HL Deb 07 May 1985 vol 463 cc550-61

4.8 p.m.

Viscount Whitelaw

My Lords, with the leave of the House, I shall now repeat a Statement about the Bonn Economic Summit being made by my right honourable friend the Prime Minister. The Statement is as follows:

"With permission, Mr. Speaker, I shall make a Statement about the Economic Summit which I attended in Bonn, accompanied by my right honourable friends the Foreign and Commonwealth Secretary and the Chancellor of the Exchequer.

"Heads of State or Government of the United States, France, West Germany, Italy, Canada and Japan were present, accompanied by their Foreign and Finance or Economic Ministers, together with the President of the European Commission.

"I have placed in the Library of the House copies of the Economic Declaration and of the Political Declaration to mark the 40th anniversary of the end of the Second World War.

"I shall deal first with the political issues. As countries which once fought each other bitterly, we recalled the benefits of reconciliation and of 40 years of co-operation, and pledged ourselves to their continuance.

"We welcomed the opening of negotiations in Geneva on the reduction of nuclear arms, expressed our appreciation of the positive proposals of the United States and urged the Soviet Union to act positively and constructively in order to achieve significant agreements.

"Foreign Ministers discussed the Middle East, Southern Africa and Central America. They condemned the continuing brutal occupation of Afghanistan by Soviet troops and of Cambodia by Vietnam.

"On Britain's initiative we had a discussion of the growing problems posed by drugs and we agreed to set in hand work on further co-operative measures to combat the vicious trade which is the cause of so much human suffering. We also reaffirmed our determination to strengthen further the co-operation against terrorism agreed at the London Summit last year.

"On economic matters the discussion and the Communiqué reflected the similarity between the approaches and policies of all seven governments. We recognised the further progress since our last meeting in keeping down inflation and strengthening the basis for economic growth. We also welcomed the fact that the recovery has begun to spread to the developing world. Nevertheless, we recognised that our countries still face important challenges. Among other things we need to strengthen the ability of our economies to respond to new developments, to increase job opportunities, to combat protectionism and to improve the stability of the world monetary system.

"In order to sustain non-inflationary growth and to create higher employment, we agreed that we will consolidate and enhance the progress made in bringing down inflation. We will follow prudent and, where necessary, strengthened monetary and budgetary policies with a view to stable prices, lower interest rates and more productive investment. Each of our countries will exercise firm control over public spending in order to reduce budget deficits when excessive, and, where necessary, reduce the share of public spending in gross national product. We will work to remove obstacles to growth and encourage initiative and enterprise so as to release the creative energies of our peoples, while maintaining appropriate social policies for those in need. We will promote greater adaptability and responsiveness in all markets, particularly the labour market. We will encourage training to improve occupational skills, particularly for the young.

"Building on those common policies, each country indicated its specific priorities: for example, President Reagan emphasised his determination to achieve a substantial reduction in the United States' budget deficit; the Japanese Prime Minister undertook that his Government would make further progress in deregulating financial markets, promoting the international role of the yen, facilitating access to markets, and encouraging growth in imports; the United Kingdom will continue to work to reduce inflation, keep public spending under control, promote the development of small business and advanced technological industries, and encourage initiative and enterprise in the creation of new job opportunities.

"On international trade we agreed that protectionism does not solve problems, it creates them; that further progress in relaxing and dismantling trade restrictions is essential; that a new round of multilateral trade negotiations should begin as soon as possible, with the broadest possible participation; that the preparations for the new round should begin with a meeting of GATT officials before the end of the summer. With the exception of France, we were agreed that the new GATT round should start in 1986. France was not prepared to commit herself to a date.

"The discussions on international monetary questions which began after the Williamsburg Summit will be completed next month when the Group of Ten meets in Tokyo. They will put forward proposals for discussion in the Interim Committee of the IMF at its October meeting. We endorsed the case by case approach to the debt problems of the developing countries set out at the London Summit.

"We expressed our particular concern for the plight of African peoples suffering from famine and drought. While acknowledging the very substantial assistance provided not only by governments but by private organisations and individual citizens, we instructed experts to report to the Foreign Ministers of the Seven at the end of September with proposals for further measures which might be necessary. Particular concern was voiced about the practical distribution of food aid which has been so generously given, and the need for long-term policies of good husbandry to avoid creating more desert land. We also called on the Soviet Union and other Communist countries to assume their responsibilities in helping to relieve the suffering caused by famine and drought.

"Mr. Speaker, what was impressive in the Summit discussions was the conviction of all represented there that lasting job opportunities can be created only if we maintain sound financial policies and open markets and remove disincentives and unhelpful regulations to foster a climate of more vigorous enterprise and initiative.

"As the Communiqué said: 'By pursuing these policies we will not only address our domestic problems, but at the same time contribute to an enduring growth of the world economy and a more balanced expansion of international trade'.

My Lords, that concludes the Statement.

4.17 p.m.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Viscount for repeating that long Statement. It covers several important matters and refers to the key points in the Communique. I shall seek to make two or three short points.

The objectives in the Statement are obviously acceptable, especially the urgent need for talks to avert the protectionist trade war, although we must regret that the Communiqué was not unanimously supported. I am sure that the noble Viscount agrees that the failure to secure unanimous agreement on a firm date for talks is disappointing and regrettable.

The Statement says that officials will prepare for the new round of multilateral negotiations this summer and that the talks will commence, as soon as possible". This is obviously disappointing. But can the noble Viscount say whether the new GATT round now scheduled to start in 1986 could in fact take place without France? This seems to me to be the implication of the words of the Statement. Obviously French participation is eminently desirable, but are talks without them a possibility? If I may read from pages 10 and 11 of the Statement: With the exception of France, we were agreed that the new GATT round should start in 1986. France was not prepared to commit herself to a date". There is there some slight implication that talks without France are a possibility.

We warmly welcome the reference in the Communique to the need to increase job opportunities and to reduce social inequalities. Can the noble Viscount say how this is to be achieved in this country? We note that Mr. Shultz did not rule out a mild measure of reflation. Can the noble Viscount say whether the Government have this in mind, and what other initiatives are now proposed by the Government in the light of the Bonn talks?

On the issue of Japan, can the noble Viscount say whether there was any specific proposal by the Japanese Government to take action to adjust their trading balances with us, they being grotesquely out of proportion? Is it true that while the United Kingdom bid for the second Bosphorus bridge was highly competitive, the Japanese bid, while less competitive, involved excessive aid and subsidy to Turkey? If that is true, it is a deplorable state of affairs.

We welcome the references in the Statement to the plight of the African people suffering from famine and drought and to the setting up of the expert group to prepare follow-up measures. We warmly support what was said about the necessity for constructive work at the Geneva talks, and also the initiative, which we understand was taken by the Prime Minister, to take action against drug traffic.

While it is clear that many useful initiatives were taken at the summit, will the noble Viscount answer this question: if fiscal tightness and the pursuit of an ever-lower rate of inflation are to take priority over all economic goals, where is the stimulus for a world economic recovery to come from under those circumstances? Can the noble Viscount be confident that, by the time of the next economic summit, world poverty will be reduced, if only marginally? Or does the noble Viscount subscribe to the theory that the world economy defies any kind of international planning?

Lord Diamond

My Lords, we on these Benches are also very grateful to the Leader of the House for being good enough to repeat this important Statement. It was a long Statement but not very full of substantial content. I will start by selecting those matters on which we should like to support the Government fully in what they have been saying in this Statement.

The first matter is the fight against protectionism. All countries have a modicum of protectionism inbuilt in their trading policies. The United Kingdom is no exception to that. That illustrates how difficult it is to keep protectionism out of our trading pattern, whereas all of us know that what is in the prime interest of a great commercial and trading country such as ours is the absence of protectionism. We therefore assure the Government of our fullest possible support in maintaining and improving the fight against protectionism. We are grateful for the steps that were decided upon. Although we can understand France's attitude for the time being, we are sorry that France found it inopportune to share in fixing an early date. We repeat our assurance of total support in this battle.

We welcome also what the Government said about the fight against drugs. Indeed, the House will recollect that we on these Benches devoted one of our very few available days to debating this important topic. At the end of that day a vote was taken and the Motion was unanimously agreed to. I am therefore bound to ask the Leader of the House what is meant by the words, to set in hand work on further co-operative measures to combat the vicious trade"? Can the noble Viscount tell us what steps have keen taken by the Government following upon the unanimous vote of your Lordships' House?

As to the rest of the Statement, I am bound to say that I regard this summit conference as a conference of missed opportunities. I want to illustrate that by referring to the two most important opportunities. One of the major opportunities that was missed is referred to in the Statement, when it makes mention of the need, to improve the stability of the world monetary system". Why were the Government unwilling to start on that by improving the stability of the European Monetary System, and why do they insist on being the one man outside the group who are sharing in this system and so helping with this very desirable end?

The second great opportunity that was missed was in failing to do something tangible about increased job opportunities. We on these Benches rate that as Priority No. 1 and not Priority No. 3, as the Statement makes clear. The Statement makes as the first priority reducing inflation and the second as enabling our economies to respond to new developments—whatever that may mean. It cannot mean unemployment in this country because that is an existing development. The Statement gives third priority to increasing job opportunities.

We regret immensely that no action was taken to persuade particularly the European countries to do something to reflate their economies so as to provide an increase in economic activity and an increase in job opportunities as a result of that. We totally disagree with the statement that there was: similarity between the approaches and policies of all seven governments". Of those seven governments there are two at the top of the ladder and the rest are broadly at the bottom of the ladder. If one is at the top of the ladder, it is not surprising that one is happy to go along with suggestions that no reflation should take place in the economies of those at the bottom of the ladder but that everything should be left as it is: "I am perfectly happy here, Jack", if I may use that expression.

It is astonishing to me that the Government should attempt to assert that the policies of the United States and Japan are quite similar to our policies, their financial policies being the total reverse. Of course they sold us the original monetary policy on which the Government have been hooked ever since they first came to power, but they very quickly departed from it. As we all know, they have run up a huge deficit, as a result of which they have increased their employment, have maintained low inflation rates, and have done very well indeed, thank you.

In the case of Japanese domestic policies, their social and labour relations policies are totally, but totally, dissimilar from our own. It is not surprising that those two nations, with their totally separate policies in the areas which matter, have risen to the top of the ladder whereas the rest of us have remained at the bottom of it. I therefore say that it was a missed great opportunity to help in restoring the economies—especially those of the European countries—so that we could start to climb up that very ladder and hold our own with these other countries.

This summit conference was so unproductive that it raises the question of whether summit conferences are worthwhile. Every government knows that summit conferences have to be most carefully prepared. We do not share the view that summit conferences are not worthwhile. We congratulate the Government on having held a summit conference and trust that they will continue to do so. But it is extremely regrettable that this conference produced so little.

4.27 p.m.

Viscount Whitelaw

My Lords, I am grateful to the noble Lords, Lord Cledwyn and Lord Diamond, for their reactions to the Statement. In view of the many comments they both properly made, it will be easiest for me to reply to them separately. I will do that simply because, through my own inadequacies, I would find it difficult to combine my replies to their comments.

First, the noble Lord, Lord Cledwyn, raised the question of the talks on protectionism. He said that those talks were good so far as they went. I agree with him that it was extremely important that those talks took place. I also entirely agree with the noble Lord that they need to be followed up by action. The noble Lord also questioned whether the new GATT round in 1986 could take place without France. Without having heard the discussions, I would have thought that it was very desirable indeed that the French should participate and that every effort should be made to ensure that they do. Without one of the major countries, clearly any such talks would be that much less effective.

On the question of increasing job opportunities, of course it is fair to say to the noble Lord that indeed all the countries concerned (and I shall return to that aspect when I come to answer the noble Lord, Lord Diamond) believed that job opportunities were best found, provided that inflation was kept under control in all these countries. The noble Lord said that Mr. Shultz spoke of a mild measure of reflation. I believe it is fair to point out to the noble Lord and to the House that it cannot, I think, be said—in view of the many measures the Government are taking at the present time in this country for the improvement of the infrastructure, when one looks at roads, housing and many other factors—that a great deal of work is not being done. I would challenge those who say that, and look at the facts of what is actually happening.

On the question of Japan, the trading balances and the bid for the Bosphorus bridge, I think it would be unwise for me to comment any further on that particular deal. Obviously, I know something of the details, but at this moment in time it would be better for me not to make a comment on something which, certainly from our point of view, has been a sad position.

As far as constructive work for the Africans and for the famine in Africa is concerned, I am grateful for the noble Lord's support, and, indeed, for his support on the question of drugs. On the noble Lord's last point, I believe he asked: if fiscal tightness is to continue, how will there be recovery? I believe it is felt by all the countries concerned that a measure of fiscal tightness and a determination not to allow inflation to start again is a necessary prerequisite of the recovery which we all want to see.

Perhaps I may now turn to the noble Lord, Lord Diamond. He welcomed the fight against protection and he welcomed the fight against drugs. He welcomed the idea of further co-operative measures. He raised the question of the debate initiated by his party in this House on the question of drugs, and asked what measures had been taken by the Government. I believe that over a period of years considerable measures have been taken by the Government. Perhaps I am entitled to say from a previous incarnation (which is always difficult) that a great deal was done in seeking to stop drugs coming into this country, and a great deal is being done today both through the customs and the police. I hope that this House will realise—and I make no apologies for this "plug" for something that may be happening in this House in the near future—that intelligence work on this matter is crucially important, and that those who would seek to deny any form of intelligence that can be gained by those who are fighting against drugs would be very unwise if they really want to stop drugs coming into this country.

The noble Lord regarded it as a missed opportunity that the United Kingdom Government had not joined the EMS. I appreciate the noble Lord's point on this. I have to say that the Government's position has not been changed. Economic spokesmen far more able than me have explained all the reasons why the Government have not decided to join the EMS, and I do not think I will add to them any more this afternoon. As far as inflation and increased job opportunities are concerned, the Government firmly believe that the efforts to reduce inflation are absolutely crucial if we are to provide increased job opportunities; and I can only report, in relation to the Statement, that that was the view of all the other countries who were engaged at the summit conference. Those who wish to disagree have to disagree with all the seven Governments.

The noble Lord says that the seven Governments were agreed, but some of them on different propositions. In reply, I can only say that if we look at the countries concerned it is perhaps inevitable. Nevertherless, they were all agreed that low inflation rates were crucial, and it would be a very unwise country, therefore, which decided that, whatever their circumstances, they would go back on that and give up the determined struggle to keep inflation as low as possible.

Lord Shinwell

My Lords, will the noble Viscount the Leader of the House agree—

Lord Harmar-Nicholls

My Lords, I think it is the turn of this side of the House.

Lord Shinwell

My Lords, I merely want to ask a question.

Lord Harmar-Nicholls

My Lords, I think it is.

Lord Shinwell

Very well, my Lords; go ahead.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that he did not completely answer the noble Lord, Lord Cledwyn, when he said that we are having a meeting of the officials of GATT? Of course, everyone hopes that France will eventually join; but are we to understand that if they do not join, if they remain adamant, the talks will go on, or will they not? If they are not to go on, there is no point in the officials meeting. Could I remind my noble friend that there is some significance, which should bring satisfaction to this country and to this Government, in the fact that all the other Governments seem to have accepted a basis of improvement in the world's problems founded upon the lines already being taken by our Government; and that the implied criticism from the Front Bench opposite and the SDP Bench does not fit in with the acceptance of all the other nations that our line of approach to overcome the world's problems seems to be the right one.

Viscount Whitelaw

My Lords, I am grateful to my noble friend. He has expressed more trenchantly than I did what I had sought to put before your Lordships' House. On his first point, one must say that so long as the question of France attending is a possibility, every effort must be made to ensure that France does attend, and if the meeting of officials works to that end that surely is something which we would all wish to see.

Lord Shinwell

My Lords, does the noble Viscount the Leader of the House agree that if the noble Lord speaking for the Liberals can occupy our attention for nearly 20 minutes in a speech, one might from this side of the House ask a simple question arising from the Statement that he was kind enough to make—that is, about the attitude of France? We learn from the press that for some reason (though so far as I know nothing has been discovered as to the cause) the French did not support the otherwise unanimous decision of the summit conference. Can we understand the reason for that? If there is to be another conference and France may be asked to change its mind, how is that to be brought about? Can the noble Viscount the Leader of the House explain this attitude of France, and why it is adopting this attitude? There must be some reason for it.

Are we taking any measures to correct it; and, if so, what are those measures? For example, a very prominent member of the Government recently visited Czechoslovakia and East Germany. Would it not be advisable for somebody to meet President Mitterrand and discover the reason for France's refusal to join the summit conference in coming to a unanimous decision? There is a very great deal of doubt about it, and from the press we discover very little. I wonder whether the noble Viscount the header of the House could answer that question.

Viscount Whitelaw

My Lords, I am indeed grateful to the noble Lord, Lord Shinwell, all the more because, of course, however long any other noble Lord might take in saying things, the noble Lord will still be able to ask his question and most certainly will do so. The answer, I believe, as far as the French are concerned, is bound up particularly with the case of French agriculture, and especially with the common agricultural policy in the Community. As the noble Lord, will probably appreciate, there are still discussions (alas! not so far leading to agreement) on the agricultural settlement within the common agricultural policy for the next year, and the French, not necessarily in that regard but certainly as far as French agriculture is concerned, are very dubious as to whether they can take part in the GATT discussions for that reason. It is French agriculture that is at the root of the problem, and added to that is the problem of the common agricultural policy.

Lord Hatch of Lusby

My Lords, the noble Viscount will recall that at last year's summit agreement was reached that all the industrial countries should increase in real terms their aid to the developing countries, and by doing so should assist in increasing their purchasing power. Nothing has been said in the communiqué this year as to whether or not that was achieved. This year's communiqué refers to the tragedy of the drought in Africa and sets up some kind of official committee. Can the noble Viscount tell us whether the British Government have fulfilled their obligations to last year's communiqué, and in the ensuing 12 months have increased their overseas aid to developing countries in real terms, and whether they intend to increase in real terms the resources that they make available to offset the tragedies of the drought in Africa?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord and, if he will understand, I shall be very cautious in the exact terms of the response I give at this present moment because I would not wish to prove him right and myself wrong on some answer that I may give. Therefore, I would say that I could not give him a specific answer, but I will certainly seek to do so on exactly what the Government have achieved in real terms in relation to meeting the communiqué on the last occasion. I believe we have made a substantial contribution in general in line with that communiqué. I would say, too, that we have made a very considerable contribution to famine relief in the African countries. I know it can always be argued that it is possible to do more but it would be very unfair to this country not to recognise the very considerable contribution, both from the Government and from private individuals, that has been made to famine relief in Africa. I am sure that that should be recognised.

Lord Gladwyn

My Lords, while agreeing with my noble friend Lord Diamond that there are certain features in the Statement which we welcome, I also agree with him and indeed, with the entire press that the results are almost entirely negative and consist largely of a number of pious platitudes and hopes. I shall only ask one or two questions. The Statement says: We welcomed the opening of negotiations in Geneva … expressed our appreciation of the positive proposals of the United States". I do not know what exactly is meant by the "positive proposals of the United States". They have I believe been discussed in the Council of Ministers but I am not sure that they have been revealed in their entirety to the general public. In any case, would not the Government agree that unless the American Government can meet what I believe are the legitimate anxieties of the Soviet Government about the Star Wars proposals—at any rate, to some extent—and agree to have a truce, so to speak, on anti-satellite activities, which is equally important, the negotiations are likely to fail, which would be a disaster for us all?

Secondly, in regard to economic matters, the Statement says that, the recovery has begun to spread to the developing world. What evidence do the Government have that that is so? I have not seen anything in the financial press to that effect. Once again, it is merely a statement of unjustified optimism. The whole question is dominated by the debt, which is also referred to and said to be coped with by bilateral means, whatever that means. But not much progress has been made in that direction either and unless there is I am afraid we must fear the worst.

Finally, I think the Statement says that Ministers are entirely in favour of lower interest rates. What has the United States Government actually done to lower interest rates? These are still unacceptably high and the Chancellor of the Exchequer has already said, I think, that they are almost intolerable. What is to be done about it? It is no good saying that we are in principle in favour of reducing interest rates; that is not an answer at all. Equally, as regards the United States deficit, it is said that President Reagan is going to do his best to reduce it. What has he done? Nothing at all. At the moment he is quarrelling with Congress. The real reason it is not being reduced is the enormous expenditure that he is proposing to make on largely useless nuclear armaments. Cannot something be done to convince him of the folly of this attitude? Did Mrs. Thatcher say anything at the conference in that respect?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord. I am sure that with his great experience he, in his time, has attended many summit meetings of one kind or another which expressed hopes for the future and did not necessarily produce results at that moment.

He asked me what will be the results of the various agreements at the summit. All I can say is that surely the agreements as a start are worthwhile. I cannot prove to him that they will be followed up, as he asked me to prove, and neither can he; but we must both hope that they will be followed through, both on the economic front and as regards lower interest rates.

On the Council of Ministers and negotiations between the American and Soviet Governments, I do not have anything further to say, so I think it would be better that I do not seek to pursue the matter further.

4.45 p.m.

Lord Cledwyn of Penrhos

My Lords, I apologise to the House but there is one brief question of importance that I wish to put to the noble Viscount. Can he confirm that French officials will be among those officials who take part in the preliminary GATT talks?

Viscount Whitelaw

My Lords, subject to any correction, I believe that to be so. I am not absolutely certain and if I am wrong I will, of course, immediately let the noble Lord know.

Lord Kaldor

My Lords, did Her Majesty's Government disagree with what is evidently the French view, that trade questions and trade agreements cannot be considered in isolation from currency and monetary matters and exchange rates? Evidently any concession made in the field of tariffs could be offset by changes in relative exchange rates. Therefore, to follow the American attitude, which demands far-reaching agreements concerning trade and at the same time be quite unwilling to consider a new system of exchange rates, is illogical.

Viscount Whitelaw

My Lords, I am grateful to the noble Lord. I think he is enticing me almost into a further debate on economic subjects in which he would do much better than I would. Therefore, I do not think I wish to proceed further.

Baroness Vickers

My Lords, may I ask the noble Viscount whether there is a committee of experts, Africans, apparently, to discuss the question of agriculture? After all, they have been using the same methods of agriculture for over 100 years and it will be difficult to get them to change without further co-operation.

Viscount Whitelaw

My Lords, I am grateful to my noble friend. I am sure she is right in what she says. I cannot confirm exactly what efforts will be made by the countries of the summit to that end, but I will certainly look into it and let her know.

Baroness Masham of Ilton

My Lords, is the Leader of the House aware that many people throughout the country will be pleased that the subject of drug abuse was discussed at the summit? Was there any positive suggestion of legislation to confiscate the gains made by traffickers? Is he aware that if other countries have this legislation, and we do not, this may make this country an even more attractive place in which to push drugs?

Viscount Whitelaw

My Lords, I am grateful to the noble Baroness for what she has said. I am sure there are many people who think that, with the great drug menace that affects the whole world and which it would be very unwise to imagine is not likely to get worse rather than better in the immediate future, it was right that the subject should be discussed.

As regards the laws of different countries, no doubt there was an exchange of views but laws are a matter for each individual country. As regards this country, I note what the noble Baroness said, but at this moment I do not have anything further to add about our proposals.

Lord Pitt of Hampstead

My Lords, I am unhappy that the noble Viscount the Leader of the House did not answer the question put by the noble Lord, Lord Gladwyn, about the evidence which suggests that the conditions of the under-developed world have improved. I am quite worried about that. The noble Lord may not have the answer, and if that is so will he undertake to write to me with the evidence because I should like to have that?

Viscount Whitelaw

My Lords, in answer to the noble Lord I will say that that was the view of the countries at the summit. I was dutifully reporting the views of the countries of the summit. It is their consideration and I have nothing further to add to the views of the great experts who were all there.

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