HL Deb 08 December 1987 vol 491 cc78-85

3.40 p.m.

Viscount Whitelaw

My Lords, with the leave of the House, I shall now repeat a Statement about the European Council which is being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"With permission, Mr. Speaker, I shall make a Statement about the European Council held in Copenhagen on the 4th and 5th December, which I attended, together with my right honourable and learned friend the Foreign and Commonwealth Secretary.

"At the previous European Council in June we had decided that: 'the Community must submit the use of its resources to effective and binding discipline' and adopt regulations 'to keep the level of expenditure within the budget framework'. Our principal task this time was to consider practical measures to give effect to these objectives.

"Our discussions concentrated on three main aspects: first, the amount of spending and its control, with particular reference to agricultural spending; second, the level and objectives of the Community's regional, social and agricultural guidance funds; and, third, how the Community should be financed in the years ahead.

"First, control of spending: I made clear to the House before Copenhagen our determination to see the Community's agricultural spending brought under proper control, together with measures to dispose of existing agricultural surpluses and prevent the build-up of new ones. I also made clear that the most effective way to achieve our aim was by the introduction of agricultural stabilisers for each and every commodity.

"We were able to go far in Copenhagen towards establishing the basis for stabilisers, which will impose automatic cuts in price support if agreed production levels are exceeded. All member states now accept that such stabilisers are needed. We made progress in particular towards agreeing tough stabilisers for cereals, oilseeds and protein crops, on which spending has increased particularly sharply.

"We also had before us a proposal but only in very general terms for a Community-wide set-aside scheme, which a number of governments, including ourselves, support as a complementary measure to stabilisers.

"I am glad to say that the Commission's proposal for an oils and fats tax, which we had resisted strongly at the June European Council, was not further pursued.

"Second, the structural funds: the Commission had proposed a doubling of the resources devoted to these funds by 1992. In common with several other Heads of Government, I made clear that this was out of the question. Our view is that growth of these funds must be contained within a strict framework of budgetary discipline, but that it would be right to concentrate a higher proportion of them on the less prosperous member states, particularly Spain and Portugal.

"Third, how the Community should be financed: we discussed proposals put forward by the Commission for restructuring member states' contributions to the Community budget in order to make the arrangements more fairly reflect national prosperity. Decisions on the future level of the Community's own resources will be taken only when improved budget discipline arrangements have been worked out in detail. I made absolutely clear that we are not prepared to see any dilution of our Fontainebleau abatement.

"Mr. Speaker, much credit is due to the fair and indeed courageous chairmanship of the Danish Prime Minister, Mr. Schluter, for the progress which we made. Nonetheless, the large number of issues to be settled, and the amount of detail involved, meant that we were unable to finish our work at this meeting, the more so because each government naturally wants to be able to judge the results as a whole. The Council therefore adjourned and will resume its discussion under German chairmanship in Brussels on 11th and 12th February, building on the work done at the Copenhagen meeting.

"On foreign policy questions, we issued statements on East-West relations, Afghanistan and the Middle East. Texts are in the Library of the House. We recognised the importance of the meeting between President Reagan and Mr. Gorbachev and of the INF agreement which will be signed at it. We urged the Soviet Union to withdraw from Afghanistan by a set date in 1988, and to agree to the establishment of an independent transitional government there. We also called for action to enforce implementation of Security Council Resolution 598 on the Iran-Iraq conflict by means of a follow-up resolution.

"Heads of Government also discussed the world financial situation. We welcomed the agreement between the Administration and Congress to reduce the US budget deficit. We confirmed our commitment to run our economies soundly, keeping down inflation and encouraging enterprise. We stressed the importance of taking the necessary steps to have a Europe free from trade barriers by 1992.

"In conclusion, Mr. Speaker, the Copenhagen Council represented a significant move in our direction; namely towards effective and binding control of Community spending. A great deal of work remains to be done before the next Council. But the United Kingdom's determination to secure such control is very well understood and will not change."

My Lords, that concludes the Statement.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Viscount for repeating the Statement. While we recognise the difficulties, which appear to be perennial, like everyone else we must regret the failure to agree at Copenhagen at the week-end on the outstanding financial problems of the Community.

At the end of the meeting the Prime Minister and other leaders expressed some optimism, but I personally find it hard to be optimistic in spite of the careful wording of the Statement that has just been read by the noble Viscount. Does the noble Viscount really believe that things will be better in February? The fact is that in France and Germany elections will be pending and President Mitterrand and Chancellor Kohl are not noted for their resilience at such times. For example, is Chancellor Kohl likely to agree to tough stabilisers on cereals? The problems are acute and the Statement carefully lists them: bringing farm spending under control; increasing help to the poorest areas; and sharing the burden of the future financing between the 12 members. That all adds up to a massive negotiating problem.

I welcome the Prime Minister's more constructive and conciliatory line but, if one faces the facts, one cannot regard this summit as a success or indeed, as the Statement tries to argue, as a movement toward success. I am bound to say that I fail to see it.

Therefore a new budget is crucial and I should be grateful if the noble Viscount would let us know his feelings about the financial consequences of the failure to agree a new budget. If the Community continues to function on a month-to-month budget, as will be the case from now on, will the common agricultural policy then begin to suck in moneys from regional development schemes and training schemes for the unemployed? We understand that spending on the common agricultural policy is obligatory under the rules of the Community and will therefore take precedence over the other very important considerations that I mentioned.

Do the Government have any new proposals which will break the logjam and will they be discussing them with our partners in the Community between now and 11th February? Or will they continue to argue for the stabilisers and the set-aside scheme which, from the Statement, seem to be the core of the Government's policy? The Statement indicates that there was a movement toward agreement but is that really so? What were the difficulties? Is there likely to be agreement on those two points of policy in February? We hope that there will be a successful outcome to those efforts.

Finally, we support the later paragraphs of the Statement upon the Iran-Iraq conflict, on Afghanistan and of course on the INF agreement.

Baroness Seear

My Lords, we on these Benches also wish to thank the noble Viscount the Leader of the House for repeating the Statement. We welcome the apparently much more friendly atmosphere in which this summit has been conducted. There are also some very welcome signs of progress. At least the principle of agricultural stabilisers has been accepted, although I agree with the noble Lord, Lord Cledwyn, that we should like to know what in reality this amounts to. Is it just an agreement in principle or have we really taken some practical and positive steps towards the introduction of stabilisers which would at least lead in the direction of curtailing the expenditure under the CAP?

We are very glad that the Government have been able to resist the suggestion that there should be further import duties on oils and fats. The Community is far too protectionist as it is. In our view, to increase the protectionist policies of the Community would be extremely undesirable. We are therefore very glad that the Government were able successfully to take this stand.

We welcome the fact that there appears to be a growing movement towards a common foreign policy which we certainly need to develop if the Community is to grow and develop as we on these Benches, would much like to see it grow and develop. Having said that, the Statement seems to lack the sense of urgency which we must all feel about the position in Europe. Those of us who are keenest on the development of a real, effective Community and Common Market must have the greatest anxiety that so little real progress has been made.

In my calculation there are only eight weeks until the meeting in February. If you take out Christmas and the new year, it comes down to something like seven weeks. That is an extremely short period of time in which to bring about any real changes and to make any real progress in February. If progress is not made, what is going to happen? What is going to happen to the budget of the EC, which is already running on a hand-to-mouth basis?

Furthermore, what is going to be done about the mounting expenditure on the CAP? One would have thought that a greater sense of urgency would be reflected in this report. Is it not possible for Her Majesty's Government to give signs of really wanting further developments inside the EC and of their willingness to be flexible on some matters that are not actually at the core of the problem? It is obviously right not to be flexible about reducing the cost of the CAP; but how about the way in which the Community is financed? Is it not possible to look at a percentage of GDP as a way of financing? It is in some ways fairer than the present VAT system?

These are just some of the things which we hope the Government will consider. Moreover, can we not show ourselves good Europeans by stressing how much we want to see progress in regional and social expenditure? These are areas which very badly need attention throughout the Community. We are anxious, as soon as there is a settlement on CAP payments, that we should spend more money in those areas. It is a matter about which the Community is greatly concerned.

Viscount Whitelaw

My Lords, I am grateful to the noble Lord, Lord Cledwyn, and to the noble Baroness, Lady Seear, for their acceptance of the Statement. The noble Lord, Lord Cledwyn, basically asked me, first whether things will be better in February. I can only say that my right honourable friend the Prime Minister feels that on this occasion considerable progress was made. I give the same answer to the noble Baroness, Lady Seear.

The noble Lord, Lord Cledwyn, asked me particularly what sort of progress had been made. As regards oil seeds and protein products, I understand that the meeting came very close to agreement on firm upper limits on price support. In each case, where production exceeded the limit, an automatic price reduction would follow.

On cereals, the argument concerns the level at which production limits should be set and the precise mix of measures which should be taken if the limit was threatened. Certainly, on the first matter, considerable progress was made; on the second it was agreed, among the member countries, that these particular problems had to be settled. I believe that this is the first time that some measures of this sort to limit the CAP financial burden have been accepted by the member states. My right honourable friend the Prime Minister felt that that was at least a considerable advance on what had happened before.

The noble Lord, Lord Cledwyn, asked what would be the financial consequences of a failure to agree. As regards the agricultural position—and the noble Lord, Lord Cledwyn, knows a great deal about that— I would have thought that in the long run it would be very bad for the farmers in this country and throughout the Community. Failure to agree now might seem all very pleasant in the short term; in the longer term, it would mean that drastic emergency measures would eventually have to be taken in order to meet the feelings of the noble Baroness, Lady Seear, about the finances of the Community as a whole. I agree that such measures would have to be taken in a great hurry. And that is the one thing which farmers who have thought this through would, I think, rightly dread. It is important to stress that.

The noble Lord may also feel that it is important to stress that we are prepared to play our part. We have already shown that we are prepared to play our part over milk quotas. Butter production has been considerably reduced. We have said that we are prepared to make our contribution and set-aside. And, indeed in respect of all the other measures, we have made our position perfectly clear. We believe that if all the other countries would do the same, all would be well. What we are quite clear about is that if we are going to take these measures we must take them as a combined measure with the other member countries. To step out on our own, if other countries were not going to take the same sort of measures, would be wholly unfair on our farmers in this country.

The noble Baroness, Lady Seear, having said that she was glad that we had resisted the oil and fats tax, asked whether there was a real sense of urgency about financing the Community and what was going to happen to the many other important development schemes. My right honourable friend the Prime Minister has made it abundantly clear—and her view has, I think, been increasingly accepted by the other member states—that we must deal with the problem of the enormous overspend on the CAP before we can get any sensible financial developments elsewhere. So long as that situation continues, the opportunities to do things for the poorer nations and carry out other developments which are so badly needed will not happen because, as the Community is presently financed, the money will not be there. The first step must be to get this agreement.

My right honourable friend the Prime Minister believes that there was a considerable move at this summit. She thinks that it is far better that we should have made some progress and then have a major negotiating position. I agree that there is but a short time for this, but I believe that the opportunity to further think through the particular proposals which were put forward must, in the long run, be better than having a fudged agreement on this occasion. This would not have been what was actually needed. I believe that is why my right honourable friend the Prime Minister is optimistic as to the prospects of making further progress in February.

Lord Carter

My Lords, is the noble Viscount the Leader of the House aware that many farmers are very concerned indeed about the support that the Government are giving to the idea of the cereal and oil seed stabilisers which would be based on an estimate in mid-September of the whole Community harvest? He will know as a farmer that this year, for example, there have been enormous differences in harvest yields between the North-East of Scotland and the Borders and between East Anglia and the South-West. As farmers, are we really supposed to take into our calculations—besides the weather—in deciding whether to bring in cereal or oil seeds, the prices and the quality of the harvest in, for example, Italy and Greece?

I would ask the noble Viscount how on earth a highly dubious estimate of the harvest in 12 countries in mid-September, and before the harvest is finished in northern Europe, can be expected to influence farmers' individual decisions as to whether they should plant their cereals or their oil seeds?

Viscount Whitelaw

My Lords, the noble Lord, Lord Carter, knows a great deal about these problems. No doubt these are some of the problems which, were in the minds of the farmers in the Community, and so, of course, in the minds of the agriculture Ministers and indeed, therefore, of the Heads of Government. These are some of the matters which need further negotiation.

I should like to come back to the noble Lord, Lord Carter, on a point about which I think he will agree with me, which is that it is very important indeed to get a full agreement on methods of limiting production which will be fair as between the farmers in the different countries of the Community. I fully accept the detailed problems which he posed to me. He will not expect me to be able to answer them now. They are questions which have to be answered by the agriculture Ministers, but they have to be answered fairly as between all the member countries of the Community and their farmers.

Lord Gladwyn

My Lords, although I agree with a great deal of what the noble Viscount the Leader of the House has said, will he not admit that the only way in which a body such as the European Community can be successfully run is by a willingness on the part of all members occasionally to make concessions to other people's point of view in order to arrive at any agreement? Is it not the case that our very dynamic Prime Minister has a tendency to regard any possible concessions on her part as inadmissible fudge?

Viscount Whitelaw

My Lords, if the noble Lord, Lord Gladwyn, concludes that from what happened at Copenhagen, frankly I think he is wrong, because at the same time his own noble friend, the noble Baroness, Lady Seear, said that she was glad to welcome the Prime Minister's more constructive attitude on this occasion. So I think we have to get the whole thing together. I believe that my right honourable friend is of course prepared, provided that the major issues are answered; and, again, the noble Baroness, Lady Seear, said that she was very grateful to the Prime Minister for having resisted the oil and fats tax. So that is not the sort of concession which I think the noble Lord, Lord Gladwyn, would have wished this country to make. I believe that concessions can be made when a clear programme and a clear plan have been worked out, and I think it is simply because of the need to get a clear plan worked out that we have in the past made concessions to arrive at agreements. Of course, with any programme which limits production throughout as diverse a Community as we have, with all the different forms of agriculture which the noble Lord, Lord Carter, mentioned, all countries have to make some concessions. That will be the purpose of further argument and further detailed discussion in February.

Lord Hailsham of Saint Marylebone

My Lords, is not my right honourable friend the Prime Minister greatly to be congratulated on her characteristically resolute attitude on the matter of financial discipline? Will my noble friend agree that therein lies the clue to any future progress in European matters; that they should learn to keep their financial house properly in order?

Viscount Whitelaw

My Lords, I am grateful to my noble and learned friend. I am sure that he is right. There is no doubt about the problem which faces the European Community—particularly with the number of members and the diverse nature of the number of members—in succeeding in that financial discipline. However, it is clearly vital to many of us who want to see the European Community succeed that they get exactly the discipline about which my noble and learned friend has spoken.