HL Deb 24 June 1980 vol 410 cc1498-509

3.50 p.m.

The LORD PRESIDENT of the COUNCIL (Lord Soames)

My Lords, with the leave of the House I will now repeat a Statement which has been made in another place by my right honourable friend the Prime Minister on the Venice Economic Summit. The Statement is as follows:

"With permission, Mr. Speaker, I will make a Statement about the Economic Summit meeting in Venice on 22nd and 23rd June at which I was accompanied by my noble friend the Foreign Secretary and my right honourable friends the Chancellor of the Exchequer and the Secretary of State for Energy.

"This was the first Summit meeting since the Soviet occupation of Afghanistan and, therefore, the first to have a detailed and formal discussion of international political problems. The unanimity and sense of common purpose that informed this discussion is reflected in our public statements. We confirmed that the Soviet occupation of an independent sovereign nation is and will remain unacceptable. We called for the complete withdrawal of Soviet troops and for the Afghan people to be left free to decide their own future. We were not deflected by the Soviet Government's carefully timed announcement of the withdrawal of certain units from Afghanistan. We made clear that the withdrawal, if confirmed, must be irreversible and must continue until no Soviet forces remain in Afghanistan. We reaffirmed our opposition to the attendance of our athletes at the Olympic Games.

"In addition to this declaration on Afghanistan, we also agreed further statements about refugees, about the taking of diplomatic hostages and about hijacking.

"The main purpose of these Summit meetings, however, is still to review the world economic situation. Here, our discussions were dominated by the problems of oil prices. These have virtually doubled since even our last meeting in Tokyo a year ago. The increases in the price of oil have had and will continue to have profoundly damaging effects upon the world economy. They have led to even higher inflation, to the imminent threat of severe recession and to increased unemployment in the industrialised countries.

"We agreed at Venice that our top economic priority must remain the reduction of inflation and that determined fiscal and monetary restraint is therefore required. We agreed that if we were to improve productivity and to provide new job opportunities, resources must be shifted from Government spending to the private sector and from consumption to investment. We agreed that measures of this kind might be economically and politically difficult in the short term but that they were essential to sustained non-inflationary growth and to the increase in employment which is our major goal. These conclusions are entirely in line with the policies which the Government are pursuing in this country.

"We accepted the need to break, over the next ten years, the link which has been apparent in some countries between economic growth and oil consumption. With this aim in mind, we agreed upon a series of measures to reduce consumption of oil, to use it more efficiently and to develop alternative sources of energy.

"The worst sufferers from the sharply increased price of oil have been the developing countries. Both their oil bill and their current account deficit have doubled in the last two years. The increase in their spending on oil over this period is higher than the total amount of aid they received last year from all official sources. At the same time the ability of the developed countries to help them has itself been diminished by the oil price rises; as we met, all seven countries present were in current account deficit.

"It follows that the democratic industrialised countries cannot alone carry the responsibility of providing aid to the developing countries. We must now look to the main oil exporting countries to use their vastly increased resources to give help. We believe that it is as much in their interests as ours to contribute in this way to the stability of the world economy and to the development of the poorer nations. The fact is that the industrialised countries of the free world, the oil exporting countries and the non-oil developing countries depend upon each other and need to work more closely together.

"Against this background we welcomed the report of the Brandt Commission and agreed to review our aid policies and procedures. We shall consider the results of this review at the next Economic Summit.

"In addition to our formal business, we had a number of less formal exchanges. In particular, I had a useful bilateral meeting with President Carter.

"Mr. Speaker, on the economic side this was a meeting at which we were largely concerned to carry forward the work begun last year. At the same time, we broke new ground by discussing the major international political issue of the day—the invasion and continued occupation of Afghanistan by the Soviet Union. The meeting offered a timely opportunity for the seven Heads of State and Government to reaffirm their unity of purpose on the political and economic difficulties that we face. The opportunity was taken."

My Lords, that concludes the Statement.

3.56 p.m.


My Lords, we are all grateful to the Leader of the House for making this important Statement to your Lordships' House. The political content of it is, of course, rather slight, but the intention was to discuss economic matters perhaps more than political questions.

We welcome the renewed call on the Soviet Union to cease its aggression in Afghanistan and to withdraw its troops and arms from that country, leaving the people of Afghanistan free to choose its Government and its own form of government. We should have liked a more robust and comprehensive Statement on this harsh question, calling on the Soviet Government to come forward to a meaningful conference on détente, the renewal of détente, arms control and disarmament, including the real neutralisation of areas of friction, like, possibly, Afghanistan.

However, the Statement concentrates, to some extent at least, on the economic issues, and they are extremely and pressingly important. We are glad to see that the seven were unanimous in their determination to conquer inflation. I think there is general unanimity on that score. I speak on behalf of a party which formed the Government which reduced it from more than 20 per cent. to something under 8 per cent. I do not know what has happened to it since, but we are all in favour of reducing inflation.

The point is, what is the follow-up to be to these somewhat pious aspirations about inflation? I think the Government were right, with the Prime Minister, to fasten on to the oil question as the principal fuelling agent of inflation in our day and for the past few years, and indeed we welcome the reference to the need to reduce the dependence of the industrialised democracries on oil as a source of energy, to amplify the synthetic sources of energy, to double the use of coal in the next 10 years; although one wonders what the Prime Minister had particularly in mind when she very insistently reminded us that no so-called uneconomic pits were going to escape closure. What is "uneconomic" in this context? Uneconomic is, from one point of view at least, the exorbitant prices the industrialised West is paying to the OPEC countries for oil. That is uneconomic from our point of view because it distorts not only our credit system and our banking system but also our entire system of costing for home prices and, more important, for export. So I would urge in connection with the proposal to double the use of coal for energy in the next 10 years—which we strongly support—that particular attention is given to these somewhat facile caveats about not allowing so-called uneconomic pits to escape closure. We have made very grave mistakes on this score in the past. My noble friend Lord Strabolgi, who speaks for us on matters of energy, will agree with this.

We entirely support the proposal to increase synthetic and solar sources. Coming from where I do, and living near one of the biggest hydro-electric generating stations in the world which is a marvel and a hopeful example of what ingenuity can do and, which adds 4 per cent. to the grid, I hope that increased attention will be given under this heading to the use of hydro-electricity and estuarial waters. No doubt that will be done.

My point is, where is the follow up? Shall we hear more about this, as to what our own Government in Britain are going to do to follow up these excellent ideas about diversification of our sources of energy, reducing our dependence on oil, and also what our partners are going to do? I also welcome the reference in the Statement to the energy problems of the developing countries, and the recognition that the Brandt Commission Report is a truly important document with an acute relation to this question.

I particularly welcome the emphasis that Western industrial democracies cannot he expected to solve the problems of the developing countries on their own. This is the point made in the Brandt Commission Report. We must give an example and do what we can; but it is imperative that both the oil-producing countries and the communist world play their part. This part of the Statement I warmly welcome. It is time that we stood up and said these things. The West has very little to be ashamed of in the way in which it has sought to aid developing countries. We have done as much as some of us would like us to do; but compared with the performance of others who are more prone to posturing than to performance, the Western democracies have not done so badly. We want to do more but in company with the rest of the world, including the oil producers and, I repeat, the communist world. Let them live up to their assertions.

There is only one other point to which I want to refer and I once more welcome the emphasis placed by the Statement on this. There is a danger, of course, that in achieving an increased recycling of what we call the oil money we may distort the whole system of credit throughout the world, and indeed cause increasing difficulty for the international banking institutions. The conference was right to remind us all that it may need new institutions other than those we already have in order to supervise this particular aspect of recycling. I will not go into details regarding the oil money. The noble Lord will have the figures. This is a tremendous fact of monetary as well as economic life in the world today. It behoves everybody—not only the West but, I repeat, in the East, in the communist world, too—to pay attention to this. There is no economy, no system, which will long survive the kind of distortion of credit and banking operations that the relatively free flow of this money may cause to all of us.

4.4 p.m.


My Lords, we too should like to thank the noble Lord for repeating this very important Statement. There will, I think, be general agreement in this House on the tough line taken over Afghanistan. I do not think there is any divergence of opinion on that. I do not know whether there will be complete agreement on the suggestion, in respect of inflation, that resources must be shifted from Government spending to the private sector and from consumption to investment. We would agree on these Benches but I imagine the Statement is not necessarily in accordance with socialist policy, though it seems to have been approved by Chancellor Schmidt. But of course everything depends on the oil factor, on the immense increase in the price of oil, which is now dominating the whole situation.

The noble Lord, Lord Goronwy-Roberts, noted that we are going to take—as I hope—measures to restrict the consumption of oil in the signatory countries. Regarding coal, I also should like to ask the noble Lord how the Government intend to increase the production of coal in this country in a general way. Also, I should like to ask whether there is any reason to suppose that the Americans will reduce their consumption of oil to any significant degree. At the moment it seems doubtful whether they will; but unless they do the problem is increased enormously. Is there in particular any reason to suppose that they will be able to restrict their enormous consumption of petrol?

The dominant element is, however, the effect of increases of oil prices on ourselves and, more particularly, on the Third World. I see that the Brandt Report was apparently taken note of, but I do not know whether it was actually read with any great attention. Anyhow, as I understand it, its real consideration has been put off for a year. Is that not rather unfortunate? Is it not a fact that the situation is much more urgent than that? Is it not a fact that a good many of the developing countries are going to go bankrupt within the next six months, or anyhow before this time next year, unless urgent action is taken? Is it not a fact that in the Brandt Report the suggestion was that there should be some kind of meeting between the OPEC countries, the industrialised countries and the Third World—I am not certain at what level—at an early stage in order to consider a joint policy on this matter? I must say, in default of this, that I cannot see any real progress and the danger is immense. Can the Government give us any assurance that a real disaster is not going to happen? I should be very glad if they did.

4.8 p.m.


My Lords, I am most grateful to the noble Lords, Lord Goronwy-Roberts and Lord Gladwyn, for their comments and questions. To take first of all the remarks of the noble Lord, Lord Goronwy-Roberts—at least that aspect of his statement that comprised questions—on coal and uneconomic pits, the fact that we were going to try to increase production, that those seven countries with all their resources would do their best to increase very considerably the production of coal, referred largely to a number of those countries, particularly the United States, where coal is not produced at anything like the rate that it could be. This does not mean that Her Majesty's Government will be in any way altering their policies towards economic or non-economic pits. There may be room for disagreement on what is an uneconomic pit. But all that I can say from the Dispatch Box this afternoon is that once Her Majesty's Government have decided what are economic pits, then it is not the intention, because of this meeting and what was decided at this meeting, to go for opening up pits again if it is thought that they are uneconomic. It does not have any effect on that aspect of Her Majesty's Government's policies.

I find myself very much in agreement about the aid from the richer countries the OECD countries, compared with OPEC countries and, in particular, the communist countries. This is a matter which has been near to my heart for a long time. I have figures for, I am afraid, no later than 1978. Noble Lords may be interested in them. They really tell a story. In 1978 the OECD countries gave development aid of 20 billion dollars, representing 81.5 per cent. of the total development aid; the OPEC countries gave 3.7 billion dollars, representing 15.2 per cent. of the total aid; and the communist countries gave 0.8 billion dollars, representing 3.2 per cent. This has been going on, of course, for some time and, in my view, it is one of the factors which are bringing home to those countries in the developing world who have made themselves partially, if not totally, dependent upon the communist world that this is not a very happy situation for them to find themselves in where aid is concerned.

On the question of the IMF and the World Bank providing new institutions for helping the developing countries which are not oil producers to develop new energy resources, I do not think it is new institutions that are required; what are required are new facilities. I do not think there is a need for a fresh bureaucracy. The arrangements are there all right, both for the IMF and the World Bank, but I think that new facilities will be necessary for this particular and enormously important problem, where a number of developing countries find themselves in the position where their total exports are less than the increase they have to pay, not for total oil exports but, I emphasise, the increase they have had to pay on oil imports in recent years.

The noble Lord, Lord Gladwyn, was concerned as to how we should increase the production of coal—I think that is probably the basis of the noble Lord's question. There is a limit, I think, to what we can do in this country because there are other countries which were represented at the Venice Summit who will be able to do more than we can. But it is thought that the total production of coal by the seven countries could be doubled over a period of years and all will make the contribution that they can towards this end. Of course, that does not mean that every country is going to double production.

As to how the United States will reduce consumption of oil, I would say that at least they recognise the importance of so doing. I find already that it is difficult enough to answer questions about a meeting which I did not attend without answering a question about how someone who was present—namely, the President of the United States—is going to implement some of the decisions taken at that meeting.

As regards the Brandt Report, it is not for me to cast any aspersions on the Statement, but I rather sympathise with the noble Lord, if I may say so, particularly with regard to the passage: We shall consider the results of this review as it is written".

That seems to refer to the review of the Brandt Report, but my own hunch is that it does not in fact refer to that review. I take the noble Lord's point: the Brandt Report must be looked at and reviewed more quickly than that, but I think this refers to a review which was going to be undertaken by personal representatives of the heads of Government concerned and it was their review as to how we could best control the problem of the world contributing aid to the developing countries. It is that review to which that sentence refers, I think.


My Lords, may I ask two questions? The first relates to production of coal. Am I right in thinking that all the Ministers thought it would be a good thing to increase the production of coal?


Yes, my Lords.


My Lords, secondly, am I right in thinking that you would not increase the production of coal by closing down pits? Is it not also true that, if the price of oil rises, some of the pits which are now regarded as uneconomic will become economic? The other question is about resources. If I heard the noble Minister correctly, the Ministers concluded that the resources should be shifted from consumption to investment and from the public to the private sector. What do you do if those two criteria happen to point in different directions? For example, if you save money by closing down a coalmine and use it to make tax concessions to wealthy people, and the recipients of that bounty spend it on luxuries, you might shift it from public to private but what have you done about investment and consumption?


My Lords, to take the noble Lord's first point, he has a very nice and tidy mind and likes everything explained exactly, and I for long admired it when I was working for him, indeed, as one of his ambassadors. As to what was said regarding coal, I can only repeat what I said before. It was understandable—at least I understood it, and I am sorry if the noble Lord did not understand it. It was thought possible that those countries participating in this conference could double the production of coal. I can only tell him that my understanding of that is that it does not mean coal at any price, because that would not be very wise. What I think might have been meant is that it is thought that those countries could double the economic production of coal.

Now you come to the question, what is the economic production of coal? That is a somewhat wider point and I do not think we should get into a debate on that on the basis of what happened at the Summit Meeting. As to the transfer from the public to the private sector, broadly speaking, if you look at the economies of these countries as a whole, it is the private sector that produces so much of the wealth and it is necessary to get more investment and less spent on consumption as a general principle, in order to help all of us to get out of this inflationary problem.


My Lords, in view of the emphasis given in this Statement, quite correctly, that the OPEC and communist countries must co-operate with the Western countries and the developing countries if the problem of hunger is to be met in the world, may I ask the Minister this. Was there any discussion of the Brandt proposal for a summit meeting of representatives of these four elements so that they might discuss measures of cooperation to deal with this problem?


My Lords, I do not know about the noble Lord but I have had some experience of North-South meetings, and I do not think it is particularly wise for them to be brought together unless and until a lot of homework has been done before they are brought together and unless light can be seen at the end of the tunnel.


My Lords, may I draw the attention of the noble Lord the Leader of the House to the fact that, when I questioned his noble friend the Foreign Secretary on the previous Venice conference—the EEC conference—as to the content of the Brandt Commission discussion there, he asked me to go and read Hansard of the other place where the Lord Privy Seal was making a Statement on Government policy. I not only read that but I listened to it, and I joined with a lot of his friends in his party in finding that Statement both negative and depressing. I wonder whether the noble Lord has read a subsequent speech by another of his former colleagues, Mr. Heath, who called in that debate for an immediate international initiative by the British Government to put the recommendations of the Brandt Commission into effect. Because this does not seem to square with the Statement he has read out this afternoon, one phrase of which—

Several noble Lords



One phrase of the Statement which the noble Lord has read out quite rightly stated that: we depend upon each other".

That is the heart of the Brandt Commission Report: not aid: but the economic dependence on each other. Can the noble Lord tell the House whether the Government have completed their review of the Brandt Commission's report, as was mentioned by his right honourable friend the Lord Privy Seal, and what part did the Government's conclusions play at the conference in Venice this past weekend?


No, my Lords. I cannot tell the noble Lord—if he would like to put down a Question it will, of course, be answered—what stage the Government's consideration of the Brandt Report has reached. More than this, I fear I cannot tell him: I think that it is not dependence on each other, so much as interdependence, which is a term which has now been on our lips and tongues for many a long year. We have been talking about it ever since 1973—for seven years. The trouble is that interdependence means transfer of resources and transfer of money, and it is not always easy to persuade people to part with their money for the good of others. This is what we have all got to get down to. What is being said today, quite frankly, is putting into modern language and adapting to present-day circumstances what a number of people have been saying for a number of years about the need for the recycling of petrol money, and the need for OPEC and also the Communist world to come in and help with aid. What we have got to do is stop just talking about it and get on with it.


My Lords, may I ask my noble Leader whether this means that we are going to cut down in any way on the development of our North Sea oil resources, which are so valuable to the balance of payments? We are not going to divert any investment from North Sea oil into the production of coal or anything like that?


No, my Lords. It is not envisaged that this will, in any way, affect the Government's plans for investment in oil.


My Lords, on the assumption that the question of gold was not mentioned at the summit conference, may I suggest to my noble friend that he might consider whether it should be put on the agenda for the next summit conference, because as a commodity it is just as important as oil and after the next presidential election may assume even greater importance.


My Lords, it is not for me to lay down what will be the agenda for the next conference. But I shall certainly ensure that what the noble Lord, with all his experience, has said is drawn to the attention of those whose responsibility it is.