HL Deb 01 July 1965 vol 267 cc1031-5

4.4 p.m.


My Lords, it may be convenient if, with your permission, I now repeat a Statement which has just been made in another place by my right honourable friend the First Secretary to the Treasury. I will use his own words:

"With your permission, Mr. Speaker, and that of the House, I should like to make a Statement about the foreign exchange cost of maintaining British forces in Germany.

"On the 28th and 29th June I discussed with Mr. Dahlgrün, the Federal German Minister of Finance, the question of German payments offsetting these costs. Our discussions covered both the current two-year Agreement ending 31st March, 1966, and the extension of that Agreement for a further year to March, 1967.

"During the current two-year period the foreign exchange cost of our forces in Germany is expected to be about £170 million; in the first 15 months of that period German offset payments have totalled £30 million. The German Government has now agreed to these additional measures:

"First, an immediate payment of £42 million on account of sums falling due by 31st March, 1966, in respect of contracts already placed or foreseen;

"Second, finance for additional British exports of £45 million. Half of this will come from the release of moneys belonging to the Germany Government but already held in London: it will not, therefore, represent new money for the reserves, but it will represent additional exports and the cancellation of an outstanding debt. Drawings from this account will be matched, pound for pound by new German transfers across the exchanges.

"Thus, I expect German offset payments in, and in respect of, the current two-year period now to total some £117 million.

"In the third financial year, 1966–67, the German Government will see to it that offset payments total some £54 million. This figure will, of course, be additional to the payments which I have already described for 1964–66.

"I hope that the House will share my view that this represents a satisfactory settlement of an issue of the greatest economic and political importance to both countries. I feel that this outcome owes much to the spirit of good will and real friendship which I found in my discussions with the German Finance Minister, and in particular, to the new understanding and sense of urgency which was imparted to this subject by the Prime Minister's talks with Dr. Erhard in March of this year. With permission, I will circulate in the OFFICIAL REPORT the text of the Communiqué issued in Bonn on 29th June."

Following is the communiqué referred to:

No. 28.

June 29, 1965

Anglo-German Talks on Offsetting the Foreign Exchange Costs of British Forces in Germany June 28 and 29, 1965

Final Communiqué

When the British Prime Minister, Mr. Harold Wilson, visited Germany on the 8th and 9th of March of this year he agreed with the Federal Chancellor, Professor Ludwig Erhard, that the Federal Minister of Finance would meet the Chief Secretary to the Treasury to negotiate improved arrangements for offsetting the foreign exchange costs of the maintenance of British Forces in Germany for the period ending April, 1967. These talks were held on 28th and 29th of June, 1965. The British delegation was led by the Chief Secretary to the Treasury, Mr. John Diamond, who was accompanied by the British Ambassador to the Federal Republic, Sir Frank Roberts together with representatives of the Treasury, the Board of Trade and the British Embassy. The German delegation was led by the Federal Minister of Finance, Dr. Rolf Dahlgrün, who was accompanied by Ministerialdirektor Dr. Féaux de la Croix and representatives of the Federal Ministries of Finance, Foreign Affairs, Economics, Defence and Economic Co-operation as well as the German Federal Bank. The negotiations took place against the background of the special political and economic importance of solving the problem of offsetting the DM expenditure incurred by Great Britain through the stationing of British troops on the territory of the Federal Republic. They were conducted in a spirit of friendly understanding and ended in complete agreement.

The Ministers agreed:

To recommend to their Governments

that the current Agreement shall be extended for a further year. i.e. to 31st of March, 1967. The Federal Government will sec to it that the volume of payments for purchases during that additional third year will total about DM 600 million.

The two Ministers also examined progress under the current Agreement, considered various ways in which performance under it could be improved and satisfied themselves that with the help of the following new measures this performance would not fall short of expectations.

In order to accelerate the implementation of the current Agreement, which covers the period from the 1st of April, 1964 to the 31st of March, 1966, and under which recognised payments so far total DM 336 million under contracts already placed, the Federal Republic will promptly make an advance payment of DM 464 million. This sum is intended to meet payments due by 31st March, 1966, under contracts already placed or foreseen. This will enable a beginning to be made with drawings on the Deposit Account amounting at present to 23.6 million (the equivalent of about 250 million DM). These drawings, which will not be transferable across the exchange would be used by the Federal Government together with German payments to finance additional purchases from the United Kingdom amounting to twice that sum in respect of the two year period ending 31st March, 1966.

4.8 p.m.


My Lords, we have all been very greatly concerned about the disparity between the mounting expense of maintaining our Armed Forces in Germany, which has the nature of an unrequited export, and the very small receipts, whether through German purchases or arms from Britain or in other ways, which could be set against this heavy drain on our balance of payments. This disparity has always provided strong arguments for those who advocate that we should no longer maintain British Forces in Germany. I hope very much that this new Agreement which the noble Lord has just described and which, I take it, covers something between one-half and two-thirds of the cost, will be fully implemented in the next three years. I hope it will make it a little easier for us to discharge our present obligations towards NATO. I hope it will also have the effect, which is very much to be desired, of promoting a greater amount of general trade and greater Political co-operation between the United Kingdom and Germany.


My Lords, may I ask the noble Lord whether I am right in thinking that this is quite a substantial improvement on anything that has been negotiated in the past? Can he give any indication of the extent of the improvement?


My Lords, I am most grateful for the welcome to this Statement given by both noble Lords. This is indeed a significant improvement on the previous Agreement. I think the improvement falls into two parts. The previous Agreement, arrived at by the previous Administration, left the German authorities in the position that they would make a contribution as far as possible. This may, perhaps, be one of the reasons why there has been this short-fall between what was hoped for and what eventually was received. No particular blame may be attached to the German Government it may well be a failure on our part to supply the right type of goods. The difference is that under this Agreement the German Government will see to it—those are the words written into the Agreement: "will see to it"—that these offset payments are made. There is therefore a firm undertaking in that respect. Not being a great mathematician, I cannot immediately say what is the difference, but there is a very substantial difference between what has been the position and what will now arise.


My Lords, I think this Agreement will be regarded on both sides of the House as a very important one, and I am sure that it will be warmly welcomed by the whole nation. I would suggest to the noble Lord that he might convey to his right honourable friend, the Chief Secretary to the Treasury the general sense of satisfaction which obtains, and indeed congratulate him on the successful outcome of his negotiations.


My Lords, I am most grateful, and I will certainly see that the comments of the noble Lord are passed on. I hope—I am sure that my hope will be shared in all quarters—that what will arise from the Agreement will be not only the immediate results, but also a new sense of understanding of the very great problems which exist between countries in NATO regarding the financing of their defence commitments.