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European Council (Luxembourg)

The Prime Minister (Mrs. Margaret Thatcher)

With permission, Mr. Speaker, I shall make a statement about the European Council held in Luxembourg on 2 and 3 December. My right hon. and learned Friend Sir Geoffrey Howethe Secretary of State for Foreign and Commonwealth Affairs accompanied me to this meeting. I have arranged for the conclusions of the Council to be put in the Library of the House.

The European Council reached agreement in five main areas. The first was the completion of the Community's internal market. This has been an important United Kingdom objective for a long time, with the strong support of British industry and business. The target of completing the Common Market by 1992 will be established in the treaty, and we agreed that there should be greater use of majority voting on a number of treaty articles dealing with goods and services. But unanimity will be retained for all decisions on taxation, the free movement of persons and the rights and interests of employees.

We also retain the right to take national action where required to protect public, animal and plant health.

The United Kingdom's position and the position of this Parliament are thus properly protected on such vital questions as frontier controls in relation to terrorism, crime, drugs and immigration from outside the Community; and on essential controls in health—for example, on rabies. The Luxembourg compromise, whereby a member state can invoke a very important national interest to prevent a decision being taken, is unaffected.

Secondly, the European Council agreed that the treaty should be brought up to date by new articles on technology, environment and the regional fund. Action has hitherto been taken in these areas on the basis of the general article in the treaty. The new articles will provide a more precise basis for action in these areas in future. Unanimity will be preserved for all-important decisions.

Thirdly, we agreed on procedural changes to improve consultation with the European Assembly. There will be better arrangements to enable the Council to take account of amendments to Community legislation suggested by the Assembly. But in all cases the last word on such legislation will rest with the Council. There will be no transfer of power on these matters from this House to the Assembly.

Fourthly, on monetary co-operation between member states, an amendment to the treaty was agreed which describes what has already been achieved in the Community framework, without entering into new commitments.

Finally, agreement was reached on a separate treaty of co-operation in foreign policy on the basis of the draft presented last summer by the United Kingdom. This formalises existing arrangements for consultation among the Ten on foreign policy matters and looks to a steadily closer co-operation.

The European Council's decisions on all these matters remain subject to general reservations from Italy and Denmark. The proposed amendments to the treaty will go forward only if these reserves are lifted. The United Kingdom has reserved its position on the voting arrangements in a proposed new treaty article on working [column 430]conditions. We insist that unanimity be preserved, in view of the risks that this article might be used to impose unfair burdens on our small and medium-sized business.

The European Council also discussed the economic and social situation and confirmed existing economic policies designed to reduce inflation and encourage sustained growth. On deregulation, the Commission gave an undertaking that in future all new proposals would be accompanied by an assessment of the effects on business and job creation; that the most important existing regulations would be re-examined to simplify them and to reduce the burden on industry; and that there should be a regular procedure for monitoring progress towards this objective. The United Kingdom's initiative earlier this year has thus been formally adopted.

In my statement in this House following the last European Council in June, I made it clear that we would have been ready then to take the steps necessary to complete the internal market, to improve decision taking, to formalise foreign policy co-operation and to improve procedures for consultation with the European Assembly.

Those objectives are now embodied in the conclusions of the Luxembourg European Council together with some tidying up of the treaty to reflect the Community's development. The amendments to the treaty have to be approved by each sovereign Parliament and accordingly will be submitted to this House.

I believe that the conclusions on completing the Common Market and reducing the burden of regulations will be of long-term benefit to British firms selling their goods and services in the European Community. Together with the arrangements to reduce the scale of Britain's budgetary contribution agreed last year, they will be an important step towards enabling this country to realise more fully the benefits of our membership of the European Community.

Mr. Neil Kinnock (Islwyn)

Is the Prime Minister aware of the widespread feeling that yet again a summit has evaded the obligations and opportunities to tackle effectively unemployment in Europe and to promote Europe's role in international affairs? Does she recall saying to the House on her return from the Milan summit in July:

“I saw nothing before us that would require an amendment to the treaty” —[Official Report, 2 July 1985; Vol. 82, c. 189.]

Why has she now performed a U-turn and agreed to procedures for amending the treaty as well as conceding the national right of veto in important sectors?

At Luxembourg, did the Prime Minister bother to pursue reform of the common agricultural policy, which produces food stockpiles that not only obviously outrage the British people but continue to distort seriously Community funding? Did she raise the question of the huge gap between social fund remittance and payments which, according to Commissioner Varfis, will ensure that the worst losses will be inflicted on the British people in 1986? Why does the Prime Minister continue to promote the idea of European foreign policy co-operation but ignore the views of our partners in the Community over issues such as the Falklands and South Africa, and today spitefully rejected their unanimous plea for us to remain in UNESCO?

The Prime Minister

We had a debate on economic matters and considered a substantial report by the Commission. It will be considered in more detail by the [column 431]finance Council. All member Governments present endorsed the approach of the Commission which was to pursue policies to keep inflation down and prudent financial policies, and thereafter to pursue deregulation and to take steps to bring the internal market into being.

As to the amendments, as the right hon. Gentleman is aware, most of what has been done now could have been achieved without treaty amendment. Many of the others wished to go by treaty amendment. I was not one of those, but as they wished to do so they were entitled to. The detailed drafting of the amendments shows that all our interests are protected. Many amendments, such as that on monetary matters, merely describe the state that we have reached in the Community. It was interesting that those who wanted treaty amendments most were those who have put a reserve on the results.

As to the CAP, the treaty is not the obstacle to reform. There is nothing wrong with the treaty provision for the common agricultural policy. The matter comes up each time, but, as we were dealing with treaty matters, reform did not arise.

As to foreign policy co-operation, I expect that there will continue to be differences, but we shall try to work together as much as possible. As the right hon. Gentleman mentioned the Falklands, I remind him of the support that we got from the Community when the Falklands compaign was beginning, support for which we were profoundly grateful.

Mr. David Howell (Guildford)

Is not the best way to bring monetary affairs within the scope of the Community and the treaty to achieve free trade in financial services and free capital movement throughout the Community? Can my right hon. Friend reassure us that the summit agreement has made, and will make, progress on that front?

The Prime Minister

My right hon. Friend is aware that we pointed out to some of those countries that wished to go much further than we did that in practice we have released exchange controls and have freedom of capital movements, while some of those whose rhetoric was to the fore in the Milan Council have not done either of those things as yet, and some will not do it now. As my right hon. Friend made very clear, we were right. The treaty amendment is very modest. However, I doubt whether every country will free exchange controls, although Germany is anxious that capital movement should be freed.

Mr. Roy Jenkins (Glasgow, Hillhead)

Does the Prime Minister regard the result of the European Council as a significant advance towards majority voting and more effective decision making? Is it again, in her view, just a question of “that much” , or is this a significant advance?

The Prime Minister

If the articles that are enumerated in the treaty are passed, it will be a significant advance for the internal market. As the debate and discussion continued, it became obvious that those countries whose rhetoric had been the highest were among those who put a reserve on, for example, majority voting for transport matters in the Community. They are of great importance to us. As the right hon. Gentleman is very much aware, there was a big gap between the rhetoric and what they [column 432]were prepared to agree in practice. We had a small reservation about one matter. Other countries had reservations about the whole matter.

Mr. Teddy Taylor (Southend, East)

Was it not a little daft to make significant concessions in order to achieve a piece of paper on the so-called completion of the market, when France has today imposed a complete ban upon all lamb imports and apparently we cannot do a single thing about it?

Was it wise for the Government to concede the veto on article 28 relating to changes to the common external tariff? Will not this mean that the majority of the member states can go ahead with a protectionist regime and that there is nothing that Britain can do about it?

The Prime Minister

On my hon. Friend's last point, he is aware that trade matters are for the European Community. We agree that sometimes by unanimity and sometimes by majority. Some of them are already agreed by majority.

As for my hon. Friend's question about lamb, that was not a matter for treaty amendment, so we were not considering it.

Mr. Tony Benn (Chesterfield)

Will the Prime Minister clarify her view about the long-term objective of political union within a fully federal united states of Europe, about which a great deal is regularly said in the Commission and elsewhere? Is she aware that an overwhelming majority of the British people would not only reject it but would believe that the policies designed to deal with unemployment in Britain could not be carried through under the treaty as it now stands?

The Prime Minister

I do not believe in the concept of a united states of Europe, nor do I believe that it would ever be attainable. The whole history is completely different, so I agree with the right hon. Gentleman about that matter. I am constantly saying that I wish that they would talk less about European and political union. The terms are not understood in this country. In so far as they are understood over there, they mean a good deal less than some people over here think they mean.

Mr. Robert Jackson (Wantage)

My right hon. Friend is to be congratulated upon a personal diplomatic success in ensuring that there is a high degree of practical content in these institutional agreements. One of the most striking features of the discussions seems to have been the silence of other delegations on the much discussed question of the revision of the Luxembourg compromise. How does my right hon. Friend envisage the future operation of majority voting procedures in the Community?

The Prime Minister

As my hon. Friend is very much aware, the Luxembourg compromise will still be applied even when there is majority voting, provided that a very important national interest is involved. He will also be aware that at Milan we said that we should write down that interest so that it could be clearly defined and seen by other delegations. However, my hon. Friend is right. Other delegations did not pursue that matter, so presumably the Luxembourg compromise will operate as it does now by the declaration of a particular point that is of very important national interest.

Mr. Eric Deakins (Walthamstow)

What advantages does the Prime Minister now see in amendments to the basic treaties to extend the legislative powers of the [column 433]European Assembly and the competence of the Commission which she did not appreciate when she made her statement against treaty amendments after the Milan summit?

The Prime Minister

Most of the changes that have been made under the text on the European Assembly, which are modest, could in our view, have been done by discussion without amending the treaty because the last world will continue to remain with the Council. Only two changes in the text would not have been undertaken otherwise. First, where there is an application for new accessions from a different country to the Community, the Assembly could, by withholding its consent, stop that application. Secondly, where there is an application for a new association agreement between third countries and the Community, the Assembly could, by failing to give its consent, stop it. Those are the only differences, except that we shall consult more with the Assembly before decisions are taken.

Sir Anthony Meyer (Clwyd, North-West)

Could my right hon. Friend say whether this modest step in the direction of majority voting, which is surely inevitable if the 12 nation Community is not to be paralysed, is itself threatened by the possibility of one of the signatories to the summit agreement applying a veto to its implementation?

The Prime Minister

Yes. If Italy and Denmark maintain their general reserve, the matter could not be passed by each sovereign Parliament. Italy has undertaken to see what the European Assembly's views are before she makes up her mind. Denmark has certain constitutional problems, which she might be able to resolve, in which case, if Italy could go ahead, we could go ahead and bring the matters before the House.

Mr. Bryan Gould (Dagenham)

Is it not the case that the Prime Minister has made a statement to the House on a meeting which she did not want to take place, on an agenda which she did not want to discuss, and on agreements which she did not want to make? How did that come about?

The Prime Minister

The meeting would have taken place anyway because—[Interruption.] The hon. Gentleman misses the point. If it had not been called the “intergovernmental conference” , the same people as sit on the European Council would have met at the same place at the same time.

Mr. Anthony Nelson (Chichester)

Although I welcome the agreement as far as it goes, may I ask my right hon. Friend if she is of the view that protection and promotion of national interests should be synonymous with joining more wholeheartedly with our European member neighbours on monetary and economic policy, particularly on full membership of the European monetary system? Will my right hon. Friend consider whether it is time for us to be in the vanguard rather than the rearguard of such movements?

The Prime Minister

I have said, and it remains our policy, that we shall join the exchange rate mechanism of the European monetary system when we believe that the time is appropriate. We do not believe that it is so at present.

As for being in the lead on monetary matters, as I said earlier, there are many matters on which we are well in the lead, both in the absence of a foreign exchange control and [column 434]in capital movement. It would be a great benefit to further monetary co-operation if some of the states who are members of the EMS would follow our lead.

Mr. Alex Carlile (Montgomery)

While in Luxembourg, was the Prime Minister informed by the French Government that they would ignore the communality of the so-called complete Common Market by putting a ban two days later on the import of British sheepmeat? Will she tell the sheep farmers of Wales what the Government will do about the ban?

The Prime Minister

Obviously, my right hon. Friend Michael Joplingthe Minister of Agriculture, Fisheries and Food will take up the matter, because we negotiated the agreement on lamb, and it is beneficial to the hon. and learned Gentleman's farmers in Wales and to farmers throughout the country. The hon. and learned Gentleman's comments reflect my earlier point that other countries have an enormous gap between their rhetoric about what they want to do and what they do in practice. The whole time, part of our task has been to diminish their expectations, and to bring them down from the clouds to practical matters.

Mr. Robin Maxwell-Hyslop (Tiverton)

Since there is no pretence that United Kingdom lamb is banned from being exported to France on health grounds, will my right hon. Friend inform the Commission and the Council of Ministers that she will not place before the House any motion to ratify the Luxembourg agreements until the French comply with the basic elements of the original treaty of Rome in allowing free movement of agricultural produce of that sort?

The Prime Minister

If that action trespasses against the Community's law, it will be a matter for the Commission to take to the European Court.

With regard to the point about not putting matters before the House should Denmark and Italy not lift their reserve, I must point out to my hon. Friend that some of the matters, especially those relating to the internal market, would be helpful to our insurance business and financial services setting up in Europe, because one vote against has stopped many people from establishing themselves in Europe as they can in this country. It would be wrong to hold that up because it would not help the problems to which my hon. Friend correctly refers.

Mr. Allan Rogers (Rhondda)

Will the Prime Minister say in what circumstances in future negotiations she will invoke the Luxembourg compromise?

The Prime Minister

No, Mr. Speaker. One has to wait for the negotiations. As the hon. Member will be aware, we sometimes have to consider the Luxembourg compromise, in particular, with regard to agriculture.

Mr. Michael McNair Wilson (Newbury)

In her statement, my right hon. Friend referred to the Community attitude to terrorism. Did the Irish Prime Minister use the Council meeting as an opportunity for him to sign the European convention on the suppression of terrorism, as promised at the time of the Anglo-Irish agreement?

The Prime Minister

The European convention on the suppression of terrorism is not the Community's convention. Dr Garret FitzGeraldthe Taoiseach and I met and reviewed the position following the signing of the Anglo-Irish agreement and confirmed that the agreement would be implemented as planned. I hope that the signing of that convention will take place.

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Mr. Nigel Spearing (Newham, South)

Will the Prime Minister reconsider her reply to my hon. Friend the Member for Walthamstow (Mr. Deakins) about the European Assembly's powers? Is she aware that in the communiqué issued yesterday article 149 of the present treaty, which contains five lines, was replaced by a new article of about 35 lines? It refers to the Assembly's increased powers of consultation and recommendation. Does not the inclusion of such a proposal in the treaty constitute a change in that Assembly's powers and require an amendment to the European Assembly Elections Act 1978 passed by this House?

The Prime Minister

Increased consultation with the European Assembly was taking place in any event. It was proposed by us at the Milan Council but without treaty amendment. It has now been put into a treaty amendment, but in that amendment the last word stays with the Council, as was made clear by the President's communiqué.

Mr. Michael Grylls (Surrey, North-West)

Was my right hon. Friend able to make progress with our European partners on the pledge contained in the document “Lifting the Burden” on raising the VAT threshold to £50,000? Does she agree that that would remove a serious burden from small firms?

The Prime Minister

As my hon. Friend will be aware, our VAT threshold for small firms is considerably higher than those in the Community. We are strongly advocating the retention of our limit. I agree that we should like it higher, although that view is not shared by everyone in this country. At the moment, we insist upon retaining our level, although in its calculations the Community says that it is too high.

Mr. Dennis Skinner (Bolsover)

How much did the summit cost? How much will it add to the £4,726 million net that the British taxpayer has had to find in the first 10 years of Britain's membership of the Common Market? Those are the questions that people ask in Bolsover, not all the gobbledegook that we have heard from the Prime Minister. Is it not a rather strange state of affairs that we have a Prime Minister who constantly tells the British nation that there will be no meetings at No. 10 with beer and sandwiches, but at the moment when they decide to have a Common Market summit, with all its banqueting, junketing and claret—even though it is a meeting that the Prime Minister does not think is important—she gets on the first aeroplane?

The Prime Minister

I wonder whether the hon. Gentleman will convey to his most distinguished constituents of Bolsover the fact that the Government are in favour of having only two European Councils a year instead of three, and that I hope that we shall implement that next year.

Mr. Jonathan Aitken (Thanet, South)

I sympathise with my right hon. Friend's efforts to play down this non-event at Luxembourg on the ground, as she put it, that it would have happened anyway. May I remind her that before going to the summit she and my right hon. and learned Friend the Foreign Secretary reiterated time and again that in their view there was no need for any changes in the treaty of Rome? How does she justify the change of policy which, presumably, need not have happened?

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The Prime Minister

We could have made most of the changes without amendments to the treaty. We could have done it by agreement among the same people, who would be called a European Council instead of an intergovernment conference. If one belongs to a Community, one has to take into account other people's views, particularly if one wants some of the changes that are being made to enable some of our people to establish themselves in the Community, which they cannot now do. We wanted something from our European partners and they wanted something from us. It seemed a reasonable compromise.

Mr. Stuart Bell (Middlesbrough)

With reference to the question put earlier by my right hon. Friend the Leader of the Opposition about how the treaty modifications affect unemployment, will the Prime Minister tell the House whether the modifications in relation to the environment, the regional fund and technology will affect stricken regions such as Cleveland? Is the Prime Minister aware that Cleveland has the highest unemployment rate in the country? Are the treaty modifications designed to increase and improve the flow of funds to areas such as Cleveland?

The Prime Minister

The treaty modifications are called cohesions. As the hon. Gentleman will be aware, there were two funds operating under the treaty which were contained in the treaty. The third fund, the regional fund, had not been a matter for the treaty. We put the regional fund into the treaty and we put into it that the areas which have been subject to industrial decline and change should also rank for payments from that fund and for consideration in any review of the three funds. We have retained the status quo on that matter. Again, it could have been done without the treaty. The amendments on the environment and technology show more precisely the activities which were previously taking place under article 235.

I believe that the changes in the internal market can help a number of people. The general policy to try to have more job creation is set out in the economic report which is being considered by the European Council, and whose general thrust was approved by us.

Mr. Hugh Dykes (Harrow, East)

My right hon. Friend deserves congratulations on achieving a significant, but in some respects still modest, agreement which takes the Community further forward. Does she agree that after 12 years of membership, following 12 years of negotiating entry, it is high time that the United Kingdom pitched in with much more integration and co-operation with the other member states to create general extra prosperity for all member states? Accepting the House's endorsement of the measure when it is presented to the House in due course—which I am sure will happen—does my right hon. Friend also accept that this is a first step which should be used to continue in the future the process of co-operation and integration, involving the European Parliament at the margin more and more? As a gesture of Christmas monetary confidence, would it not be a good idea to join the European monetary system without delay?

The Prime Minister

No, Mr. Speaker. One does not do such things at Christmas or any other time unless it is in Britain's interest to do so. I believe that it is right to have more consultation and co-operation with the European Assembly, but it is difficult enough to reach decisions with 10, let alone 12, members of the European Economic [column 437]Community. If the decision has also to take place in conjunction with the European Assembly, we should never have any. I am sorry, but that is what I believe. Therefore, we have not given more powers to the European Assembly. In general, we have kept the final word with the Council. The European Assembly has extra rights to consultation and to make amendments.

Mr. James Wallace (Orkney and Shetland)

The Prime Minister has reported on the limited progress made at the Council, which will involve some alterations to the treaty. Was any progress made on the articles in the treaty which are awaiting fulfilment, specifically article 138 on the uniform electoral system to be used for elections to the Assembly? If not, why not?

The Prime Minister

No, Sir, because I believe that they are neither desirable nor would they be agreed.

Mr. Stephen Dorrell (Loughborough)

Does the Prime Minister agree that the best way of reinvigorating our economy and that of Europe and thereby creating more jobs is to create companies in Europe capable of holding their own in international competition? Does she agree that the steps that the Government have taken to complete the European market are the best way to provide the kind of home market that is available to competitors based in the United States and Japan?

The Prime Minister

My hon. Friend is absolutely right. At our insistence, an extra clause was added to the article on technology stating that technological co-operation will work to the advantage of job creation only if the producers can see the whole of Europe as a single market similar in size to that of the United States. We believe that that would make more jobs available to the British people.

Several Hon. Members

rose——

Mr. Speaker

Order. I will allow questions to continue for a further five minutes, but I remind the House that there are other statements to be made.

Mr. Tony Marlow (Northampton, North)

My right hon. Friend the Prime Minister made some robust and reassuring remarks about the European union. Will she clarify any speculation by stating categorically that during the time of her premiership she will not ask the House to agree to a European act of union?

The Prime Minister

I do not understand what is meant by a European act of union, but I assure my hon. Friend that I would never commend to the House a federation equivalent to a United States of Europe.

Mr. Michael Latham (Rutland and Melton)

Is my right hon. Friend aware that lurking near the top of her statement today and of other statements that she has made is the obvious pressure placed upon her by other Common Market nations for more integration, more interference and more power for the European Assembly? Will she state clearly that her opinion is against any such action?

The Prime Minister

My hon. Friend is absolutely correct. We often hear such talk at Councils. On each occasion, the Government's task is to bring the rhetoric back to reality, which is that other countries—with one or two exceptions—tend to take the same view as we do. Indeed they sometimes do not observe the conditions [column 438]of the treaty as well as we do and they frequently put reserves on particular matters that are in their interest to a greater extent than we do.

The Government are wary of greater integration except on matters such as the internal market which are to our advantage. We are also very anxious to protect British interests where they differ from the rest of the Market—for example, in animal health and farm matters where, because we are an island, we have and shall retain different systems of protection.

With regard to the question of further interference, I firmly hold that any treaty changes must be a matter for each and every sovereign parliament.

Mr. Frank Cook (Stockton, North)

The Prime Minister has laid great emphasis on the need for a spirit of compromise, particularly with regard to greater integration. Does that mean that the House will hear in future of a possible Anglo-Spanish agreement in line with the Anglo-Irish agreement? If there is such a prospect, what provision will be made for a process to self-determination for the Gibraltarians?

The Prime Minister

As the hon. Gentleman is aware, the position of the Gibraltarians is protected in their constitution and will continue to be protected.

Mr. Eric Forth (Mid-Worcestershire)

Does my right hon. Friend expect the European Parliament to consider the proposals at its meeting next week? [Hon. Members: “Assembly, not Parliament.” ] The Prime Minister will know that I do not share the obsession of my colleagues with the distinction between Assembly and Parliament. Will there not be a paradox if we do not accept the verdict of the European Parliament to which we seek to give more consultative powers?

The Prime Minister

I do not think that there will be a paradox. The European Assembly is different from our national sovereign Parliament. Any changes to the treaty are a matter for each and every sovereign Parliament to which we as a Government are responsible. I think that it is reasonable to consult the European Assembly. My hon. Friend may have been to the Assembly more often than I, but it is the differences between the European Assembly and a national sovereign Parliament which impress me more than the similarities.

Mr. Tim Smith (Beaconsfield)

Is my right hon. Friend aware that the agreement which has been reached on assessing the effects of Euro regulations and directives on businesses will be very welcome, especially to small firms? How will the proposal be implemented if, for example, a particular directive is seen to be unduly burdensome for small firms?

The Prime Minister

The President of the Commission is setting up a unit within the Commission which will examine every new directive or regulation and assess the costs that would be added to businesses before the directives are implemented. The unit will also look at existing regulations in that light and report to the relevant groups considering them. That is a good move, though I confess that I expressed a certain amount of scepticism about it because when the unit was proposed regulations were being made which were needlessly detailed and would add considerable cost to small businesses and others. The Government have rightly resisted such [column 439]proposals and will continue to resist them. By setting up the unit, the Commission is making an effort. I hope that it will produce the results that we want.

Mr. Keith Best (Ynys Môn)

Does my right hon. Friend agree that there is so much opposition from Labour Members, particularly from the right hon. Member for Chesterfield (Mr. Benn) and the hon. Member for Bolsover (Mr. Skinner), to closer monetary and economic co-operation within Europe because such co-operation would be a permanent safeguard against the implementation of full-bloodied Socialist policies in this country?

The Prime Minister

I do not believe that there can be any safeguard against that happening except to make sure that it never does.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Is it not clear that in foreign policy matters and on all important issues each member state acts according to its own national interests? Is not the pretence and rhetoric of a common policy on foreign affairs dangerous in that it leads to muddle and misunderstanding?

The Prime Minister

The leading article states:

“That being members of the European Community, we shall endeavour jointly to formulate and implement a European foreign policy” .

Of course, each member state has its own particular national interests by virtue of history and of economic and geographical differences. If differences exist, we maintain them and act in our own interests, but it is equally in the interests of all member states to act together if we can on certain matters because we are very much stronger by so doing. One of the reasons for coming together in Europe was to be the most powerful market in the world and to have more power in negotiating trading matters with other nations. Sometimes it is in our interests to act separately, and sometimes it is very much in our interests to act together.

Sir William Clark (Croydon, South)

Following my right hon. Friend's answer to my hon. Friend the Member for Surrey, North-West (Mr. Grylls), is she aware that many hon. Members think that the threshold for VAT, at £19,500, acts as a deterrent, especially to small businesses? While it is true that some thresholds within the Common Market are lower than ours, does my right hon. Friend agree that the rates in those cases are much lower than 15 per cent.?

The Prime Minister

There are a number of differences between us and the Community on tax matters. That is why we have been so anxious to limit the Community's capacity to make more taxation regulations. I want to maintain our VAT threshold, but the Community is already at us because it thinks that our threshold is too high. It was because of those differences that we insisted at the intergovernmental conference that changes in taxation should come about only by unanimous rule. We do not want to get into more difficulties of the kind involved in the threshold directive.