HL Deb 21 March 1984 vol 449 cc1237-47

3.45 p.m.

The Lord President of the Council (Viscount Whitelaw)

My Lords, with the leave of the House, I will repeat a Statement that is being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"With permission, Mr. Speaker, I attended the European Council in Brussels on 19th and 20th March, accompanied by the Foreign and Commonwealth Secretary. As the House will already know, the Council did not reach agreement on the reform of the Community's finances nor on any of the other matters before it.

"I made clear at the summit in Stuttgart last year that the United Kingdom would be prepared to consider an increase in the Community's financial resources but only on condition that there was effective control of agricultural and other spending, and that there was a fair sharing of the budget burden.

"We made progress towards securing control of spending by, first, an annual limit on overall expenditure and, second, a strict financial guideline on agricultural expenditure. The French presidency also proposed a lasting system for a fair sharing of the budget burden. We would have been able to accept this system but some other member states, despite the long discussions over the last nine months, were still unable to do so. Nor were we able to reach agreement on the level of the United Kingdom net contribution which would result from the application of the system.

"The Council also had a long discussion on the agricultural problems which had been remitted from the Agriculture Council. Ireland sought exemption from the super-levy on a quantity of milk which would have been higher than their 1983 production. Their demands and those of other member states would have led to milk production well over I million tonnes in excess of the production level set earlier by agriculture ministers for the Community as a whole. Further discussion of the agricultural package will take place in the Agriculture Council next week.

"We made a sustained attempt to reach a satisfactory compromise on all the matters at issue. At the end of the discussions the proposition which the United Kingdom was invited to accept was: first, that instead of a lasting, equitable system for Community financing there should be a five-year ad hoc arrangement which would have left us receiving less than the average refund which we received in the years 1980 to 1983.

"Second, that we should endorse the unsatisfactory and discriminatory arrangement for milk which I have already described. Third, that we should accept an increase in the Community's VAT resources to 1.4 per cent. in 1986 and have in prospect a possible future increase two years later to 1.6 per cent. I made it plain that neither I nor the British Parliament could accept such a package. Therefore, I did not agree to any increase in the Community's resources. The 1 per cent. VAT ceiling remains.

"Immediately following the European Council, the Council of Ministers (Foreign Affairs) met in order to see whether the objections of some member states to the regulations necessary to implement the United Kingdom's 1983 refund of 750 million ECU net which was agreed last year could be removed. But France and Italy blocked these regulations. The Government are considering what action we should now take to safeguard our position.

"The Community is in a difficult situation. We shall however persevere in our efforts to achieve a reform of its finances and to make its internal and external policies more relevant to the needs of today's world. I want to see a more effective Community developing its full potential. That is the Community in which I believe."

My Lords, that concludes the Statement.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Viscount for repeating the Statement. I am sure that the whole House would agree that this is the most serious Statement to be made since we first entered the European Community in 1973, and that the implications of failure to reach agreement are very grave indeed. We deeply regret this failure and also the action of France and Italy in blocking the payment of £457 million in rebates on this country's 1983 budget contributions.

Will the noble Viscount confirm that one of the matters to be decided is whether Britain will withhold part of the monthly contributions to the Community budget? Is there any doubt about the legality of such action? Can the noble Viscount also say how quickly further negotiations on the budgetary issue will proceed? Is it intended that there should be an early meeting of Foreign Ministers to seek to resolve the problem? The Prime Minister has been reported as saying that the gap between her and her colleagues had not been very large. Can the noble Viscount say whether that is in fact true? Can he say how large is the gap and what was the figure involved—if it can be translated into a sum of money? Can he say which countries in addition to Ireland opposed the agreement on milk made by the agriculture Ministers a few days ago? In view of this agreement, how can one explain that part of the Statement which says that progress has been made towards securing, a strict financial guideline on agricultural expenditure"? Furthermore, can the noble Viscount say whether the Bill to grant £100 million to the EC Commission to help the Community's cash flow problem, which I understand was due to be introduced in another place next week, will now be introduced? Apart from the actual figures involved, can the noble Viscount say whether the meeting came near an agreement on some permanent correcting mechanism, to avoid the annual haggling which has caused, and continues to cause, such acrimony between the member states?

Finally, have any decisions been taken with regard to expanding the Community's own resources? What decisions, if any, were made about the EC regional and social funds, from which this country benefits?

Baroness Seear

My Lords, we on these Benches also wish to thank the noble Viscount the Leader of the House for repeating the Statement, but we hear it with the very greatest alarm. It is presumably an exercise in brinkmanship, but those who practise brinkmanship run the risk of falling into the abyss. It seems to us that the position of the European Community is now very serious indeed. It is of a quite different order from the difficulties that we had in the past, which involved all-night sittings, but which led subsequently to agreements. This problem today is of a quite different kind.

We understand that EC funds will run out somewhere by the end of June. Is there any method by which an informal summit can be called to avert this catastrophe—for catastrophe it surely would be—or, as the noble Lord, Lord Cledwyn, suggested, is it possible that the Foreign Ministers will be able to get together to avert this alarming possibility? After all, we in this country stand to lose very considerably from the many benefits which we draw from the Community, in particular in relation to training schemes, if the financing of the Community cannot be satisfactorily settled—and soon.

We also hear with considerable concern that there is a possibility that the Government will decide to withhold payments if the refund is not forthcoming as we had expected. Surely it is likely that if we do that, we shall be taken to the European Court. If we go to the European Court, we shall lose and we shall be virtually excluded from the Community. So both the future of the Community and the future of this country in relation to the rest of the Community as it now stands is very much in peril at the present time. We must remember that when we entered the Community we knew full well that we should have to make a larger contribution, if only because we intended to import more of our food from outside the Community than is the practice among other members. That was a risk that we took, with our eyes open, when we entered the Community.

We understand that the difference in financial terms over which the split has arisen is in the order of £180 million or £200 million. Is this really the value that the Government put on our membership of the Community and on the development of the Community for the future? Is that all that they really think the Community is worth? The suggestion of a five-year settlement would surely not have been impossible to accede to, even if it meant that we would receive slightly less than we thought we would. We on these Benches must press for an early debate on this subject, which we regard as one of the very greatest to be considered in recent years.

Viscount Whitelaw

My Lords, I am grateful to the noble Lord and the noble Baroness for their questions and the points that they have put forward to me. In view of the large number of points, I think it would be best if I tried to seek to answer each of them in turn, and if I overlap, I hope that the House will accept that.

The noble Lord, Lord Cledwyn, mentioned the worry of the French and Italian blocking of the refunds due to us. The Government take that very seriously. This was the result of a free-standing agreement at Stuttgart, and we believe that it is money to which we are entitled. We deeply regret what has happened. On the question of withholding payments, perhaps I should reply to both the noble Lord and the noble Baroness together. This is clearly a matter which will have to be very carefully considered. The Cabinet will discuss it and make a recommendation to this House and, of course, to Parliament, in due course. As to what follows from that and as to the question of legality, I think it would be right for me to confine myself to that statement before the Cabinet has had a chance to consider all these matters.

The noble Lord, Lord Cledwyn, asked about further discussion. Indeed, I hope that there will be further discussion. I mentioned, for example, that the problems of the agricultural package will be pursued further by the Agricultural Council, I think next week. I cannot give any answer as to whether there will be a further meeting of Foreign Ministers, but clearly that will have to be most carefully considered.

On the question of the gap, it is important to remember that the gap revolves on a number of agreements which all had to come together. First was the question of whether it was right to agree to an increase in the total resources of the Community. We were prepared to do that, provided there was clear financial discipline and a clear understanding on the control of the CAP. Equally, that was clearly dependent on the agreement of the Agriculture Council and the whole question of milk, to which the noble Lord, Lord Cledwyn, also referred. Therefore, it all had to stand together. I think I can best say to the noble Lord what was on offer; but I must emphasise that it depended on the other agreements and, of course, in particular on the agricultural agreement on the CAP. We were offered 1,000 million ECUs for five years. That, of course, was even lower than the average refund of 1,100 million ECUs a year which we have received over the last four years on the basis of the original 1980 agreement, despite the fact that the Community's expenditure has gone up considerably since then and is, indeed, going up all the time.

The noble Lord asked what figure we would have accepted. My right honourable friend will make it clear that we would have been prepared to accept a figure of 1,250 million ECUs in the first year of operation of the new system. However, a system based on the parameters devised for this figure would have given us limits on the level of our net contribution in the future.

It is important to remember in all these discussions that we are, of course, one of the two main net contributors. Germany and ourselves are the two main net contributors. Everything that is said has to be looked at against that background.

I turn now to the noble Baroness. I think that I have answered her on the question of withholding. That will be most carefully considered by the Cabinet, and it would be wrong of me to make any further statement in advance of that consideration. I believe that she hoped that further discussion would take place. Yes, indeed; I cannot say when, but clearly the agricultural Ministers will have their meeting and I have no doubt that there will be a meeting of the Foreign Ministers, too.

The noble Baroness mentioned the loss to us from any failure of the Community in many fields, including training. Yes, indeed, but of course that has to be looked at against the background of the fact that we are still one of only two net contributors to a budget which has constantly been rising. In the very important debate which we had in this House, the noble Lord, Lord O'Brien of Lothbury, made it clear that so far we have not been able to restrict the amount of the Community's expenditure, nor its demand on resources, and yet, as one of the two net contributors, we have to meet that burden. I think we are entitled to look at the matter against that background.

The noble Baroness says that it is a small amount and asks whether disagreement about such a small amount is worth the future of the Community. It is not just the small amount; it is the problem of the whole future financing of the Community, which includes the CAP and the burden that it will place on the total resources. Unless the Community can solve its internal financial problems, all its other great values—to which I should like to say that I fully subscribe—are inevitably put at risk. Perhaps in that context, I am entitled to say this. I think that some unfair things have been put about regarding my right honourable friend. The noble Lord, Lord Cledwyn of Penrhos, asked me about the milk position and the Irish proposals. It has to be said that they were opposed by several other members long before the United Kingdom came into the arguments. Very few other member states were prepared to accept that particular Irish proposal. That shows the complexity that we are up against.

We come back to this, and I answer the noble Baroness properly in this field. Of course this is a proper matter for discussion and will be discussed, no doubt, in this House and elsewhere. I hope that no one will think that this disagreement means that the Government are not totally committed to our position in the Community and desire to play our full part in it. All we ask is that we are able to do so on the basis of a sound financial proposition for the future and one which will be fair to our country.

Lord Renton

My Lords, is my noble friend aware that the need to reach a satisfactory revision of the arrangements under the CAP is so fundamental that my right honourable friend the Prime Minister will have the full support of most people in this country in refusing to agree to a temporary and unsatisfactory package which would have been unfair to this country? Secondly, may I ask my noble friend whether he is in a position to give us the reasons (which I do not think have so far been stated) as to why it is that France and Italy have decided to block the repayment of the monies which are lawfully owing to us at this stage?

Viscount Whitelaw

My Lords, in answer to my noble friend, I think perhaps it is important to say that, when one comes to the question of the CAP, we were prepared and ready to accept a 7.3 per cent. cut on the 1983 output of milk. I think that this would be recognised by many noble Lords who know our agricultural industry well to be a very considerable matter and one which would have been very difficult for our dairy farmers. It has to be said that the Irish Government sought authority to continue increasing its milk production. I think that such discrimination would have been extremely difficult for this country to accept. It would have been an extremely difficult idea for anybody in this country to sell to our dairy farmers, who, I believe, would have been perfectly prepared to accept the sort of restrictions that anyone else would have accepted. But I do not believe that they would be prepared, or should be asked, to agree to something which is so totally discriminatory.

On the reasons for France and Italy blocking our payments, I think that the proper and correct diplomatic answer to that (which I am not very good at giving) is that that is a matter for the French and Italian Governments.

Lord O'Brien of Lothbury

My Lords, is the noble Viscount the Minister aware that some of your Lordships who have had the advantage of studying this subject in some depth for many months past most warmly support the stance taken by the Prime Minister in the recent negotiations and believe that in the end she will be successful? But would the Minister be good enough to answer this question? Since the milk arrangement apparently was agreed by all parties before the summit in the last two days, why was it then repudiated by those who had already agreed to it?

Viscount Whitelaw

My Lords, I am extremely grateful to the noble Lord, as I know will be my right honourable friend the Prime Minister, who in fact this morning called my attention to the speech made by the noble Lord in the debate in this House recently. I did not actually need my attention called to it, but I pretended that I did as I thought that was a wise action to take.

On the second point, the answer is, to be fair—and one must be strictly fair in this matter because that is very important as between partners in any community when there has been a disagreement or as between partners in any aspect of life when there has been a disagreement—the Irish Government did reserve their position at the Agriculture Council.

Lord Kennet

My Lords, will the Government now stop talking about refunds as if we were in an arm's length deal with a shop which we claim has sold us defective goods, and rebates as if we were tenants receiving charity from a benevolent landlord in regard to rent, and realise that the European Economic Community is an international institution of which we are full members, exactly like the others? Will they realise that all these woes stem from the failure of the Heath Government to carry out certain economic forecasting routines when we first joined; that the Community was bound to impose the burden that it has on any member state whose economy was the shape that ours is; and that what we see here is lack of foresight, just as clearly as we see it in the comparable collapse of the fishery policy negotiations?

Viscount Whitelaw

My Lords, I do not think that I would wish to bring too party political a controversy into this. I would simply say this to the noble Lord. The benefit of hindsight is very valuable. It is particularly valuable to the Liberal Party, which over many years has not had the responsibility of forming a Government in this country. I quite understand that. Those who have had the responsibility of forming the Government of this country sometimes have to admit their failures and errors. Those who have not can always use the benefit of hindsight without ever admitting that they have made any errors at all.

Lord Chelwood

My Lords, my noble friend the Leader of the House has told us in repeating the Prime Minister's Statement that there was no agreement about any matter at the summit. I think I paraphrase him correctly. Is that really correct? Was there no agreement about political co-operation? If there was some agreement, why was there no political communiquéé? Is not the Middle East in dangerous turmoil, American policy having, on the admission of Mr. George Schultz, collapsed, and is it not high time that the European Community gave a lead in that part of the world?

Viscount Whitelaw

My Lords, I am grateful to my noble friend. I think that I have to say—and no doubt he will regret it as much as do many of us who believe in the political importance of the Community and of its voice in the world—that the meeting was so concerned with these particular financial problems that I do not believe that that matter was fully discussed. I think that it is very important that we solve our financial problems so that once again we can, in accordance with the hopes of many of us who supported this country's going into the Community at the start, have a full voice in the affairs of the world, and a much stronger voice together than we should have apart. I still believe that that is crucially important.

Lord Wilson of Rievaulx

My Lords, is this not a coup which is even more unacceptable than anything that even President de Gaulle aimed at, and is not the whole thing due to the grasping habits of the French Government, whose agriculture is almost the worst organised in Europe? Is it not a fact that everyone, whatever view they have taken about the Common Market—British entry or anything else—in the past should now express their full support of what the Prime Minister said yesterday?

Viscount Whitelaw

I am extremely grateful to the noble Lord who has—perhaps I could almost say—an unrivalled experience in these very great and very difficult matters. I am grateful for what he says. I think it would perhaps be political for me at this stage to allow his comments on what the French Government have done to rest in his mouth and not in mine. He will understand the reason for that.

Lord Gladwyn

My Lords, in the Statement read out by the noble Viscount. it says that, presumably as part of a deal which includes some agreement on the common agricultural policy, the United Kingdom was invited to accept a five-year ad hoc arrangement which would have left us receiving less than the average refund which we should have received in the years 1980–83. But is it not a fact that in one of those years we received practically everything, and that our liability was consequently nearly zero? Therefore if we had no more to pay now net than something equivalent to what we paid in the last year or two, or a little less—I think it is probably a little less—surely that would be fairly satisfactory from our point of view?

On another point, may we take it from what the noble Viscount has said that before the Government take the probably illegal and possibly fatal decision to withhold funds after the end of this month, there will be a full debate on this issue, both in this House and in another place?

Viscount Whitelaw

My Lords, in reply to the noble Lord's first point, I am sure that what was said in the Statement was factually correct. Certainly we did better in one year—and the noble Lord was perfectly correct—than many people expected at the time; but I do not think that that in any way changes the basis of the whole principle on which the finances of the Community in the future are to be based as a result of this agreement. I am sure he would agree with that. As for the question of withholding, I made it perfectly clear that that is a subject which the Cabinet will consider, will recommend to this House; and of course if any action were to be taken it would certainly come before this House.

Lord Bruce-Gardyne

My Lords, would it not be somewhat unwise for the Cabinet to decide tomorrow to embark on a course of withholding which, whether or not we like it, would indisputably put us outwith the pale of Community legality while negotiations were still continuing? Secondly, is not the crucial issue not the matter of the budget but in the long term the control of agricultural surpluses? Could my noble friend explain what, in fundamentals, is the difference between what he calls strict financial guidelines in the agricultural sector, and a character who was well known to the noble Lord, Lord Wilson of Rievaulx, and the noble Lord, Lord Cledwyn, in the 1960s and 1970s, called "Solomon Binding", who turned out to be a man of straw?

Viscount Whitelaw

My Lords, on the noble Lord's first point, I can only say that I will take account of it. In view of his important contribution to this Government in the last Parliament, I will certainly make sure that his views are represented to my colleagues, as is my duty. On the second point about the control of spending and the agricultural problem, I do not think I should be drawn too far down the road that the noble Lord goes, except to say that indeed the controlling of the CAP is an essential part of controlling the expenditure of the Community. In the final event, there can he nothing other than hard reality so far as that is concerned, and I do not believe that solemn and binding assurances will mean anything unless they can be backed up by hard facts, and that is part of the problem.

Lord Boothby

My Lords, will the noble Viscount bear in mind the wise words of the late Field Marshal Montgomery when he told this House (I heard him) that we would never get effective co-operation in the field of defence or economics in western Europe until the political association between the western European powers was defined? It has never been defined, and in view of the fact that the original Council of Europe, of which I was a member and which might have done it, was smashed by a British Foreign Secretary—Mr. Anthony Eden—does he not think that Her Majesty's Government should consider making a political initiative designed to achieve not fictitious but real union in western Europe?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord. I hope that I have made clear already in some of the other answers I have given the importance which Her Majesty's Government attach to the political solution—and I have associated myself with that. I note the importance of the reference he made to history, and I accept much of what he says. It makes it all the more important that we seek to solve sensibly the problems before us now; otherwise we shall prejudice our efforts at political unity.

Lord Molloy

My Lords, would not the noble Viscount agree that despite the very serious current situation it would he a gross distortion of the facts to pin all the blame on the British? Successive British Governments, those under my noble friend Lord Wilson of Rievaulx and with the present Prime Minister, have endeavoured to arrive at some sensible agreement, and they have been thwarted time and time again by others quite bluntly in this community of nations ganging up against us. I believe that if we give way on this now, there will not be much point in remaining in the Community because we will not have the spirit and the support of the British people behind us.

May I also ask the noble Viscount whether, if we can sort out this current problem and when things are flowing properly again, we will examine the absurd situation on the CAP? Then we can see that the greater contribution that can he made for ordinary people via the regional and social funds are given much more support and made much more of a reality. That is the quintessential of what this Community is all about.

Viscount Whitelaw

My Lords, I think that there are many people who will understand some of the feelings of frustration that the noble Lord expresses, after considerable years of experience—as we all have—in this matter. I hope that the House will agree that it will be part of my job as a member of Her Majesty's Government, and part of Her Majesty's Government's job, to do everything possible to cool the situation and to try to see how we could advance sensibly to an agreement. Therefore I would not wish to indulge in any particular comments about the actions of other people, and I think that would be correct. Of course it is important that we should examine the CAP. It is because we have failed so far during these discussions to get an agreement to a sensible solution to the problems of the CAP that we are in this difficulty.

Lord Mayhew

My Lords, would not the noble Lord agree that while there are big issues at stake on CAP and Community financing, it is a sad failure of British diplomacy that world opinion should have been presented with a picture of a British Government in a minority of one jibbing at a sum of money which in context is negligible?

Viscount Whitelaw

My Lords, the noble Lord makes these various assertions; but I have made it clear first of all on some of the matters that were raised to do with the common agricultural policy that we were certainly not in a minority of one—because that in itself leads to some of the other problems—and it is quite unfair to suggest that this was all the others against the British Government; and I simply do not accept it. As for these failures of British diplomacy, all I can say to the noble Lord is what I have said—although perhaps it is not quite so fair to say it to him as it is to some of those who have never been in Government: that is, of course it is much more difficult, as I think the noble Lord knew at the time, to be in Government with responsibility than it is, with the benefit of hindsight, to criticise from outside.

Viscount Tonypandy

My Lords, will the noble Lord take back the message that this country is united behind the statements that have been made by the Prime Minister for us all, and that that is what we would expect of a Prime Minister of the United Kingdom?

Viscount Whitelaw

My Lords, I am naturally extremely grateful to the noble Viscount, from his position, for these remarks, as I know my right honourable friend the Prime Minister will be. There will be many arguments, and I realise that there are arguments between some Members of your Lordships' House. I understand that perfectly fully. But I hope that it will be recognised by everyone that we have a British position and we ought to stand up for our own interests—other countries in the Community do so—and we would be failing our people if we did not.

Lord Morris

My Lords, may I ask whether the noble Viscount the Leader of the House would use his good offices to encourage my right honourable friend the Prime Minister not to lessen her most admirable resolve in any way?

Viscount Whitelaw

My Lords, I think I can assure the noble Lord that my right honourable friend's resolve is very clear and very plain. Naturally, she is disappointed at the failure to get an agreement because she believes in the future of the Community, and she very much hopes we can have an agreement in which this country will play its full part. I think it is important for me to say to this House once again that that will be the purpose of Her Majesty's Government.