HL Deb 02 June 1980 vol 409 cc1126-38

3.46 p.m.

The SECRETARY of STATE for FOREIGN and COMMONWEALTH AFFAIRS (Lord Carrington)

My Lords, with permission, I will make a Statement on the meeting of the Foreign Affairs Council which I attended with my right honourable friend the Lord Privy Seal in Brussels on 29th and 30th May. My noble friend Lord Ferrers will make a Statement on the Agricultural Council which took place at the same time. Both councils were the culmination of a long and complex negotiation which the Government began shortly after taking office last year on the size of the United Kingdom contribution to the EEC budget.

The Foreign Affairs Council, in which work continued throughout the night of 29th and 30th May, reached provisional agreement on a number of issues, as did the Agricultural Council which was meeting in parallel. After a meeting of the Cabinet today, the Government have informed the Italian Presidency that we accept the proposals that emerged from both councils. I should like at the outset to offer unstinted praise to Signor Colombo, the Italian President of the Council, for his outstanding chairmanship. His skill played a vital part in the work that was done.

At the Foreign Affairs Council on 29th May, the following arrangements were proposed to alleviate the United Kingdom's budget problem. The first element in the solution is the following formula: Provided our net contribution does not exceed the amounts estimated by the Commission, there will be ceilings on what we pay of £ 370 million in 1980 and £440 million in 1981. This would mean rebates of £710 million and £860 million respectively. All these sterling figures are converted at a rate of 1.65 units of account to the pound. These arrangements would result in a total rebate to Britain over the two-year period of £1,570 million.

A further element of the solution is a risk-sharing formula. Should the amounts of the United Kingdom's uncorrected net contributions in 1980 and 1981, as estimated by the Commission, in fact be exceeded, the arrangement is that in 1980 we will bear only one-quarter of this excess. For 1981 a more complex formula exists under which we would meet the first £12 million of any excess, the next £60 million would be shared between us and our partners equally, and thereafter we would meet only a quarter of the excess, as in 1980.

For 1982 it was envisaged that by this time the Council would have completed a radical review of the patterns of Community expenditure and the operation of the budget. However, if that had not by 1982 produced arrangements which would resolve the United Kingdom's budget problem, the Commission would put forward proposals along the lines of 1980 and 1981 and the Council would act accordingly. We can therefore be sure that for 1982 as well there will be similar restrictions on the level of the United Kingdom's net contribution.

"The payment of these amounts to Britain will be brought about by improvements in the operation of the 1975 Financial Mechanism, bringing our gross contribution more or less into line with our share of Community gross national product, and, for the rest, through Community expenditure in the United Kingdom. There will be a new regulation under Article 235 of the EEC Treaty to provide for this expenditure.

"Following the precedent of the Financial Mechanism, the credits under the new regulation will appear in the Community budget for the following year, but with the possibility of advance payments in the current year. For 1980, we would expect to be paid before the end of our financial year 1980–81.

"In the long-term the most important part of the package is the commitment of the Council to review the development of Community policies and the operation of the budget. This, together with the retraints imposed by the 1 per cent. ceiling, will enable us to press for lasting reforms which will among other things resolve the British budgetary problem. This review offers an opportunity which has never been available before, since we joined the Community, to work together with our partners for financial arrangements and Community policies which are to the advantage and interest of all the member states, as befits a Community of equals.

"We agreed to a statement of general principles on fisheries, which leaves the substantive issues open for consideration on their merits in the Fisheries Council, which will next meet on 16th June. A deadline of 31st December 1980 has been fixed for agreement on a revised Common Fisheries Policy. This is in the United Kingdom interest: Her Majesty's Government have repeatedly urged rapid progress towards a satisfactory Common Fisheries Policy settlement. I welcome the fact that the fisheries text recognises the need for this, and for a settlement of all the outstanding elements of the CFP together. It in no way prejudices the vital interests of our fishermen which we are determined to safeguard.

"When my right honourable friend the Prime Minister refused the offer our partners made at Luxembourg, she made clear that this was because the combination of amount and duration was not right. We have now negotiated better arrangements for the two years 1980 and 1981, taken together, than were on offer then; and we have also secured an arrangement for its third year, 1982, which was refused to us then. Furthermore, the Community has recognised that there will have to be a major review of the operation of the budget and the balance of Community expenditure and that the United Kingdom budget problem must be resolved finally.

"As my right honourable friend the Prime Minister made clear after Luxembourg, we also refused what was on offer then because we were being asked to accept agreements outside the field of the budget which were damaging to us. Since then, as the Minister of Agriculture, Fisheries and Food will make clear in his Statement to the Commons (and my noble friend Lord Ferrers here) on sheepmeat and CAP prices and related measures, we have secured changes in what was being suggested which give us substantial advantages. Taking the balance of these proposals together, the Government believe they add up to a fair and advantageous outcome.

"In a negotiation as complex as this, no one party can expect to get everything he wants and to concede nothing. There should be no belittling of the concessions our partners are making at a time when, whatever the impact on them of the Community budget, the general economic background is unfavourable. With this arrangement, Britain can play her part in developing further the internal and external policies of the Community. The negotiation has, moreover, focussed the minds of all member states on the unsatisfactory way in which the Community budget operates and, more clearly than ever, on the undesirable imbalance in the pattern of Community expenditure. With the review commissioned for 1981 and the proximity of the 1 per cent. VAT ceiling, we have an unrivalled opportunity to bring about sensible adjustments to the operation of the Common Agricultural Policy and to put the Community's finances on a sounder basis than ever before.

"This Government came to office determined to make a success of our membership of the Community. The first task was to tackle the inequitable budget contribution. That we have now done. But Europe is about more than that. The challenges that face the Community both internally and externally are as daunting as any in its relatively brief history. None of us can find adequate solutions to them on our own. This agreement gives us the chance to solve them together."

3.55 p.m.

Lord GORONWY-ROBERTS

My Lords, we are all grateful to the noble Lord for his Statement. Indeed, we should like to commend him for the skill and patience which once more he has contributed to some very complex negotiations. All the more reluctantly, then, I have to ask whether, in fact, this Statement represents more than a postponement of the fundamental problem. There has been some advance in granting to this country a reduction in its contributions over the next two years and some indication that there may be an arrangement in the third year; but beyond that there is nothing but expectation and no concrete assurance at all. The reductions in the British contribution this year and and next year, welcome as they are, may not be repeated in 1982. We do not know. The Community is going to have a look at it. But beyond 1982 there remains a persistent and fundamental problem which will have to be solved if, in fact, the economics of the Community are going to be so reasonable and are going to commend themselves to people in this country and to other countries to the extent that the great boon of political co-operation is made possible¤unless there is a parallel advance in rationality about economics, the first failure will be what everybody in this House wishes to see as a fact; namely, political co-operation.

Our contribution may well be at the rate of £1,500 million or more in 1982 unless there is a fundamental change in the arrangements beyond that year. Moreover, even the present arrangement, as I see it, keeps us still the second-highest contributor to the Community when we are the third poorest¤and perhaps the noble Lord may correct this calculation that I have made. The communiquée is vague about the structural changes (as it calls them) which are hopefully to be negotiated. At the same time, it is absolutely clear that the heart of the problem, literally 70 per cent. of the problem, the Common Agricultural Policy, is to remain fundamentally unchanged. The surpluses will continue. Indeed, we will add to them. The British housewife will pay 80p for butter; the Russians will pay 34p. They will be laughing all the way to Afghanistan and beyond with that sort of bargain. Nothing has been done about this repugnant aspect of the Common Agricultural Policy; namely, that our own housewives have to pay nearly three times as much as the people they are engaged almost everyday in condemning for their lack of international probity and decency.

What about the position of New Zealand? Is there any reaction from the Prime Minister of New Zealand? There are reports that the New Zealanders may exercise a kind of veto on this arrangement. We import, I believe, quite half of our sheepmeat from New Zealand. What will be the result of these arrangements on the position of New Zealand over the next four years in this, still, its major external market? What undertakings have been given on fisheries? The paragraph read out to us indicates that there will be a decision one way or the other in December 1980 and that that will be in our interest. It depends upon the decision. The vital interests of our fishing industry are to be borne in mind. Who are to say what they are? I hope that it will be the fishing industry. They have been very vocal in the past few days and have been talking a great deal of sense in comparing what is done in this country as compared with what is done in other countries in the Community for fishing.

Was there any mention of oil? We have been told that there must be no linkage between oil, fish and lamb. Lamb is already linked, is it not? There has been a linkage between lamb and this arrangement. Fisheries are dealt with in the two non-commital paragraphs that we have heard. Was anything said about oil? Are not the problems of the budget, and the fundamental problem of the CAP, questions which must be tackled and solved irrespective of any other peripheral matter like British oil and British fisheries? It is too late to say "British lamb "of course. As to the intention on 16th June to discuss fisheries, I hope that these paragraphs mean that there is absolutely no commitment which may harm our already ailing fishing industry.

The point about our having withdrawn our assistance to the 5 per cent. increase in farm prices: I hope the Government realise that with these constant increases in food prices for this country they are making a complete mockery of any appeals that they may make to the trade unions to exercise wage restraint in the next few months. Those of us who have every sympathy with a rational wage and salaries policy find it increasingly difficult to talk to the leaders of the British working force about restraint in these matters. When rent, rates and now food go up in price almost every day, wage demands begin not really on the shop floor but in the kitchen, and here we are buying political co-operation by more subventions to European farmers, many of them grossly inefficient.

My criticism of this Statement¤and it in no way means a criticism of the noble Lord, whose capacity and devotion we all respect¤is that it has not come to grips, or does not seem to be about to come to grips, with the fundamental problem facing the Community and facing Britain in particular. I speak as one who has done his part to try to create in Europe the basis for the necessary political co-operation without which the defence of our freedoms in the West may prove impossible. I am concerned constantly that this supreme boon of political co-operation has been sacrificed to short-term concessions to interests which have regard only for the monetary financial advantage that may accrue to them already. We are told that the French farmers are demanding even higher increases in farm prices than the 5 per cent. now given to the Community farmers. I hope that the noble Lord the Foreign Secretary with his very great gifts¤I repeat this¤will seek on 16th June to revitalise negotiations that have been proceeding and not be content with this agreement, because this does not take us anywhere near a solution of the fundamental problems that have been afflicting the community and bearing very hard on Britain in particular for quite a number of years now.

4.4 p.m.

Lord GLADWYN

My Lords, we also should like to thank the noble Lord, Lord Carrington, for making this highly important Statement. We recognise, along with the noble Lord, Lord Goronwy-Roberts, that there are various outstanding points which will have to be cleared up in the next year or two. We entirely recognise that. However, while entirely recognising it, we Liberals¤unlike the official Opposition¤welcome the Brussels agreement wholeheartedly and we sincerely congratulate the Foreign Secretary, to whom I may perhaps refer without any risk of being misunderstood as our everpresent help in trouble.

Whether the present deal, for deal it is, is much better than that which seemed obtainable at Luxembourg¤as seems to be argued by the Government in the noble Lord's Statement¤is debatable, but is of course now immaterial. The great thing is that our absurdly disproportionate contribution to the EEC budget has¤provided that all the other Governments agree¤been very substantially reduced at the cost, it is true, of a small but, for the consumer, unwelcome rise in farm prices, mostly on goods also in surplus. This, however, was necessary if the Community was not to break up owing to individual action on the part of one or more members. Since the CAP is bound to be renegotiated in a year or two's time, as we all know, this is all in the nature of some kind of holding operation.

The overriding point is that in the event, with general agreement the EEC has survived a serious crisis and will continue. That will provoke the fury of the many isolationists and "Little Engenders" in this country who will make as much running out of the less pleasant features of the present agreement as they can. My first question is: Should not the Government now embark, in co-operation with the European movement, on a serious campaign to explain to the nation the very real advantages, both economic and political, of Community membership¤and, above all perhaps, to indicate what would happen if by any chance it broke up and we left?

Finally¤and my second question is this: Might not the Foreign Secretary suitably pay tribute to the helpful part not only played by the extremely intelligent Italian President but by many other of our partners, notably by the German Government, who, provided the opposition of their Finance Minister can be overcome¤and I believe it will be¤will have made what from their point of view were straight financial concessions to us amounting, so we read (and in electoral year, also) to no less than £ 650 million? Surely the much abused Commission might come in for some word of praise, too. We all know that the Commission may well be in need of structural reform; but at least in its upper reaches it contains some highly intelligent and devoted men determined to make a success of the one really hopeful effort in the way of regional international co-operation that has come about in the past 500 years.

4.8 p.m.

Lord CARRINGTON

My Lords, I am most grateful to the two noble Lords, though it will come as no surprise that I prefer Lord Gladwyn's intervention to that of the noble Lord, Lord Goronwy-Roberts. Lord Goronwy-Roberts is always so courteous that I will measure my words and speak as gently as possible. I will say one thing to him: A year ago, when this Government came into office, our predecessors had failed so dismally in understanding or putting over the problems which faced Britain that in Strasbourg last June the Prime Minister was not able to persuade the Heads of Government that there was a problem. In one year we have not only persuaded the Heads of Government that there was a problem (which the previous Government never succeeded in doing) but we have a solution which is satisfactory as far as it goes. I really do not think that it lies in the mouths of noble Lords opposite to complain about this settlement.

Secondly, I would say equally gently to the noble Lord that from what he said I do not think that he understands what the Statement says. He was talking about a postponement of the problem and of the problems starting up again in three or two years' time. The whole point of this deal is that there is now a recognition by the Community that there has to be a new look at the financing of the Community; that it cannot go on as it is. If the noble Lord says that the Community will never come to any agreement about it because it is so difficult, the ceiling of 1 per cent. on VAT makes it inevitable that the Community has to come to a conclusion about this because otherwise the Community will go bankrupt. Therefore there is no question of a postponement of the problem.

What we have done is to get a solution for three years for the British problem¤a satisfactory solution, though not all of what we would like, as I have said¤and in the meantime the Community is going to look at the structure of its finances without the British being blamed for that. We shall not be responsible for it. It is the actual size of the budget which will cause this restructuring to take place and so there is no question of postponement, and I would ask the noble Lord to look at the Statement again rather carefully. If I could also ask him¤I do not blame him because I know how difficult it is, but he really must not mix up millions of pounds and 'millions of units of account, because the two things are different and it makes the figures rather less—

Lord GORONWY-ROBERTS

Mixing units of account! Really—

Lord CARRINGTON

The noble Lord can come in later, but I think I really would like to finish what I was saying. My noble friend will speak about sheep-meat, but perhaps I may speak in advance of him. I think this is an exceedingly advantageous deal for the country and for the housewife. As regards the 5 per cent. increase in agricultural prices, would the noble Lord please remember that throughout Europe there has been an inflation rate this year of between 10 and 20 per cent. and in this country of about 20 per cent. What we are asking our farmers to do is to accept 5 per cent.

price increases when they have had 20 per cent. inflation. I really do not think it is entirely reasonable that the farmers of this country should be the only people who are not regarded as being worthy of any price increases because they have no other way of selling their products. I will give the noble Lord one other figure which might interest him. That is that since 1972 food prices have risen by something like 200 per cent. in this country, and of that 200 per cent. only 8 to 10 per cent. can be laid at the door of the Common Agricultural Policy. In terms of this settlement, on the Retail Price Index it is very small indeed. I believe that on that index it is something like 0.7 per cent. and so I think one has to bear that in mind.

I made it perfectly plain that we had agreed to nothing on the fisheries issue which prejudiced the fishermen of this country. I say that again: there is certainly no commitment of any kind, and if we cannot get a satisfactory fish settlement then we shall not get a fish settlement. There is no mention of energy in the Statement at all, so the noble Lord can set his mind at rest on that.

With regard to what the noble Lord, Lord Gladwyn, has said, I think that this is a better deal than was offered at Luxembourg and it says much for my right honourable friend the Prime Minister that the stand she has taken has enabled us to get this better deal. It is better because overall we get more back; it is better because we get the commitment again on 1 per cent. back and it is better because we have an agreement to look at the structure of the budget. I thought that in the Statement I had paid tribute¤if not, I do so now¤to those other countries who have sought to get a settlement. I most certainly do that. As for explaining the advantages of the Community, that is all explained; and do not let us underestimate the political advantages of belonging to the Community. I am glad to think that at any rate the noble Lord, Lord Gladwyn, will be with me in doing that.

Lord GEORGE-BROWN

My Lords, may I just put this point to the Foreign Secretary? This must be the third renegotiation since I first tabled the appli- cation on behalf of the then Government on terms which the then Government, and most of the party sitting there now, thought were acceptable. This third renegotiation¤the other two, I think, were conducted by the present Opposition¤has produced terms not only far better for us than the terms on which we tabled the application but far better than either of the two renegotations conducted before, both of which were commended to this House by the present Opposition. May I, therefore, if no one else is willing do do so, say on behalf of my then colleagues in the Labour Party how much I congratulate the Prime Minister and the Foreign Secretary on what they have achieved?¤and I hope it has taken me less time to say that than it took my unfortunate previous Minister of State to make his circumlocution to avoid saying that.

May I secondly ask the Foreign Secretary to take this from me: that many of us echo most heartily what he said towards the end of his Statement? Creating Europe was never about the CAP. It was never about the economic policy¤and indeed I made that clear in the speech I gave for the then Labour Government at the time we tabled the application. It was about creating a political Europe, creating a Europe with a common international and defence policy, creating a Europe with a common economic policy. There has never been a time¤not even at the time of the Hague Congress in 1948, or whenever it was¤when the world has stood so much in need of a political entity in Europe and a lead from Europe¤a lead which, alas! for the moment can no longer come from the United States and which for the moment is allowing all the running to be made by the Soviet Union. I hope therefore that, having got this third renegotiation out of the way on this, in a sense, minor matter of detail, everybody's attention can now be turned towards creating the political Europe which was the basis of the case in the very first instance.

Lord CARRINGTON

My Lords, the noble Lord will know that "renegotiation" is a pejorative word in the Community! This was, I think, a fairly satisfactory "readjustment ". With regard to his second point, I agree very much with what he said about the political entity of Europe. Now that we have got this settlement, do let us all lift our sights a little bit higher.