HL Deb 08 June 1982 vol 431 cc116-25

3.57 p.m.

Baroness Young

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Prime Minister about the economic summit at Versailles which she and my right honourable friends the Foreign Secretary and the Chancellor of the Exchequer attended from 4th to 6th June. The Statement is as follows:

" The Heads of State or Government of the seven principal industrial countries were present, and the European Community was represented by the Prime Minister of Belgium, which at present holds the Presidency in the Community, and by the President of the Commission.

" The conference was agreed on what was needed for sound economic management and for achieving a well-based recovery from world recession. This solidarity extended to the political field also and in particular to the Falklands dispute. Our discussions placed emphasis on the value of medium and longer term policies and were notable for their continuity with the economic policies advocated at earlier summits.

" I have placed in the Library of the House the declaration issued at the end of the summit setting out lines of action which we shall follow. We agreed that growth and employment would be increased on a lasting basis only if we were successful in our continuing fight against inflation, which would then help to bring down interest rates and lead to more stable exchange rates. To that end we all agreed to pursue prudent monetary policies and to reduce budgetary deficits. Recognising a joint responsibility to work for greater stability in the world monetary system, we issued a statement of international monetary undertakings.

" Believing in the need to expand world trade, we reaffirmed our commitment to strengthen the open trading system as embodied in GATT and to work towards the further opening of markets.

" With regard to trade with the Soviet Union and Eastern Europe, we agreed to work for improved arrangements for the control of exports of strategic goods; to exchange information on all aspects of economic, commercial and financial relations with these countries; and to exercise commercial prudence in limiting export credits for them.

" The statement of monetary undertakings to which I have referred was one example of a medium term policy supported by the summit. Another medium term theme was the necessity to exploit the immense opportunities presented by the new technologies if we are to create the jobs of tomorrow. It is significant that those countries represented at Versailles which have the lowest inflation and the latest technology are those which have the lowest unemployment rates. We agreed to set up a working group to pursue these technological matters and to submit a report by the end of the year, which could be considered at the next economic summit to be held in 1983 in the United States.

" The Heads of State and Government spent some time discussing relations with the developing world. The growth of the developing countries and the deepening of a constructive relationship with them are vital for the political and economic wellbeing of the whole world. The launching of gobal negotiations in the United Nations is a major political objective approved by all the participants in the summit. At the same time we recognised that although the United Nations can make requests to the specialised agencies, like the IMF and the World Bank, it cannot give them instructions.

" The Heads of State and Government also agreed to give special encouragement to programmes or arrangements designed to increase food and energy production in developing countries which have to import these essentials and to programmes to address the implications of population growth.

" Mr. Speaker, we naturally discussed the situation in the South Atlantic. I set out the British position in detail. As the House knows, British forces in the Falklands are preparing to repossess Port Stanley. The Secretary General of the United Nations and certain members of the Security Council have proposed various formulations for a cease-fire. None provides the unequivocal link between an immediate Argentine withdrawal and a cease-fire which is the only basis on which we could agree to a cease-fire. The Government have made it clear publicly that if the Argentines tell us that they are prepared to withdraw, we shall enable them to do so with safety, dignity and despatch. So far, we have had no positive response.

" I am glad to say that there was agreement among the Heads of State and Government at Versailles on all the essential points of the British position. This was underlined unequivocally by President Mitterand in his Press Conference at the end of the meeting.

" We also spent some time on East/West relations. A number of us will be attending the NATO summit starting tomorrow and speaking later this month at the Second United Nations Special Session of the General Assembly devoted to disarmament.

" Finally, we discussed the very serious situation in the Middle East. Following a personal request from the Secretary General of the United Nations, the conference issued a declaration of support for the resolution adopted unanimously by the Security Council on 5th June. This is being followed up by intense diplomatic activity by all participants, in particular the United States, designed to reestablish the cease-fire and restore the territorial integrity of Lebanon. I have placed a copy of the summit's declaration in the Library.

" Mr. Speaker, all the Heads of State and Government who took part in this conference were grateful to President Mitterand for giving us an invaluable opportunity to discuss the economic and political problems facing us today. Our talks were notable for two characteristics: a strong sense of continuity and an encouraging measure of solidarity about our approach to the major issues of the future. We shall be successful in dealing with those issues only if we pursue sustained and co-operative policies. The meeting at Versailles made a significant contribution to that goal."

My Lords, that concludes the Statement.

4.4 p.m.

Lord Peart

My Lords, the House is grateful to the noble Baroness the Leader of the House for repeating the Statement. Rather than making a general comment, may I put some questions to her straight away. On the economic and industrial front, can the noble Baroness state rather more specifically what steps were proposed to deal with unemployment in the Community, which stands at the appalling figure of over 30 million? For many of us this should have been a central point of discussion. Can the noble Baroness say what measures will be taken to reduce the figure?

We note what the noble Baroness has said about reductions in interest rates. Can she indicate what impact this may have on industrial activity within the Community? Can she further say how a stable relationship between the world's major currency groups is to be achieved following the summit? On the important question of East/West trade, about which the United States is clearly concerned, can the noble Baroness explain more fully what the communiquê means when it refers to the financial relations with the USSR and the East European countries being handled "cautiously"?

About the Falklands, can the noble Baroness say whether the Prime Minister's European colleagues urged her to table a further resolution at the Security Council setting out the British conditions for negotiations? Can she say whether there were any offers of a wider international involvement for the future administration of the islands, and whether she was urged to provide an alternative to unconditional surrender for the Argentines?

We on these Benches find this a rather discouraging Statement, but we should like particularly to pay a tribute, as the noble Baroness has done, to President Mitterrand for his constructive approach, particularly to the problems of the third world. May I say that on the Middle East crisis we of course support the Security Council resolution calling for an immediate end to the fighting by all the parties involved. We support the maintenance of the Lebanon as an independent, sovereign and united state.

4.6 p.m.

Lord Gladwyn

My Lords, we also would like to thank the noble Baroness for repeating this important statement. On the general economic side, I must say one sometimes has the rather despairing impression that these now fairly frequent and very high level meetings are of questionable utility. They always seem to result in expressions of admirable intention but the world economic situation never seems to get any better as a result. Inflation may have been halted to some extent in some countries but, as the noble Lord, Lord Peart, has just said, unemployment goes roaring on. The recession, in other words, shows hardly any signs of clearing up.

Everything in practice—I do not know whether the Government agree; I hope they do—seems to depend not on general statements by the leaders but on the monetary policy pursued by the United States, which has an immense effect, of course, on the whole industrialised world. Some people have very little confidence in that policy. Piling up immense and apparently uncontrollable deficits resulting from a considerable relaxation of taxation and vastly increased expenditure on nuclear weapons, all seem inevitably to result in increased and very high interest rates, which can hardly be said, taken as a whole, to be a cure for the world's economic ills. I do not know whether the Government agree with that in any way, but I suspect that they do.

On East/West relations I think we can all welcome the improved arrangements for the control and export of strategic goods, and more especially prudence in limiting export credits. This is something which my party here has been urging for years and years. But I note that in a statement outside the meeting President Mitterrand said that all would depend on everybody agreeing to apply the suggested rules. In the past they never have.

On the third world, I think we can all certainly welcome the programmes designed to increase food and energy production generally. But what pro- grammes are these? Could the noble Baroness tell us exactly what programmes are meant? Can we read them? Are they going to be published? It is an important matter.

On the Falklands, I agree with the noble Lord, Lord Peart, that President Mitterrand's statement was very helpful, and he deserves all our thanks; and I think the House will agree that a ceasefire must coincide with the withdrawal of Argentine troops, or at any rate a declared intention to withdraw. But again I agree with the noble Lord, Lord Peart, that that is only the first stage. Much more important after that is how we are going to end the war; and on that we really would like some expression of Governmental intention. Finally, on the Middle East, yes, but apart from the intense diplomatic activities going on—and I quite agree with that—what is going to happen? What are the seven nations going to do? What are their representatives in the United Nations going to do? How will the Security Council give effect to its demand—and we understand it will be a demand—for Israeli withdrawal? The United Nations should not, if a valid resolution is passed to that effect, be in the position of having to declare its impotence. At least as regards the Falklands it passed an admirable resolution but, as we all know, it allowed one of its members to carry it out.

Baroness Young

My Lords, I thank both noble Lords, Lord Peart and Lord Gladwyn, for their comments on the Statement. They asked a number of questions dealing with a wide range of subjects and I shall do my best to answer them. The first question, to which they both referred, was the whole sphere of unemployment, which we all recognise as being a serious matter; there are now approximately 10 million unemployed in the European Economic Community, but the number of course is higher for the seven summit nations. We have accepted that today's unemployment, deeply regrettable though it is, is the price we have to pay for allowing inflation to continue for so long in the past. We are glad to note that most forecasters expect resumed growth in activity in summit countries later this year and next, and that at least should help to halt the rise in unemployment. We therefore regard attempts to bring down inflation as most important and it is therefore good news that inflation has been reduced to single figures on average in the summit countries, that there has been realism, which is growing, in wage settlements, that the United States, Germany, Japan and the United Kingdom all have settlements in single figures and that our inflation rate is now down to single figures.

Regarding high interest rates, concern has been expressed about that, and at the summit conference the fact that the United States was making progress in reducing its inflation was applauded and it was recognised that the interests of everyone would be met if the United States could achieve a decisive break in inflation. Nevertheless, the continued high United States interest rates were a legitimate international concern in view of the dollar's weight in world financial markets. President Reagan is well aware of the concern and shares it on domestic grounds, and he is continuing to seek early agreement by Congress on the budget, putting the deficit on a downward path. That, we believe, would have an important effect on confidence and help to bring down interest rates, which we hope would lead to lower rates of inflation and so to an improvement in the economies of the countries.

There is in the Library the Statement on the international monetary undertakings, a subject raised by the noble Lord, Lord Peart, who asked what it would mean. It is not a major change of policy by anyone but, depending in effect on what we can make of it, it could be the start of a gradual move to greater stability. What is new is that the major countries should accept so explicit a responsibility for the international monetary system.

Both noble Lords asked about East-West trade and in particular about financial relations with Russia and Eastern Europe. As the communiqué—which has also been placed in the Library—indicates, we have agreed with our partners on the need for caution in our financial relations with those countries, and the noble Lord, Lord Gladwyn, remarked on the need for commercial prudence in limiting export credits.

On the Falkland Islands, we were all very grateful indeed for the statement by M. Mitterand at the end of the conference giving us such staunch support for our policies on the Falkland Islands and summing up the support of the countries present. Regarding the present position, it would be right to say that our first concern must be the repossession of the Falkland Islands, and we must concentrate on that end. We have been very grateful for the strong co-operation we have also had from the United States, and that support continues. I think it would be wrong for me to comment at this stage on any further policies which may emerge after the Falklands have been repossessed.

Finally, on the Middle East, the noble Lord, Lord Gladwyn, asked a series of questions, and I would say first that we were associated with the Statement which was put out from Versailles on 6th June. We voted for Security Council Resolutions Nos. 508 and 509. The latter demands Israeli withdrawal from the Lebanon and that all parties should observe the cease-fire called for in No. 508. We regard it as a matter of great regret that Israel has failed to comply with that. It is obviously a most serious situation.

Lord Kennet

My Lords, I congratulate the Minister on answering so many of the great mass of questions asked by the previous two speakers. I have only two, one of which is rhetorical and I will put that first. Is it not clearer every day that the only wise course in this world at the moment is to obey the relevant United Nations resolutions, and that Argentina must withdraw from the Falklands and Israel must withdraw from the Lebanon? Secondly, may I ask the Leader of the House to comment on the distinction between unconditional surrender—which it seemed to me the Leader of the Labour Opposition was accusing the Government of demanding—and simple departure? Is there not a great distinction between, on the one hand, putting up a white flag, seeing your soldiers rounded up, having them processed, put into different clothes and taken away in the enemy's ships, which is surrender, and, in the case of the simple departure, sailing away in your own ships, in your own uniform, in your own time and in a dignified manner?

Baroness Young

My Lords, the answer to the first part of that supplementary is Yes. The answer to the second part is that I should prefer not to comment. I would only say that it is our intention to repossess the Falkland Islands.

Lord Boothby

My Lords, while thanking the noble Baroness for the Statement, may I ask one question directed towards the economic front? The world is still suffering, despite fluctuations from time to time, from the scourge of inflation; and we have no viable international monetary system. So long as that continues, it will be impossible, in the long run, to stop world inflation continuing. The only way out is to give money, as such, some value; so long as it remains worthless, the problem will remain insoluble, and my complaint is that the summit conference did nothing to resolve that problem. The easiest way out would be for the United States to lead us all back to a gold exchange standard, with flexible exchange rates and a price for bullion fixed from time to time, in accordance with reality, by the IMF, though there are other possibilities of giving value to money. Can the Leader of the House say whether the Governments concerned will give further consideration to this vital problem? So long as the international monetary system remains in a state of chaos, we cannot really bring inflation under control.

Baroness Young

My Lords, to answer the first point raised in what I think the noble Lord, Lord Boothby, intended to be a question, we are all agreed that the rate of inflation should be brought down. To answer his second point—his view that we should return, if I understood him correctly, either to the dollar being a major currency or go back on to some form of the gold standard—I do not think we could put the clock back. What the economic summit did in the last few days was set out in the Statement on the international monetary undertakings.

As I have already said in answer to a question raised by the noble Lord, Lord Peart, although there is not a major change of policies, we think that there will be a gradual move to some form of greater stability. The important part of the Statement is that which relates to the agreement on future co-operation by the IMF, by us and the four other countries responsible for currencies in the special drawing rights, and that this will develop the IMF's role further for surveillance of economic policies in the way first proposed by the Chancellor at the IMF annual meeting last September. It is something which aims to achieve a greater stability, but it is of course a long, slow, process.

Lord Mayhew

My Lords, is the noble Baroness saying that the summit confined itself on the Middle East to diplomatic activities and to endorsing the United Nations resolution? Did no one, for example, suggest to President Reagan that the Americans might make their lavish provision of money and arms to Israel conditional on the observance by the Begin régime of civilised international conduct?

Baroness Young

My Lords, the summit was primarily an economic conference, but of course political issues were raised as well. Clearly one of these was the situation in the Middle East, and I would not wish to go beyond the point that. I have made—that what we should like to see, as I think other noble Lords have already indicated, is the United Nations' resolution fulfilled. That would mean that there would be a cease-fire in what is clearly a dangerous situation.

Lord Balogh

My Lords, subject to later scrutiny, is it not clear that the Statement really affirms the continuation of policies which have caused an amount of havoc in creating unemployment, cutting down the growth of the national economies?

Baroness Young

My Lords, I am afraid that I did not quite hear the end of Lord Balogh's question. However, I hope that I understood him correctly and that he was asking whether the economic summit endorsed a continuation of policies that had given rise to unemployment. We believe—and I think that this was recognised by all other countries—that the very regrettable level of unemployment has been the price that we have had to pay for a long period of inflation in the past, and it is the getting down of inflation which should be our first concern.

Lord Taylor of Gryfe

My Lords, I should like to ask the Minister questions on two matters on which there appeared to be some disagreement. I should like to say that I am delighted that there was so much agreement among the parties concerned, and we very much welcome these kind of regular meetings of Heads of State, which can do only good, though they may not produce dramatic and revolutionary changes overnight. The two issues on which there appeared to be some divergence of view occur in relation to East-West trade, in which it appears that the European countries take a less rigid view of trading relationships with the Soviet Union than does the United States. The words quoted in the Statement arc that in future ECGD arrangements commercial prudence would be observed. It might be interesting to get a clearer definition of what is "commercial prudence". I mention this because if we take a specific issue on this—the Soviet-European gas pipe-line, on which John Brown Engineering is sitting on an order of £100 million, at Clydebank, incidentally—it might be interesting to know whether the gas pipe-line was specifically referred to and whether that is within the terms of "commercial prudence ", since it is obviously very important in terms of employment.

The other issue was referred to by President Mitterrand in his opening Statement in regard to high technology and the welcome of exchanges of research and ideas on high technology. He said that investment in high technology requires some stable financial system and a general reduction in interest rates. There appeared to be a divergence of view as to whether reduction in interest rates would be arranged by some Government intervention, which is the Mitterrand view, or through market forces making an effect, which is the United States' view. I wonder what is the view of the Government in relation to achieving financial stability and some reasonable interest rates, and I also wonder whether they take the Mitterrand view that Government intervention may be necessary in this field.

Baroness Young

My Lords, if I may, I should like to reply to the questions of the noble Lord, Lord Taylor of Gryfe, in the reverse order to that in which he asked them. On the question of new technology, it is true that President Mitterrand stressed the important role of new technology and said that a working group will prepare a report for consideration at the next economic summit. We have welcomed the initiatives taken by President Mitterrand in this field, which we believe is a very important one in generating both growth and new employment. However, we believe that the industrial structures of our country must in the last resort be those which will be determined by industrialists and by the demands of the market. They cannot, in fact, be determined by a committee. On the question of export credit to the USSR, inevitably there are some differences of emphasis between the different countries, but there has now been broad agreement, and there is to be further discussion with the United States on the whole question of credit to Eastern Europe and to Russia.

Lord Hatch of Lusby

My Lords, may I point out to the noble Baroness that unless my hearing is deficient, she has not answered the two questions that the noble Lord, Lord Gladwyn, put to her about the plans for food and aid in the third world? May I add a third question to those questions? In the Statement there are the usual bromides, such as we had last year from Venice and from Cancun, about the necessity for growth in the third world, and the im-portance of growth and so on. If that is not hypocrisy, can the noble Baroness tell the House what the British Government are specifically proposing and what they proposed at Versailles in order to get the third world out of the deep slough of depression, which is so much greater than, and is causing so much more suffering than, it is in the industrial world? The proposals—and I should like her opinion of this—may very well be the key to the end of the depression in the industrialised world, if the third world is given the purchasing power to lower unemployment rates.

The third question that I would add to those questions asked by the noble Lord, Lord Gladwyn, is whether at Versailles the British Government promised to maintain their percentage contribution to the IDA (the International Development Agency) which is the organisation for "soft" loans? I ask that question because it is now apparent that although the United States has this year tragically, drastically reduced its subscription to the IDA, that no longer necessitates the other donors reducing their proportion by the same amount. Are the British Government going to maintain their percentage contribution to the IDA during this year in order to give some reality to the phrase used in the Statement about the necessity for growth in third world countries?

Baroness Young

My Lords, I must apologise to the noble Lord, Lord Gladwyn, if I did not answer his question about the third world, and I will try to answer it in my answer to the noble Lord, Lord Hatch. On the question of third world countries, yes, of course, this was a matter which was discussed, and it is in fact important to see what the seven countries can do to help them. I have already drawn attention to what is said in the Statement about the declaration as to the launching of global negotiations. I hope there will soon he consultations with the Group of 77, leading at last to the opening of global negotiations; and we have made the proviso that the independence of the specialised bodies—that is, the IMF, the World Bank and GATT—is guaranteed.

The two priority subjects are food and energy, but the mechanisms in this respect are still under discussion. As to the third point about which the noble Lord, Lord Hatch, asked, which was about IDA, I should like to confirm that we want to ensure that adequate funds are available for IDA, which is an important form of finance for the poorest countries. I can confirm to the noble Lord that we were the first of the major donors to waive the pro rata provision for the second annual contribution to the sixth replenishment of IDA, and we are encouraging others to do the same.