That is what Toyota believes will provide the high-value-added, high-investment, highly skilled work force that we need for the future. Does the Prime Minister realise that, by tracking a different course and cutting Britain out of that debate, he is doing our country, our workers and our economy considerable damage for the future?

I want to refer to Bosnia. The emphasis that the Council has at last placed on taking steps to protect the Muslims is very welcome, but if it is to will the ends, it must also will the means. Where will the troops come from? Is it not the case that the French have more troops in Bosnia than we have? If the French are prepared to reinforce, are we not prepared to make a contribution beyond that which we have already stated we will make? Does the Prime Minister realise that, if we are not prepared to say where the troops will come from, we shall yet again he condemning the European Community to make a statement that will not be put into practice?

Does the right hon. Gentleman realise that the present wretched situation in Bosnia was entirely inevitable from the very moment when we let the Serbs understand that they could carry out aggression and that we would not stop them? Has he any idea of the size and cost of the failure, not of the soldiers on the ground but of the politicians in Europe these last nine or 10 wretched months?

The Prime Minister

First, let me try to respond to the right hon. Gentleman's second point, on Bosnia. Right from the start, there were, in reality, only two ways of dealing with this whole wretched miserable war. [HON. MEMBERS: "For whom?"] For anyone. The first alternative was to put in literally hundreds of thousands of western troops. [ Interruption.] That is the view of every political or miltary leader who has been deeply involved in the matter. No one was prepared for that.

I wonder whether, if we had done that,' we would have had the right hon. Gentleman's support when the dead and injured troops came back here. The only other way to deal with the problem was the way that we have chosen, which is to deal with the humanitarian aspects and seek a negotiated settlement—painful and difficult though that may be. That is what we have sought to do.

The right hon. Gentleman is wrong to say that the French have more troops in Bosnia than we have. The French have more troops in Yugoslavia as a whole but Britain has more troops in Bosnia than any other nation at present.

The right hon. Gentleman asked where the 7,500 troops will come from. The commitment of troops arises from a United Nations resolution. It is not just the countries of the European Community that have committed themselves to contributing towards those troops: we have made a substantial contribution. Other European Community countries have indicated that they are considering doing the same.

Beyond the Community, others will also make a contribution. It does not help anyone for the right hon. Gentleman to assume that it is just the Community that must deal with this matter, when that is patently not the case.

On the right hon. Gentleman's earlier point about investment, it is not odd that we spent so long discussing these matters at the European Council. We had been pressing for a long time for a realistic and frank discussion in the Community of what really deals with growth. My right hon. and learned Friend the Chancellor has been stressing the need for flexibility and social changes for a long time; he was doing so long before he became Chancellor—sometimes, when he held other positions, to the frustration of others.

If the right hon. Gentleman wants to know about investment, he asked the wrong question of Toyota. He should have asked, "Why did you invest in this country?" The answer to that question lies in the supply side policies that the Government and their predecessors have followed since 1979.

Several hon. Members

rose—

Madam Speaker

Order. Before we proceed any further, I remind the House that I am now looking for single direct questions to the Prime Minister. I want brisk exchanges so that I can call as many hon. Members as possible.

Mr. John Biffen (Shropshire. North)

I welcome the proposals for Community enlargement, and congratulate my right hon. Friend on his work to that end. But in the spirit of what is practical, which he said underlined the Copenhagen Council meeting, was consideration given to revising the timetable for economic and monetary union in the light of the current state of the European economies?

The Prime Minister

In the interests of observing your admonition, Madam Speaker, I am tempted simply to say "No", but my right hon. Friend's question deserves a more comprehensive answer. Revising the timetable was not considered but, of course, the convergence criteria that we agreed in Maastricht need to be met before there can be any progress. As I have told the House before—I am happy to reiterate it today—I do not think that there is a snowball in hell's chance of those criteria being met on the previous timetable.

Mr. Neil Kinnock (Islwyn)

I say to the Prime Minister with regret that, coming from him, "flexibility" and "deregulation" in the labour market are euphemisms for lower wages, lower skills and greater insecurity. That is no way out of the difficulties that this country and other comparable countries face, because attempts by economies such as ours to go down market in the world economy simply mean impoverishment and social fragmentation, as they have in many parts of the United States.

I share the right hon. Gentleman's enthusiasm for competitiveness. The road to that competitiveness, lower costs and wealth creation must lie in encouraging innovation, deepening and broadening skills, and achieving greater success in the modern world, not in a wage-cut world.

The Prime Minister

On the right hon. Gentleman's latter point about innovation and deepening and broadening skills, I stand full square with him. It is not least for that reason that we have greatly increased the number of our young people going into higher education—our target of one in three by the turn of the century is nearly met. The encouragement that we have given people to develop skills in polytechnics and elsewhere is well known to the right hon. Gentleman. On his earlier point about euphemism, I tell him that it is a euphemism for more jobs, more prosperity and more growth.

Sir Peter Hordern (Horsham)

Does my right hon. Friend believe that Mr. Delors and the European Commission have any idea of the risk to employment that is brought about by the working time directive and other such measures, and increasing competition from the far east and the United States? Does my right hon. Friend see a serious risk of protectionism and a lack of will to bring about a successful conclusion to the Uruguay round?

The Prime Minister

In my remarks to the European Council, I stressed again specifically the damage that we believe is done by the working time directive and a number of other directives that I particularly specified. There are differing views in the Community about that, but I think that the views that oppose ours are less strongly held today than they were a few months ago.

There is a danger that some nations in the European Community may have a tendency towards protectionism, rather than dealing with the underlying problem of making changes that will ensure that they are competitive around the world. That view is not shared across the Community.

A number of other states join us strongly in our belief that we need to deal with our costs—employment on-costs are perhaps predominant among them—to ensure that we are competitive. If we were to get in a position where protection led to a trade war among the United States, Japan and Europe, let no one be in any doubt whatever of the devastating effect that that would have throughout Europe, and the devastating impact that it would have on jobs in each and every country of the Community.

Mr. James Molyneaux (Lagan Valley)

Is the Prime Minister aware of the widespread support for his determined efforts to instil some common sense into the deliberations of the Council, not least in the area of the irresponsible meddlings in Bosnia? In the past, it would seem that our European partners have tended to say "Go on" instead of "Come on" in terms of military commitment.

The Prime Minister

I am grateful to the right hon. Gentleman. Some of our European partners have, of course, made a substantial contribution. Others perhaps have tended to stand back a little more. I think that the right hon. Gentleman puts it more crisply than I would have done, but I understand, as does everyone else, precisely what he meant and whom he means.

Mr. Bowen Wells (Hertford and Stortford)

Will my right hon. Friend confirm that there was no discussion of the social charter at Copenhagen? Was there any recognition of the serious harm that it does to competitiveness throughout Europe?

The Prime Minister

There was certainly a recognition of the harm it does, because I referred to it in the remarks that I made. I am bound to say that there was less obvious enthusiasm for the social charter, and there was no indication from other member states that they were inclined to take a harshly critical view of us for not being part of it. Clearly, many of them still have their old oratory and their own ideas to cling to. But I have hopes that, as month succeeds month, reality will dawn ever more clearly across the Community.

Mr. Andrew Faulds (Warley, East)

As for safeguarding the future of Bosnia, we have nothing but words, words and words. Does the Prime Minister realise that he should be ashamed of himself, as should his Foreign Secretary and the supposed leaders of the European Community, for his total spinelessness and pusillanimity? [ Laughter.] Stupid bastards! They are laughing about this.

Madam Speaker

Order. The hon. Gentleman had better calm down—as indeed Ministers on the Front Bench had better calm down.

The Prime Minister

In the interests of brevity and in view of your injunction a moment ago, Madam Speaker—no.

Mr. Alan Howarth (Stratford-on-Avon)

Does my right hon. Friend agree that there is a large constituency across Europe for the Conservative vision of an unbureaucratic, decentralised Community of member states joining together for sensible, practical and limited purposes, and that that has been increasingly reflected in the willingness of other member Governments to follow his lead in embracing both subsidiarity and enlargement?

The Prime Minister

My hon. Friend is right about the changing mood across the European Community. When there was clear year-on-year growth of 3.5 per cent. a year, many people were inclined to overlook some of the difficulties of central bureaucracy. Now that that 3.5 per cent. year-on-year growth has disappeared, public opinion is perhaps ahead of political opinion across Europe in being suspicious of moves towards centralisation. I regard that as an attractive change of opinion, because I believe that it will bring more realism among politicians of all shades across Europe about what can and should be attempted in any reasonable time scale.

Mr. Alfred Morris (Manchester, Wythenshawe)

What is the Prime Minister's assessment now of the prospects for success in the Uruguay round, and what discussions did he have with other Heads of Government in Copenhagen about the pace of progress, in particular with Mr. Mitterrand?

The Prime Minister

I have often said how important I believe the settlement of the Uruguay round is. I bitterly regret that we have not had a settlement for the past two years. For far too long, Heads of Government across the world have committed themselves to reaching a settlement of the Uruguay round by the end of that year. The end of that year has come and no settlement has come with it. I regret that very much. So I am concerned that we do not yet have an agreement.

There are clearly problems to he overcome. Some progress has been made. The progress made on the oilseeds agreement in the Community was definite progress. We may be able to form a clearer judgment after the G7 summit in Tokyo in a month or so.

Mr. Nicholas Winterton (Macclesfield)

Is my right hon. Friend aware, as I suspect he is, that Europe is becoming more and more uncompetitive with the rest of the world year by year, and that, in. addition, Europe is losing manufacturing capacity to the rest of the world? Is it right that, when we are beginning gradually to come out of recession and most of Europe is going into recession, we are not spending more time seeking business in north America, south America and the Pacific rim, where the real wealth of the world is currently being created?

The Prime Minister

I am certainly aware of the competitiveness points. I am keen to ensure that primarily Britain but also the whole of Europe seeks to become more competitive and goes to those markets to pick up the business that can best be undertaken in Britain or elsewhere in Europe. We must do that.

But that will not be achieved, as my hon. Friend said, unless we are competitive. That means that we must address seriously all the component costs that go into the cost of our goods. Predominant among those are labour and social costs. I know that that will be interpreted by Opposition Members in the way that they always interpret it—as recommending a sweatshop economy. That type of thinking about a sweatshop economy leads to 17 million people being unemployed across Europe. The people who genuinely care about creating jobs and employment are the people who will take action to make this country competitive, and they sit on these Benches.

Mr. Peter Shore (Bethnal Green and Stepney)

On the key question of unemployment and recession in the Community, is not the Council of Ministers' policy becoming almost completely schizophrenic? Is it not strange indeed that we should be urged to increase public expenditure, including public investment in infrastructure and other projects and that money should be put aside to subsidise interest rates up to a production of 3 per cent. when at the same time all member states are committed to economic and monetary union and are prisoners of the exchange rate mechanism that keeps European interest rates more than twice as high as the interest rates in Japan and the United States of America? That is not merely schizophrenic, but completely absurd.

The Prime Minister

The right hon. Gentleman is perhaps addressing his remarks to the wrong Head of Government. Within existing levels of public expenditure, we have sought to ensure the priority of capital investment as against revenue expenditure. That is what happened in the public expenditure survey carried out last autumn, and certainly that will be a priority in our public expenditure this year.

The right hon. Gentleman touches on an intriguing point with the proposition that is to be discussed by ECOFIN to have subsidised interest rate lending by the European Investment Bank to small and medium-sized companies. He may be interested to know that a reason why that has gone to ECOFIN is that I flatly opposed it on the grounds of competition.

Sir Peter Tapsell (East Lindsey)

Did any Head of Government at Copenhagen make the point that it was somewhat futile to have a Community summit with unemployment at the head of the economic agenda when the terrible and still worsening unemployment position in the Community has been caused largely by the past, present and continuing high interest rate policies of the independent central bank of Germany?

The Prime Minister

No one entirely agreed with the point made by my hon. Friend. The clear indication in the summaries that we saw and discussed is that, although the recessionary impact of the past few years has accelerated the growth of unemployment across the Community, there has been an underlying growth in unemployment that has gone on through boom and slump during the past 20 years. There has been an inexorable rise during the past 20 years.

Apart from the impact of the recession over the past few years, it is the realisation of that underlying and inexorable rise over two decades that has finally prompted so many European Heads of Government to decide that they must address this problem seriously and urgently.

Mr. Dennis Skinner (Bolsover)

When the Prime Minister talks about unemployment, is he aware that he is making a good case for getting out of the Common Market? When I saw the press conference during the past few days, for the life of me I did not realise that they were discussing some of the things that he has mentioned today. Every time, he was asked when he was going to sack his Minister of State, Northern Ireland Office. I will ask him that now: is the Prime Minister going to sack him or keep him?

The Prime Minister

The hon. Gentleman may be surprised to know that that was not discussed in Copenhagen.

Sir James Kilfedder (North Down)

May I congratulate the Prime Minister on a successful summit, in which he played a positive and leading role? Can he say whether there was any discussion of federalism, as expected, or did the summit concentrate on the need to deal with competitiveness to get rid of high unemployment and inflation?

The Prime Minister

It may have been a subliminal theme, but it did not see the light of day too often. At the outset, I invited colleagues to throw away Euro-theology. Perhaps federalism comes under that heading.

Mr. Peter Mandelson (Hartlepool)

Does it not worry the Prime Minister that, as the public see splits over policy in Bosnia, inaction over unemployment and disagreement about some of the most fundamental social rights and standards in Europe, they will become increasingly disillusioned about Europe's ability to act together? Does not the right hon. Gentleman think that he has some pesonal responsibility, above all, for ensuring that Europe's ability to work together is increased, rather than constantly frustrating and undermining it, as seems to be his approach to European affairs in general?

The Prime Minister

The hon. Gentleman's idea of how Europe should work together is that Britain should roll over and do what everybody else invariably wants. That is not the way I see European co-operation; it is not the way for any British Government to behave; and it is not what we are going to do.

Mr. Patrick Cormack (Staffordshire, South)

While disagreeing emphatically with what the hon. Member for Hartlepool (Mr. Mandelson) has just said, may I ask my right hon. Friend what steps the Community is now taking to inform the Serbs—those in Serbia and those in Bosnia—that safe havens in Bosnia will be made safe and that they will not be allowed to keep territory that was acquired brutally?

The Prime Minister

That, essentially, was the message of the communiqué that resulted from the summit. Today, the European Community's co-chairman, Lord Owen, will meet the partners—the Serbs, the Croats and the Muslim representatives—to discuss their ideas about the search for a settlement. I have no doubt that that point will be made again by Lord Owen, just as it is being made frequently by my right hon. Friend the Foreign Secretary and other European Foreign Ministers. My hon. Friend is right: this point needs to be emphasised continually. He has my promise that it will be emphasised.

Mr. Tam Dalyell (Linlithgow)

In Copenhagen, did anyone think to send to Mrs. Brundtland an indication that Norway would be more welcome if it were to change its policy on whaling?

The Prime Minister

I know the point that the hon. Gentleman has in mind. My right hon. Friend the present Secretary of State for the Environment has on a number of occasions made very plain the British Government's position on that matter; but it was not a subject for discussion at Copenhagen.

Mr. Tim Rathbone (Lewes)

Will my right hon. Friend remind the House of the fact—and re-emphasise it—that there seemed to be across-the-board agreement about the importance of low interest rates to the re-establishment of growth and the reduction of unemployment?

The Prime Minister

Yes, there certainly was some agreement about the attractiveness of that. However, perhaps just as important is the fact that there was agreement that the way to achieve the economic circumstances that would enable interest rates to come down is to reduce fiscal deficits right across the Community. We in this House are well aware of our own difficulty with the fiscal deficit. It is a difficulty faced by many other European countries. The need to reduce fiscal deficits throughout Europe in order to achieve low interest rates was well understood and clearly expressed.

Mrs. Margaret Ewing (Moray)

While welcoming the accelerated time scale for enlargement of the Community, may I ask the Prime Minister what discussions took place about the implications of that extension for the various institutions of the Community? We have to deal with this matter in a practical manner, but we must also ensure that there is democratic accountability to every citizen of the Community. Will the Prime Minister be more forthcoming about the time scale that is envisaged in the case of eastern and central European countries?

The Prime Minister

The hon. Lady has touched upon a very practical and important point. As part of the enlargement negotiations, some consideration will have to be given to institutional change. The voting weighting of the incoming countries is an obvious illustration. But really substantial institutional change is likely to be discussed at the next intergovernmental conference, which will follow the EFTA states' entry to the Community.

Mr. Raymond S. Robertson (Aberdeen, South)

Does my right hon. Friend agree that the best way to secure stability and democracy in eastern Europe would be to bring the countries there into full membership of the European Community and, in the meantime, to open up free trade with them?

The Prime Minister

My hon. Friend is quite right. I can say with absolute conviction that we have been the foremost proponents of ensuring that the central and eastern European countries are enabled to join the Community when they are ready and if they wish to join. Two or three years ago, it seemed a rather forlorn hope that the whole Community could be persuaded to agree to that policy; it has now not only agreed to the policy but set it out as a firm Community objective.

Mr. Bob Cryer (Bradford, South)

In the course of the discussion of the competitive position, did the Heads of Government consider the position of farmers and a cut in the common agricultural policy, which accounts for most of the £2.5 billion that this country pays each year? Do the Heads of Government ever sit back and consider the benefits that are supposed to flow from membership of the Common Market? Or would an unaccustomed silence fall if they were to try?

The Prime Minister

An unaccustomed lot of unemployment in the hon. Gentleman's constituency would follow if we were to fail to consider the benefits of joining the European Community. Sixty per cent. of our exports—this will apply to the hon. Gentleman's constituency, as well as to every other Member's—result from our trade relationship with the European Community.

If the hon. Gentleman thinks that his constituents will stay in work without jobs, he is living in cloud cuckoo land. On the question of agriculture, it may have escaped the hon. Gentleman's notice, as he lives in his own fantasy land, that this country led the way to securing an agreement on reform of the common agricultural policy.

Sir Teddy Taylor (Southend, East)

Is it not a shame that no time was given to discussion of the crisis in agriculture? Despite these wonderful reforms, spending this year is breaking all records, as is the size of the cereal mountain. Does the Prime Minister agree that the best way of cutting costs and creating jobs would be to wind up this absurd policy, or to promote the idea that member states should be able to disengage from it, in the interests of farmers, consumers and jobs?

The Prime Minister

My hon. Friend is not right.

Sir Teddy Taylor

Want to bet?

The Prime Minister

I did not know that my hon. Friend was a natural better, but I may well be tempted to take him on. I do not think that he is right about this matter. The common agricultural policy has been discussed on many occasions. If it were to be discussed at every meeting of Heads of Government, it might be attractive to my hon. Friend to have Council meetings lasting three weeks, but it would not be attractive to me.

Ms Joyce Quin (Gateshead, East)

Can the Prime Minister explain, why, in television interviews after the Council meetings, the Dutch Prime Minister and the French Foreign Minister both repudiated his views about European Community social legislation? Can he explain also why employment in the Netherlands has dropped sharply throughout the past four years even though that country has high levels of employment protection?

The Prime Minister

The hon. Lady is clearly unaware that the Netherlands is at present cutting social protection.

Mr. James Paice (Cambridgeshire, South-East)

Is not the best news for Britain the decision to bring enlargement forward to 1 January 1995? Will my right hon. Friend confirm that that would not have happened without the commitmen't at Maastricht; that, as a result, Britain will for the first time be one of a majority who are net contributors: and that, for the first time in Europe, those who pay the bills will be the voting majority?

The Prime Minister

I can confirm what my hon. Friend has said. There will be many advantages in a larger Community, including the EFTA states. It will certainly be a material advantage to have four more net contributors to the Community budget: that will add very dramatically to proper financial discipline when the Community makes decisions on spending.

Mr. Harry Cohen (Leyton)

How do lower wages, less social provision and greater unemployment, allegedly for the sake of competitiveness, differ from the policies that led to the great depressions of the 1920s and 1930s?

The Prime Minister

The hon. Gentleman would do well to go back and study the causes of the great depression. The policies that he advocates, with great sincerity and great regularity, are precisely those that would ensure that we had more unemployment. It would be worse and longer—in fact, for ever.

Mr. Ian Taylor (Esher)

The Prime Minister showed at Copenhagen that, when we argue positively about a wide range of European issues, we have nothing to fear about the Community or its Councils. Will my right hon. Friend continue in that positive vein by stressing that economic convergence may take longer than expected, but that it is still in this country's interests that it should occur, and that the same thing applies to fiscal balances? In those circumstances, will he come forward, before the next summit, with positive ideas about how the European Monetary Institute might conduct its, affairs from 1 January, and perhaps revive the idea of the hard ecu?

The Prime Minister

My hon. Friend is entirely right about the importance of economic convergence and the specific fiscal and other criteria that we set out in the Maastricht treaty. Quite apart from the part they play in the move to economic convergence across Europe, those criteria are right on their own merits for control of the economy in each and every European country. All the countries will consider how the EMI will work.

Mr. Tony Banks (Newham, North-West)

Did any discussion take place in Copenhagen about the nightmare scenario involving the thousands of obsolete and leaking nuclear weapons held in the old Soviet Union? Has the Prime Minister any firm proposals to assist the various states of that former country to decommission and get rid of those terrible weapons?

The Prime Minister

Yes, that issue has been discussed in the past, and it was discussed again in Copenhagen. We are helping the Russians and other eastern European countries, bilaterally and as part of the Community, to deal with that problem. It is my intention and that of the other European Heads of Government to raise that matter yet again at the G7 summit in Tokyo. We require the assistance of the United States and Japan in particular if we are to make a comprehensive attempt to tackle the problem.

There is no doubt that any repeat of the accident at Chernobyl would have devastating consequences across a wide part of Europe. It is therefore very much in our interests to take this matter seriously now, and to seek to do something about it.

Mr. Roy Thomason (Bromsgrove)

Has my right hon. Friend seen the article published in yesterday's edition of the Financial Times which said that Mr. Delors is now having to temper his ambitions as power is moving from Brussels to the member states within the Community? Does my right hon. Friend believe that the Copenhagen summit was a further step in that welcome direction?

The Prime Minister

I think that we see in many parts of the Community a more philosophical approach than was once the case.

Mr. William Cash (Stafford)

Given that my right hon. Friend has conceded that the convergence conditions under the Maastricht treaty are unworkable and are likely to lead to higher unemployment, would he care to explain how, in the movement towards 1996, we could get the unanimity required to unravel that treaty? How will that be achieved when about six of the member states have a vested interest in the subsidies they get, and are likely to continue to ensure that that treaty stays in force?

The Prime Minister

No, no: my hon. Friend has, uncharacteristically, misunderstood the point. It is not my view that convergence is unworkable. I think that it is necessary and desirable, quite apart from being part of the move towards economic and monetary union. What I believe to be unrealistic is the belief that convergence will be reached across the Community according to the timetable set out in the Maastricht treaty.

I thought that that was unlikely when we were asked to sign up to that treaty, which is one reason why we did not do so. Since then, however, the change in economic circumstances throughout the Community has made it even less likely that that convergence will be achieved. It is desirable in its own right, but, in my judgment, it is now unrealistic to expect it by 1996 or anything like that date.

Mr. Anthony Coombs (Wyre Forest)

Is my right hon. Friend aware that, although Britain currently attracts more than one third of foreign investment into the Community, the chairman of Daimler-Benz recently said that, due to unrealistic social and environmental costs, he would never build another car factory in his home country? Is that not a demonstration of how right the Prime Minister has been to emphasise the huge improvements and advantages that the British car industry now enjoys over that of Germany? Our car costs are 60 per cent. lower than those of Germany; that is one reason why Rover is currently outselling Mercedes-Benz in Europe.

The Prime Minister

My hon. Friend is right. I am happy to quote, approvingly, the President of the Commission, who referred to this country as a "haven for foreign investment".

Mr. Iain Duncan Smith (Chingford)

Does my right hon. Friend accept that one of the main reasons why the terrible war in the old Yugoslavia has erupted as it has was Germany's rush to recognise Bosnia and Croatia, against our better judgment? Many hon. Members are concerned that, in Copenhagen, the Germans once again attempted to drive us into a position that is wholly untenable. Does my right hon. Friend accept that we would not think of deploying further troops without a full debate in the House?

The Prime Minister

As I said earlier in response to a question from an Opposition Member, I do not envisage that any further British troops will be sent to Bosnia in the near future.

On the substantive point in my hon. Friend's question, the biggest single element behind what has happened in Bosnia is the collapse of the Soviet Union and of the discipline that that exerted over ancient hatreds in the old Yugoslavia. Once that discipline had disappeared, those ancient hatreds reappeared, and we began to see their consequences when the fighting occurred. There were subsidiary elements, but that collapse was by far the greatest.

Mr. David Shaw (Dover)

Can my right hon. Friend recall the amount of job creation from small businesses from 1983 to 1987? Did he explain to his European colleagues how we achieved that? Can he confirm that the policy in Europe on small businesses and deregulation will be improved in the future?

The Prime Minister

I can tell my hon. Friend that we argued strongly for a policy that would lead to job creation across Europe. We will contribute to the White Paper which is now being produced and which will be discussed at the Brussels summit. I have no doubt that the contributions to it will be many and varied. We will certainly set out a series of supply side considerations of the sort to which my hon. Friend referred.