HL Deb 10 July 1978 vol 394 cc1325-34

3.45 p.m.


My Lords, with permission I shall now repeat a Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"I should like, with permission, to report to the House on the meeting of the European Council in Bremen which I attended with my right honourable friend the Foreign and Commonwealth Secretary on 6th and 7th July.

"We were informed by the President of the Commission that the expected rate of growth in the Community countries this year on present policies would be lower than expected, and we agreed that increased growth is a crucial objective to improve employment prospects. As regards measures to combat youth unemployment, we called for decisions within the framework of the European Social Fund to come into force on 1st January 1979. All Member States will take necessary measures to increase growth according to their own individual circumstances. We agreed that countries with smaller inflation and balance of payments problems will do more to increase domestic demand.

"We agreed that a zone of monetary stability in Europe was a highly desirable objective, as part of the concerted international action needed for economic recovery. The German and French Governments put forward for consideration a scheme for a European monetary system. A number of Heads of Government, including myself, wished to see the details fully worked out before entering into any commitment by our respective Governments. We therefore agreed that Finance Ministers should formulate guidelines for a possible scheme taking as a starting point, at their meeting on 24th July, the Franco-German proposals. Officials would subsequently elaborate the necessary provisions by 31st October, and the final scheme would be in front of the meeting of the European Council on 4th and 5th December for decision and commitment. This agreed timetable will permit the fuller preparation and consideration which is essential for a durable scheme. We can thus hope to avoid the errors of 1972 when the previous Government joined a similar scheme on 1st May, but were forced to withdraw only seven weeks later, on 23rd June. However, the outlines of the Franco-German proposal contain some new features and the Government will play their full part in the forthcoming studies.

"The Government have taken the view throughout these discussions that monetary arrangements are not enough by themselves to ensure a zone of monetary stability. Any new system must be one which will last and will take full account of the economic, as well as monetary, interests of each Member of the Community. Therefore, in company with others, I pressed for parallel studies to be made of the action that is necessary to ensure a greater convergence in the economies of the Member countries, especially in such matters as the commitments to growth and transfers of real resources. It was agreed to carry out such studies. It will be necessary to judge how far all these matters have been satisfactorily arranged when we are called upon to take a final decision on such new proposals as the Finance Council may put forward.

"There was a related discussion arising out of the need for a better use of resources in supporting Mediterranean agriculture. This led to an extensive discussion of the Common Agricultural Policy as a whole which brought out the dissatisfaction felt by a number of Member Governments with the present scale of agricultural expenditure and with the cost of financing surplus production. This was the most thorough and frank discussion of the defects of the CAP in which I have participated in the Community, and it revealed a great deal of support for our wish to see a more balanced distribution of the use of Community resources as a whole. The Commission was asked to come back with proposals to remedy this at the next European Council.

"As regards Energy, the Council adopted objectives for 1985 calling for the reduction of the Community's dependence on imported energy to 50 per cent. of its total requirements including oil, and emphasised that other industrial countries should set themselves similar objectives.

"The Council expressed its readiness to make progress with the developing countries on such matters as trade, commodity support, stabilisation of export earnings and assistance.

"The Council discussed the situation in the Middle East and Lebanon and in Africa. It regretted the lack of progress towards a settlement in the Middle East, and reaffirmed the principles set out in the Declaration issued by the Council in London on 29th June last year. The Council agreed on the necessity for early and peaceful independence for Namibia and Zimbabwe on the basis of negotiated and internationally-acceptable solutions, and expressed support for the efforts which Britain is making with others to this end.

"This was a constructive meeting in which there was some hard talking because we were getting to grips with important problems. If, as a result, some new solutions can be agreed on the convergence of our economies, on a zone of monetary stability and on the transfer of resources inside the Community, including a better use of resources in the CAP, it could turn out to have been an historic occasion."

My Lords, that concludes the Statement.

3.51 p.m.


My Lords, I wonder whether the noble Lord would be kind enough to answer a few questions on the Statement. First, will he say what the difference is between the concept of the Franco-German proposals, on the one hand, and what the Prime Minister had in mind, on the other hand, when he made abundantly clear recently his desire to see Europe as an area of monetary stability? In asking these questions I refer, of course, not to the detail but to the overall concept of what is proposed.

Secondly, is the noble Lord aware that we should like to see this imaginative proposal studied in a positive manner? Our hope would be that the decision of Her Majesty's Government, if it be taken during the course of the next month or two, would not be influenced by those within their Party who are opposed to all monetary disciplines, be they imposed either from within or by external agreements. Finally, will the noble Lord agree that the postponement by the European Council of the final decision on this matter until December seems to us to be most prudent for good internal political reasons?


My Lords, I should like to join in thanking the noble Lord for repeating the Statement made by the Prime Minister in another place. We on these Benches certainly warmly welcome the progress made at the Bremen meeting towards currency stabilisation and towards the establishment of a parallel European currency. We believe this to be very important indeed, and in fact we think that the conference could turn out to be an historic occasion, as the Statement suggests.

However, we regret that the British Government appear to have been somewhat reluctant participants, according at any rate to all that we read in the Press. The timetable for consideration of the plan is given in the Statement, but I do not think that there is any indication as to when the scheme for currency stabilisation might come into effect. I wonder whether the noble Lord can give us any idea as to when that might be? The more permanent and the less experimental the arrangements for currency stabilisation prove to be, the more they will be likely to succeed. There will certainly have to be a transfer of resources; that is important, and Her Majesty's Government are right to lay stress on it. Nevertheless, I hope that their attitude between now and December will be positive and constructive in putting forward these different considerations relating to this remarkable and exciting new development.

3.54 p.m.


My Lords, I can immediately respond to the central point made by the noble Lord, Lord Banks, because it is one that was made by the noble Lord, Lord Soames. Our study will be as constructive and as helpful as we can make it.

The timetable, which both noble Lords mentioned, is as set out in the Statement which I have repeated. It is necessary that a complicated and very important movement forward, in the interests of economic unity, should be properly prepared and properly studied, and I cannot see that there is any suggestion of undue delay, for internal or other purposes, in stipulating, by agreement of the Nine, that by 24th July, when the Finance Ministers meet, there should be something for them to consider, which officials should then prepare by 31st October. That is a short enough period for them to go into the details of a massive scheme of this sort involving great changes in arrangements and, indeed, vast sums of money. Then, as a result of their meeting, in turn, Heads of Government and Foreign Ministers, by the meeting of the Council on 4th and 5th December, will be in a position to consider whether they can come to a decision and offer a commitment.

I would commend to your Lordships' House a further study of this Statement, which I imagine will, on close scrutiny, yield encouraging answers to the question that we have already heard.


My Lords, I thank the noble Lord for repeating the Statement and congratulate the Prime Minister for his courageous stand against taking premature decisions. I should like to ask my noble friend whether he will not agree that this newly re-baptised Snake is a crude attempt by economic means to impose German domination of Europe, which they failed to achieve by military means?


My Lords, I must strongly dissent at once—

Several noble Lords

Hear, hear!


—with my noble friend in his animadversions on an important and helpful partner of ours in the Community. I think that on reflection he, himself, may wish to revise his statement. As to what he said about the Prime Minister, we are, indeed, fortunate that we have a Prime Minister who not only knows his way around these complicated subjects, but is willing to stand up for the interests of this country.


My Lords, will not the Government agree that, whatever the dangers inherent in our going along with some, let us hope tempered, version of the Franco-German plan for currency stabilisation, the prospect of our being relegated virtually to some kind of Second Division in Europe, with the inevitable consequence of protection so long advocated by noble Lords opposite, is considerably more alarming?


My Lords, I would deplore this use of terminology suggesting that this country is somehow being relegated in some league table or other. The fact is that we are playing our part in Europe by speaking out and making contributions of an informed and expert nature on the most difficult subjects, including this one. I know the noble Lord's record in this matter; he has served this principle with great distinction for many years. But I would ask him to accept that the best way in which a workable and lasting scheme on these lines can be adopted by consensus is to ensure that we get it right from the start. We did not get it right in 1972 and we had to beat a hurried retreat—in six or seven weeks, having put our signature to that scheme.


My Lords, could my noble friend say a little more on the point that he made on energy? It would appear that the only two nations in the Community with coal are Great Britain and Germany. Germany is not proposing to increase its output of coal; therefore, we are the only nation that is. Along with our oil, it would appear that we are to play a far greater part than any other country in fulfilling the point made in the Statement about increasing indigenous supplies of energy. Could my noble friend say whether they are hoping to make up on atomic energy, or something of that kind?


My Lords, I think that my noble friend is well aware of Government policy to advance as far as possible appropriately in all sectors of the fuel industry, including that of nuclear energy. As to the decision of the Council last week, it was agreed that there should be every effort made to reduce by 50 per cent. our collective dependence on imported energy, including oil. That clearly means to me, as it did to them, that we should expand severally in our various countries, and certainly in this country, which has important indigenous resources, our own national production. We shall need to do so of course in every respect by co-operation and consultation with our partners in the Community.


My Lords, would not the Minister agree that the new monetary policy means that the economic power to control our own economy here is to be further whittled away to the Continent?


Not necessarily, my Lords. Of course if we get it wrong, that and a number of other dangerous results may ensue, but we are hoping, with our partners, to tackle this question properly from the start, taking time to utilise all the expert advice available in order to get it right, so that it will work and be of lasting benefit to all Members of the Community. That is why it is natural for us to link with the Franco-German proposals the equally important and complementary suggestions about the reform of the CAP, and indeed of the distribution and deployment of resources in the Community as a whole, which is the second point which the Statement emphasises.


My Lords, may I ask the noble Lord, following upon the question of his noble friend, whether he would appreciate that there are nine countries involved? We are not the only country which does not wish to see our economy controlled from outside. This is something which all together wish to bring about because it is going to be for the benefit of all. For goodness' sake, we are not going to stand out just because we are the only ones who say that this is not such a good idea because we are frightened of what other people might do. Others equally are going to see that decisions so vital to the health of their economy are not going to be taken above their heads, but a bit of common discipline is surely going to be required.

This leads me to ask the noble Lord—I asked him this in my supplementary, but I do not think that I understood his answer very well—what is the difference between the German-French proposals on the one hand for a zone of monetary stability within Europe, and what the Prime Minister had in mind when he was referring to the desirability of bringing about just this?


My Lords, the noble Lord did not understand my answer because—and I apologise for this—I did not answer. He asked what was the difference between the approach of the Franco-German proposals and the observations made cogently by my right honourable friend when these came up for discussion. I think it lies in the one word "convergence"; economic convergence, which the noble Lord perhaps understands better than any other Member in this House, and if we add also resources and proper distribution of resources so that the kind of fairness as between all Members of the Community, to which he spoke just now, is in fact achieved. That is the difference. We are not yet satisfied that those two points are fully understood by some of our partners. As to being on our own in asking for consideration of our own national interests, we were not on our own. As the Statement makes clear, my right honourable friend the Prime Minister was by no means the only Head of Government who expressed these necessary caveats and reservations.


My Lords, is my noble friend aware that many of us on this side of the House have great hopes that the Bremen scheme is going to lead somewhere, and that it is important and potentially valuable? But will he, for the sake of clarity, make it clear to some of my noble friends that this is a scheme of monetary co-operation? It is not to be confused with ultimate monetary union which implies a single currency and a kind of federal structure behind it for the implementation of a European monetary policy. This is a scheme of monetary co-operation with an economic side attached to it.


My Lords, I think that most people will define the scope and nature of these proposals—they are no more than proposals—in their own way. Of course it is more than a scheme of monetary co-operation. It has its implications for economic development, and that, quite properly, is one of the preoccupations of my right honourable friend and the Government in considering these proposals.


My Lords, I am in some difficulty here. I see one noble Lord from that side and another noble Lord from our side of the House who wish to speak. Perhaps the House would like them very briefly to each ask a question, and then call it a day.


My Lords, may I ask the Minister of State whether Her Majesty's Government consider monetary union to be a cause of economic union or a symptom of such economic union?


My Lords, to attempt to answer such a question at Question Time would be to introduce a not very rewarding seminar. If the noble Lord would like to discuss this with me, I should be glad to do my best, but not just now.


My Lords, will the Minister convey the thanks of most of us, at any rate, to the Prime Minister for the clarity of the Statement which has been repeated in this House today, and for his courage in standing up for the interests of this country? Would the Minister realise that he made a very important point when lie stressed how necessary it is to get our approach absolutely right? Would he therefore urge on the Prime Minister to seek every means in his power to make sure that the issues which, after all, although they affect the other eight countries also affect the British people, are made known to our fellow-countrymen? And, not least of all, to make known the terrible price that Britain is paying for the follies of a Conservative Government which dashed headlong into an arrangement and then, seven weeks later, withdrew from it, and that the price of that bill is still being paid in terms of unemployment?


My Lords, I shall most certainly convey my noble friend's words to the Prime Minister, who, in any case, knowing the source of those sentiments, will himself take care to read them in Hansard tomorrow.