Mrs. Thatcher
Ladies and gentlemen I am afraid I have no good news to bring you. We were very near to agreement and yet in the end we were not able to close the gap. It was a great pity because this was another European council which failed to achieve its objective, namely to have a new method of financing the Community operations. As you know we have tried for a long time to get a much fairer method of sharing the burden of the Community budget, we were not able to get it although it seemed at times as if we should. What we now have to do is to persevere just as we persevered over these last five years to bring effective control over Community expenditure—now I want to make very clear that I appreciate very much the enormous effort which President Mitterrand made to try to reach a settlement. He was most helpful, most considerate.
— helped us very much in trying to reach a system for our own contribution, a system which would have been enduring, there was disagreement within the council over the system, some agreed with it, others wanted yet another ad hoc arrangement which was entirely unacceptable to us. Now what we have been trying to do is to tie up the Stuttgart package, we have not been able to do so and we must simply have another go to try and get one before June—President Mitterrand has to go to Washington tomorrow, he indicated that when he returns he will be in touch with other heads of government to see if we can find an agreement among ourselves. If I might put it this way, there was not a great deal between us on the amount of Britain's net contribution. Indeed from the size of the gap most of us thought that we should be able to close it. First because what is quite a lot to us, the gap is quite a lot to us, when you divide it amongst seven or eight other contributors it is a very much smaller amount for them to contribute but a very big amount for us to finance on our own. I should not like to give you the idea that it was only the British contribution that caused problems, it wasn't—the irish had very considerable problems over milk and it was suggested that there should be an increase in the milk quota of something like £1.3 million over and above the quota agreed in the agricultural council. Then Germany, the biggest contributor, had problems over their role in limiting the United Kingdom contributions and of course that led to a problem over how our refunds were to be financed.
Now those are only a sample of the difficulties but we did in fact make quite a good deal of progress on other matters where we wanted to make progress, for example, it has been one of our objectives that we should have very strict financial constraints on total budgetary expenditure and on agricultural budget expenditure and we should therefore have strict financial guidelines. We were well on the way to achieving those and well on the way to getting them guaranteed in their application to the budgetary procedures. So that was a plus. We also were well on the way to getting agreement over own resources, had we ever managed to get agreement on the other things as well. Now of course we shall have to try again and we shall doscon, we agreed the new policies section, we agreed some of the … . what are called the structural matters but of course everything had a reserve upon it until [end p1] we all agreed … . and were satisfied with the total package. Now we will try again and sooner or later the door will open to a fairer more soundly based Community which … can play a much more influential role in the world. In the meantime nothing is agreed and it is a matter for regret. There is one further thing which I should report to you, immediately after the European council there was a Foreign Affairs council which Sir Geoffrey Howe attended, that was for the purpose of helping us to secure the refunds from the Stuttgart package, you know the refunds of 750 million ecu which are due in Britain by the 31st March. I regret to have to tell you that France and Italy blocked those refunds and we shall have to consider with Cabinet colleagues exactly what to do about it.
Now shall we have questions. I can hear nothing except the clicking of cameras. Really it is most disturbing and I can't see anyone behind the cameras.
Journalist
—do you feel that the Common Market empathy is threatened by this breakdown in the summit?
Mrs. Thatcher
No. You will … are possibly right in your headlines. Community in crisis, I don't believe it is, the Community will go on. It will be difficult because it will be difficult to finance it but I have not the slightest shadow of doubt that it will continue and that a number of ad hoc arrangements will be made.
Journalist
Prime Minister, President Mitterrand has just put you in a minority of nine to one, in not accepting the basic principles of the Community, saying that you excluded customs duty and that you should have accepted their verdict. Do you accept that you were in fact in a minority of nine to one?
Mrs. Thatcher
Certainly there were nine to one against us, on the matter of our budgetary contributions but then do not forget that most of those who are against us are substantial net beneficiaries from the Community and we are net contributors, we were asking them to take a little less in benefits so that we did not have to contribute as much, the exceptions to that rule are Germany, who are big net contributors and France, who after us will now have to be net contributors. But most of the others who refused a fair deal to Britain are countries which themselves benefit substantially from the budget, all of their expenditure, when all of their contributions to this Community have been met, the expenditure from the Community exceeds them, so they really are drawers out and so it's not surprising that it was nine to one against. But there were some who agreed on the system: if you're asking about levies there was a feeling, an erroneous feeling, that customs duties and levies are quite different in kind from other own resources, in that customs duties and levies belong to the Community. If you look at the own resources decision there is no difference whatsoever in the quality of own resources. There is no difference between the customs and levies. They are all own resources and are on the same kind of basis as own resources. So the idea that customs levies and duties are different is not in fact bound … . not in fact borne out by that 1970 decision. [end p2]
Chairman
John Wilde who is sitting somewhere behind there.
John Wilde
Prime Minister … .
Mrs. Thatcher
I can't hear you, I can see you now and then! (question inaudible)
Mrs. Thatcher
There will not I believe be a special summit unless there's a chance of agreement. I think most of us took the view that there's not much point in having a third summit, particularly a special one unless there's a tremendously good chance of reaching agreement. That means that a lot of preliminary work must be done first. As nothing is agreed from this particular European council, all the subjects will have to go back into the separate councils, for example, into the agricultural councils, some of them of course will be subject to qualified majority voting. Some will be subject to the luxembourg compromise, some would require unanimous decisions, but they will undoubtedly go back into the separate specialist councils.
Chairman
The gentleman there.
(question inaudible)
Mrs. Thatcher
Well, I never believe in walking out. I cannot believe that an empty chair can speak very eloquently and I believe in staying there to put one's own viewpoint but undoubtedly what Dr. Fitzgerald was asking caused dismay among a number of other countries who themselves are having substantially to reduce their milk production, for example Great Britain is having to reduce her milk production by 7%;, and Dr. Fitzgerald not only wanted to maintain his milk production but to have a quota for increasing it. That did cause substantial dismay among my colleagues and of course it's also very expensive. question inaudible
Mrs. Thatcher
Well, we believe that we are entitled to that rebate, that we're entitled to it by virtue of agreement at the stuttgart conference. We believe that that agreement was not dependent upon reaching agreement here but dependent upon reaching agreement on the stuttgart communique. That agreement was reached and we do not believe that the blocking which has now occurred is legitimate. We shall therefore have to consider what action to take. I would not like to reach a conclusion before I've discussed it with my colleagues. What you have suggested is of course one thing we shall have to consider.
Journalist
Could I ask you if the option of withholding is one of those … . (inaudible)
Mrs. Thatcher
What you have suggested is one of the things we shall have to consider.
Chairman
Derek Brown.
Derek Brown
Prime Minister, can you say how close you came in fact, how close was the gap on the … budgetary contributions … .? [end p3]
Mrs. Thatcher
Not a very large gap but really there were two things in issue—first, we do not wish to have another ad hoc arrangement. We want to get a permanent arrangement under which our annual refund can be calculated on the basis of a formula, as you know the Parliament, the European assembly, also want such an arrangement. A number of colleagues agreed such a system, we spent a very long time drafting and negotiating it and the French presidency was most helpful. We got something totally acceptable to us on the system. It also would have endured because it was linked to the own resources decision. So we had no difficulty in agreeing the presidency text on the system, indeed we've been foremost in negotiating it. Within that system you have to get figures. Now what really happened was that we were offered a thousand million ecus refund for five years. Now I must point out that four years ago we had a larger refund than that. If you take the average of the last four years we've had a refund of eleven hundred million ecu on average. They were now offering a thousand million ecu for five years which is lower on a very much higher expenditure, so we could not possibly accept that. But quite apart from that ad hoc arrangement, there was … there was a difference of opinion about the figures that should be inserted in the system. Now it's not easy to explain just exactly what the gap was but from the formula viewpoint they wanted to insert a thousand million in the system, we wanted to insert twelve hundred and fifty. So that was the size of the gap but it's not just a straight two hundred and fifty because that system gave us specific limits to our contributions and therefore the twelve hundred and fifty was important in calculating the limits to our contribution. But that's just … . that's the sort of measure and if you divide two hundred and fifty, the extra two hundred and fifty million up among eight … . seven or eight contributors of course it's quite a small amount for each of them but the total was quite a lot for us.
Journalist
But if you got a … .
Mrs. Thatcher
I'm sorry? No, no, there was not a two year … no. We said that in order to help things along and because 1984 was going to be a very very difficult year for financing, we were prepared to have a one year flat rate only and then go on to the system in 1985. The one year flat rate would have been to a thousand million ecu, the system would have operated as I say, not in a straightforward manner but at the twelve fifty rate which would have given us limits on our net contributions which were what we were seeking.
Chairman
The gentleman there. question inaudible
Mrs. Thatcher
Well I've said we would have to talk with a number of people, bilaterally and also with the French presidency. But again I stress that four years ago, when I was negotiating this—and I've been at it now for five years, it's five years this year since I first started at strasbourg, we've not yet got a permanent arrangement. Again when I started the system we got, or got, gave us on average refunds of eleven hundred million a year, this time we were only offered a thousand million refund although the expenditure of the Community is up very considerably and is going up all the time and frankly that was just not acceptable. Now the Helmut KohlFederal Chancellor is of course a very big net contributor and therefore he did not feel that he could contribute as much as he otherwise would have done to our own refund. Therefore we were entitled to look to those countries who, having a higher level of prosperity per head than we have, are nevertheless beneficiaries from the Community and not contributors. [end p4]
Chairman
The gentleman there.
Journalist
Prime Minister, what effect do you think this latest failure will have on transatlantic relations, do you think it will reduce Washington's confidence in the … .?
Mrs. Thatcher
No, it's a setback undoubtedly, of course it's a setback when after two major summits Europe cannot in fact sort out its own problems, to some extent because it's still refusing to face them. I mean there was a considerable tendency at this summit when we were actually considering strict financial guidelines nevertheless to add to our expenditures whenever there was a problem. The compromise tended to be solved by adding to expenditure and that's another reason why of course we could not accept the limited refunds offered when all the time the many decisions were adding to expenditure
Chairman
Right, we'll take two more questions alan?
Journalist
You said that you probably would have accepted the deal on the budget rebate for one year at the rate offered by the French presidency … does this imply, Prime Minister that you're prepared to accept a rebate of roughly two thirds of the British … . contribution?
Mrs. Thatcher
A thousand million ecu is nothing like two-thirds. The deal that we got four years ago was a refund of two-thirds of our net contribution and we bore one-third, the deal that was offered here was nothing like two-thirds. I was prepared to accept one year at one thousand million ecu provided, and only provided, it was part of a package which gave us a permanent arrangement and if the figures included would have led to a lower net contribution for us which meant a higher refund.
Chairman
Last question.
Mrs. Thatcher
Let's have two … . someone has a go … there's one over there too.
Journalist
How do you think it reflects on your Community partners and their enthusiasm for the Community that they're prepared still to block a fair deal for Britain … are you critical …?
Mrs. Thatcher
Well it's disappointing but it's not fatal, we'll just have to persevere. Don't forget it took us three times … . when we last negotiated. I've been through similar press conferences before. Some of you have been through them with me—one was at Dublin, one was at Luxembourg, so we had to have two occasions there before we finally got an acceptable system but alas it only lasted for three years and that's why I really am not prepared to go through another ad hoc miscellaneous arrangement, we want a system that will endure and which … can be calculable. [end p5]
Journalist
But it must be settled in June?
Mrs. Thatcher
I hope it will be settled in June or before June.
Journalist
But not later?
Mrs. Thatcher
Not later, otherwise it's going to be acutely difficult. There's someone over here.
Journalist
Prime Minister, it's accepted that the Community is running out of money, I've heard that … view that prospect with equanimity, is that true?
Mrs. Thatcher
No, I do not view it with equanimity at all. No-one struggled harder than we did to try to get an acceptable arrangement but it had to be acceptable also to us and it had to be saleable to the British Parliament: after all if we were going to ask the British Parliament to increase the resources to the Community, that could only be on condition that we got a fairer sharing of the burden of the budget, we did not get that fairer sharing, therefore we cannot ask for an increase in own resources. I do not face that prospect with equanimity, we've been trying for two days to reach agreement, we were not successful but we live to fight another day.
Chairman
Well, thank you very much, ladies and gentlemen. Could I ask you to move very quickly out because the Prime Minister has … .