European Council (London)
3.31 pm
The Prime Minister (Mrs. Margaret Thatcher)
With permission, Mr. Speaker, I shall make a statement about the European Council held in London on 5 to 6 December. I presided over this Council and was accompanied by my right hon. and learned Friend Sir Geoffrey Howethe Secretary of State for Foreign and Commonwealth Affairs. The conclusions of the Council have been placed in the Library of the House. There were two major themes for the Council: business and jobs, and safeguarding the open society.
On business and jobs, we noted that economic policies of member states had been steadily converging and that inflation in the Community was expected to fall to 3 per cent. in 1987, the lowest for 20 years. The Council unanimously endorsed an action programme for jobs, which stems from an initiative taken by Britain, supported by others earlier in our presidency. The programme puts emphasis on training, including up to two years' vocational education and training for school leavers and greater involvement with industry. It stresses also action to help the long-term unemployed, including schemes for job counselling.
The programme will be carried forward by Social Affairs Ministers at their Council later this week. In future, the employment programme must have priority in the use of moneys allocated by the European Community's social fund.
Linked with the need to create the conditions for a growth of jobs, the Council looked at ways of encouraging small and medium businesses—one of the main sources of new jobs. The Community has agreed to over £1 billion of loans for small businesses. This will be available, among other things, for investment in new technology.
The Council endorsed the principle of the Commission's proposal both to simplify VAT and to make it possible to lift the VAT threshold for small businesses up to about £25,000.
This is in line with our aim to take unnecessary burdens off the back of enterprise.
Completion of a large, single market in Europe has been a major priority of the British presidency. Thirty-two measures have already been adopted or agreed since July. They include: an important step towards complete freedom of capital movement within the Community; action against counterfeit goods; common testing and marketing standards for pharmaceutical products; common standards for television by satellite; and common standards for a pan-European telecommunications system using digital technology. A similar effort will be made on digital cellular radio, a market worth billions of dollars in which Europe has a technological lead. We shall continue to press for easier access to cheap air fares.
The Council recognised the crucial role of an open world trading system in achieving more growth and more jobs. We noted that the Community has already launched an action in the general agreement on tariffs and trade against Japan's barriers to trade. That action may need to be reinforced unless we see early results.
The second main theme of this meeting was concerted action to protect our citizens against terrorism, drugs, illegal immigration and abuse of asylum. Terrorism can strike anywhere, and it is vital that we act together in our common defence, as we did successfully in the case of [column 22]Syria. We therefore agreed on a policy of no concessions under duress to terrorists or their sponsors, and on solidarity between member states in their efforts to prevent terrorist crimes and to bring the guilty to justice. Free movement for bona fide travellers within the Community must go hand in hand with better controls at the Community's external frontiers.
On drugs, the Heads of Government endorsed a sevenpoint plan covering: intensified co-operation between police and customs authorities; a decision that illicit drug traffickers' assets will be liable to confiscation throughout the Community; exchanges of drugs liaison officers; and exchanges of information on the treatment of drug addiction and on education about the dangers of drug abuse.
The European Council also decided to launch a sustained information campaign on the prevention, early warning and treatment of cancer and to designate 1989 as European Cancer Information Year. It asked the Council and Commission to ensure Community-wide exchange of information on AIDS, and to consider what further co-operation in research might be taken against the spread of this dreadful disease.
The President of the Commission, Mr. Delors, reported on his review of future Community financing. He will be visiting Community capitals early in 1987 in order to set out his views and discuss options covering future financing, the common agricultural policy and the structural funds. The European Council made it quite clear that in the meantime work must be carried forward and decisions taken on issues already before the Council. The Agriculture Council is now in session with the aim of reaching such decisions on the reform of the arrangements for milk and beef.
The Heads of Government discussed East-West relations and arms control. There was wide support for the points which I agreed recently with President Reagan at Camp David. We issued a statement on the Soviet occupation of Afghanistan, which is now nearing the end of its seventh year. Foreign Ministers discussed the problems of the middle east and the Iran-Iraq war and stressed the importance of maintaining contact with the Gulf states. They also discussed South Africa and Latin America.
It has been a priority of the British presidency to make the Community work better for the benefit of individual citizens. This was a practical and successful Council relevant to jobs, to our future prosperity within the Community and to the future safety of our citizens.
Mr. Roy Hattersley (Birmingham, Sparkbrook)
I welcome and support the initiatives taken to co-ordinate policies to combat terrorism, the spread of AIDS, drug abuse, and the health information campaign. Judgment on the co-ordination of visa policy must await a statement about the rules by which the policy is to be co-ordinated. Does the Prime Minister envisage that the basis will be the generally liberal and humane policies of our European partners, or our own racially discriminatory policies?
Will the Prime Minister accept our congratulations on the support which the summit and the communiqué, although not her statement, gave to the importance of continued dialogue between EC Ministers and trade union leaders in the Community, and the support given by the communiqué to the co-operative strategy for growth? The [column 23]Prime Minister's attitude on both these matters is well known. We are delighted that she was either defeated or surrendered on each issue.
The proposals for reducing unemployment within the Community are a pathetic response to what even the Foreign Secretary called the “major challenge” facing the British presidency. They consist of platitudes, such as the expressed desire for lower interest rates. British interest rates are now the highest in Europe and the highest in British history. When does the Prime Minister expect that particularly pious hope of the communiqué to be fulfilled by her Government.
The Prime Minister has run away from all the crucial issues which should have been tackled during the British presidency. The failure to face, even less to attempt, to overcome either the financial crisis or the fiasco of the common agricultural policy was wholly deliberate, and the Community must hope that Belgium will behave more bravely next year.
I should like to ask the Prime Minister specific questions about each of the crises which she attempted to duck. How does she propose to deal with the £2 billion deficit which the Community will face next spring? Does she accept that a supplementary budget is now unavoidable——
Mr. Teddy Taylor (Southend, East)
No.
Mr. Hattersley
We hear the view of the south-east coast, but perhaps the Prime Minister will tell us whether she thinks that a supplementary budget is now unavoidable as Europe is facing backruptcy. When she gives us her judgment on that point, will she tell us what possible advantage, apart from an attempt to save her own face, was gained from her refusal to act now against the financial crisis?
Does the right hon. Lady agree that there must be major reform, a reduction in surpluses and a pricing policy for the CAP which is in the interests of consumers no less than of producers? Is it not shameful that the pursuit of those objectives, which are all in the British interest, should have been sacrificed to help the German Conservatives in their election campaign?
My final question is about relations between Europe and the USA. Why was there no mention of this topic in the communiqué, why was it given so much prominence in the press conference that followed the summit, and why did the Prime Minister deal with it in such detail today? Is it because the Prime Minister no longer has “implicit faith” —her words—in the President's integrity, or is it that she remains an apologist for the deal over Iran, but could not persuade the Heads of the other European Governments to be similarly sycophantic?
The Prime Minister
I note the contempt of the right hon. Gentleman for the 11 other Heads of Government in discussing the results of this conference and his contempt for them on the common agricultural policy and the finances, because, of course, this was a conference of all Heads of Governments.
The right hon. Gentleman spoke about growth. It was noted that the Community is a main component of the engine for growth, and that the Community has been optimistic towards the end of this year and believes that there are reasonable prospects for growth next year. [column 24]
On jobs, the right hon. Gentleman argued that nothing was achieved, but the Council's approach to jobs contains four practical elements. Towards the completion of the internal market, 32 internal market measures have already been agreed or adopted since July, the most ever registered in a single presidency. They include valuable agreements which will help liberate capital markets, combat counterfeit goods, protect consumers from chemicals in meat, establish standards for direct broadcasting by satellite, and set new standards for things such as fire safety in hotels, which will benefit British holiday makers.
Completion of the internal market is going well and enables us to set standards which British business men will know and which will enable them the better to sell in the Community. It includes positive help for small firms, such as, for example, the £1 billion loan facility, and includes cutting regulatory burdens on small and medium firms and a programme for employment growth—a programme which, as the right hon. Gentleman knows, is set out in full in the Library.
The right hon. Gentleman also asked about the common agricultural policy. In the last few price fixings prices have been stablised or reduced, largely at the instance of the British delegation. The right hon. Gentleman is aware of the quotas, and today there are further discussions on milk and beef quotas. He knows full well the steps that are being taken to reduce the amount that goes to intervention.
I said in my statement that Mr. Delors is considering the report that he has to make under the Fontainebleau settlement. He has to report on three things: the convergence of policies, financial matters of the Community and the reform of the common agricultural policy. Before making his report he will visit each capital to have discussions with each Government, and will take with him a programme of options and the consequences that flow from them. It is good that he will carry out such detailed work and consult before making his report.
Europe and the United States were discussed, especially during the discussion of East-West relationships, as I said. Colleagues at the Council of Europe gave broad support to the programme at Camp David. We also realised the importance of showing solidarity ourselves, and showing the Community as a stable force for democracy, being very practical in the proposals it made, and making them apply to individuals and citizens.
Sir Brandon Rhys Williams(Kensington)
May I congratulate my right hon. Friend particularly warmly on the rapid progress that is now being made towards the integration of the European market for capital? Will the British Government seek to follow up this success by obtaining the co-operation of other member states in taking off the regulations and restrictions which are holding back the expansion to the continent of services, such as insurance and building societies and the Stock Exchange, and other financial facilities which are available in London and which the whole Common Market ought to share?
The Prime Minister
Yes. My hon. Friend is aware that that is one of the objectives of getting a single internal market. We are anxious that there should be freer movement of capital. My hon. Friend will be the first to say that we have had free movement of capital from Britain throughout Europe during the lifetime of this Government, but not under the Labour Government.
[column 25]Dr. David Owen (Plymouth, Devonport)
While it was probably inevitable that the looming budgetary crisis would be avoided until after the German elections, will the Prime Minister tell the House whether there is any sign that the Federal Republic of Germany is now prepared to take action over surpluses in the CAP? Is it true that, at the Heads of Government discussion on East and West, great anxiety was expressed about President Reagan 's decision to break out of the SALT limits? Is the Prime Minister ready to say that she deeply regrets that decision, and that if the United States wants to go ahead with airborne-launched cruise missiles above the limit it should decommission the Poseidon submarine?
The Prime Minister
As the right hon. Gentleman is aware, the 1.4 per cent. VAT limit is now enshrined in the treaty obligations. This House has ratified it, and three other countries have ratified the Single European Act. The rest have indicated their intention to ratify by the end of the year, by which time the 1.4 per cent. will be in the treaty. It can be changed only by the agreement of all Governments and all Parliaments.
As to whether Germany is really prepared to tackle surpluses, we are all prepared to tackle surpluses, but the right hon. Gentleman will be aware that it is one thing to say “tackle surpluses” , and quite another to find a method to tackle them without stopping people from buying this year's crop. We feel that the two things must be tackled at the same time—we must not produce surpluses and at the same time have a programme to reduce them.
Mr. Teddy Taylor (Southend, East)
As the House was assured that the 1.4 per cent. VAT limit would last for several years, can the Prime Minister give us an assurance that there is no way in which the Government will agree to a supplementary budget in 1987? As every reform in the CAP to date, including milk quotas, has simply resulted in more subsidies and more production, does the Prime Minister agree that the only way to solve the cash crisis and save British agriculture from inevitable disaster is to seek the repatriation of agricultural policy from the Community to member states?
How do the Heads of Government square their statement on terrorism with a directive which is being drafted today by the Commission to remove all controls on the movement of weapons across Community boundaries, which will now be determined by majority vote under the Single European Act?
The Prime Minister
As my hon. Friend knows, the 1.4 per cent. VAT limit is enshrined in treaty and cannot be changed without the agreement of the Heads of Government and of Parliaments. As for the CAP, the President of the Commission will visit capitals, and doubtless one of the things that he will bring with him is a series of options on how best to get rid of surpluses, while ensuring a policy that does not produce more. The general principle is easy to state, but it is not easy to devise a means. If my hon. Friend has any special ways, perhaps he will tell us.
As for repatriation, one has to watch the effect on the budget. It would mean that one could dispose of some of the surpluses at the expense of each individual state and not of the budget. We should need to look at that very carefully before we gave a yea or nay.
My hon. Friend mentioned terrorism and the control of weapons. I believe that there is a question on the Order [column 26]Paper which is to be answered later today, but we make it quite clear that nothing will prevent us from applying controls to our own borders.
Dr. Jeremy Bray (Motherwell, South)
Can the Prime Minister explain why more progress was not made on the framework programme of research and development in the European Community? Are the Government in favour of an increased proportion of the European budget being devoted to research and development? If so, is it not disappointing that the Government did not make better use of their chairmanship to make progress in that direction?
The Prime Minister
I think that most people are in favour of more being spent on research and development, but it is not possible to say that much more should be spent on research and development and, at the same time, suggest that the budget is already knocking against its ceiling. We cannot say the two things at the same time.
I make it perfectly clear that unless we can get down the amount spent on argiculture, particularly on the storage and disposal of surpluses, it will be very difficult to agree a much larger budget on research and development, although we should like to see one.
Mr. Hugh Dykes (Harrow, East)
Does my right hon. Friend not think it extraordinary that when the European summit has a quiet, relatively undramatic, workmanlike meeting, with many important decisions being made, the Opposition and some of our hon. Friends criticise it for lacking dramatic decisions? However, will my right hon. Friend confess to being somewhat disappointed by the slow progress being made in the Community, at all levels, on lower air fares and airline competition?
The Prime Minister
Yes, I think that the Community is split about half and half on this matter. We are very anxious to have lower air fares. We believe that they bring more travel and more jobs, and that is the experience the world over. We are on the side of lower air fares and freeing up the airlines. The initial communiqué drafting was objected to very strongly by Socialist Spain.
Sir Russell Johnston (Inverness, Nairn and Lochaber)
Is the Prime Minister aware that, given our unemployment statistics, it is impossible to be other than cynical when told that the United Kingdom is taking the initiative on job creation? The Prime Minister referred to the social fund, but surely the impact that the fund can make on training will inevitably be very limited—and probably ineffective—unless we have more own resources and/or a reduction in agricultural expenditure. Having had six months in the presidency of the European Community, does the Prime Minister think that that is a long enough term to have any significant effect on anything?
The Prime Minister
I notice that the hon. Gentleman wants more own resources for the Community. I must say to him that I do not particularly want to have more own resources for the Community, and I shall strain against any increase in the 1.4 per cent. VAT ceiling until we are certain that the CAP and the question of surpluses have been resolved. After the Fontainebleau agreement, which gave us a continuing right to rebate, which we had not had before, and given the fact that we are coming to the ceiling, we now have the first chance for many a long year to try to get a true reform of the common agricultural policy.
[column 27]Mr. Eric Forth (Mid-Worcestershire)
My right hon. Friend has said that she believes that the 1.4 per cent. ceiling which came out of Fontainebleau is the major influence for financial discipline in the Community, but does she not agree that to concede a supplementary budget, giving more money outside the normal budgetary procedures, would remove effective financial discipline? Can my right hon. Friend give us an undertaking that we will not agree to supplementary budgets until we are satisfied that the finances of the Community have been properly and effectively reformed?
The Prime Minister
It is not only the finances of the Community. I agree that there will be very serious difficulties towards the end of next year, particularly as agricultural surpluses are still being built up. It is possible that unless we get reductions through the Agriculture Council fairly soon the money will run out towards the end of next year. We shall strain against a supplementary budget very much indeed, for the very reason that my hon. Friend has mentioned. If one goes in for more intergovernmental arrangements, one fundamentally undermines the discipline. That explains why I replied as I did previously. The fact that we are coming up to the 1.4 per cent. VAT ceiling and that we have a good and continuing rebate system for this country give us a better chance than previously of getting a reform of the agricultural policy. Disposing of the surpluses comes on the budget and may mean a heavier demand on the resources of the budget.
Mr. Eric S. Heffer (Liverpool, Walton)
As the free movement of capital usually means that capital goes where it can make a profit, will the Prime Minister explain to the House how the free movement of capital helps people on Merseyside, in the north-east, south Wales and other areas which are suffering from a lack of capital and investment? Can she explain how this, which is obviously in line with her philosophy, helps the British people at this moment, when they need every assistance to get employment?
The Prime Minister
The hon. Gentleman expects the free movement of capital inwards to get inward investment, and so do most of the special regions. Indeed, whether Scotland, Wales, Northern Ireland, the north east or the north-west, they tend to send people to countries which can bring investment here so the hon. Gentleman expects inward investment. The reason why he does not get more in Liverpool is the local authority there.
Mr. Ian Gow (Eastbourne)
I welcome my right hon. Friend's commitment to the free movement of goods and capital within the Community, but can she explain to the House why the VAT threshold should not be a matter for the exclusive decision of the House and the Chancellor of the Exchequer? To enlarge on that, should not excise duties on goods sole in this country be a matter exclusively for my right hon. Friend the Chancellor of the Exchequer, not for the Commission?
The Prime Minister
When we talk about tax, most of us in the Community resist any suggestion that we should be compelled to harmonise our tax rates or levels. When I speak about VAT, the option would be to inrease the threshold to £25,000. It would not be mandatory, but it would be an option. That will be important, and it will leave the decision to my right hon. Friend Nigel Lawsonthe Chancellor of the Exchequer. On customs and excise, it is a decision [column 28]for the Chancellor, as my hon. Friend knows. However, the House must bear in mind that we complain bitterly when other countries seem to put on highly selective increases on products which we would normally sell to them. That is a barrier to trade and we must take it into account when considering our action. On other matters—[Hon. Members: “Answer.” ] I am sorry, but my hon. Friend will ask his question again if he has not received an answer.
Mr. Nigel Spearing (Newham, South)
On VAT, will the Prime Minister tell us whether the Council discussed the Commission case against the United Kingdom, requiring us to put VAT on building construction, industrial fuels and new services? In respect of the single internal market, of which the Prime Minister seems proud, did the Council discuss the proposal to impose VAT on public transport, which is in the Cockfield package? Does the Prime Minister support that proposal?
The Prime Minister
I have already made it clear that most Heads of Government would resist strongly any approximation of taxation, and obviously, that could come about only by a unanimous vote. There would be no prospect of a unanimous vote. The case on zero rate VAT on housing, which is before the courts, is being fought strenuously on our behalf to continue the zero rate. We want to continue the zero rate VAT for housing.
Sir John Biggs-Davison (Epping Forest)
When the Prime Minister talked to Dr. Garrett FitzGerald during the conference, did they discuss ways of reducing or removing the destabilising and adverse economic effects of the Anglo-Irish Agreement.
The Prime Minister
We agreed that we were both committed to the future of the Anglo-Irish Agreement. I have nothing further to report to my hon. Friend.
Mr. Ron Leighton (Newham, North-East)
May I congratulate the Prime Minister on further British triumphs? As agriculture was not mentioned, may we assume that everything in the farming garden is rosy and that all is well with the Community budget? May we assume that the Fontainebleau agreement, as she assured us at the time, is watertight, that there is really effective financial discipline and that there is absolutely no question of a further intergovernmental whip round in the coming year, when we would send even more of our money for them to waste?
The Prime Minister
As the hon. Gentleman is aware, the result of the Fontainebleau agreement was put into treaty form before the Single European Act. It is now in treaty form and cannot be raised except with the agreement of the House and all Governments at the same time. The amount spent by the Community is coming up against a ceiling. Indeed, it is said that it is already over the ceiling, or could be, according to what kind of agricultural year we have and the decisions taken this December at the Agriculture Council. One has to remember that part of the budget comes back in rebates. What has concerned us before is whether there was enough room for us to receive the rebates, or whether they would be carried forward for some considerable time.
Mr. Stephen Dorrell (Loughborough)
Will my right hon. Friend accept that the progress towards completing the internal market will be remembered as one of the most important achievements of the British presidency? Will she [column 29]accept that if we are to regard Europe as a single internal market it does not make much sense for national competition policy authorities to look at individual national markets when making their decisions? Did the European Heads of Government discuss the impact of completing the internal market on national competition policies?
The Prime Minister
No, we did not do that at this meeting. I confirm what my hon. Friend said, that the completion of the large single market was, after all, one of the original objectives of the treaty of Rome, and it is sad that it has not yet been fulfilled.
Mr. Dennis Skinner (Bolsover)
Can the Prime Minister tell us whether anybody at the summit had the nerve to say that before a communiqué was issued containing high-sounding principles about AIDS and solving terrorism, such as we have had in previous communiqués, perhaps a communiqué should be issued saying how we could resolve some things that can be resolved only within the Common Market, such as getting rid of food surpluses, getting rid of the common agricultural policy and feeding the Third world? Would it not make more sense to the British people if, after two days of dining out, spending taxpayers' money—[Interruption.] There is no doubt that it cost a small fortune and Conservative Members like the gravy trains. Surely it would make more sense to the British people if the Common Market, instead of sounding off about other things, would say specifically, “We are going to get rid of the common agricultural policy here and now. That is something that we can do.”
The Prime Minister
I do not think that the hon. Gentleman would have found either myself or any of the other 11 Heads of Government, of whatever political complexion, fully on his side.
Mr. Skinner
I guessed that.
The Prime Minister
I am sure that the hon. Gentleman did. They would agree that we need to get rid of surpluses, but there is no point in getting rid of surpluses if, at the same time, more are created to go into the stores that would thus be released. One has to do two things at the same time. That is why the presidency of the Commission is coming round with proposals, because we cannot have reform of the financial position without dealing with the common agricultural policy. If, instead of just sounding off, the hon. Gentleman has some constructive suggestions on how to deal with the problem, we would be pleased to listen to him.
Mr. Tony Marlow (Northampton, North)
While it is well known that the Opposition have an open door immigration policy, is it not the case that there are millions of people throughout the poorer parts of the world who would use any means, fair or foul, to gain access to the Community? Is it not the case that that would be against the interests of the Community, and that it would be against the will of the British people to have anything other than the most stringent, effective and fair immigration laws?
The Prime Minister
Yes, particularly as I think that there has been a certain amount of abuse of the ease with which it has been possible to get into the Community through some ways. We all agree that if we are to have free [column 30]movement within the borders of the Community we must have strong controls at its external borders, such as airports and shipping ports.
Mr. Tony Banks (Newham, North-West)
The Prime Minister said that proposals would be coming forward to deal with the common agricultural policy and, therefore, with the food mountain. When are those proposals expected? That is what the country wants to know. It is an obscenity to have such huge amounts of food going into intervention stores when people clearly want to eat that food in this country and overseas. As the Prime Minister has been very good and forthright in the past in banging her shoe on the table and forcing people to do things, why does she not start banging her shoe on the table over the common agricultural policy? We have dumps in Stratford full of beef and butter, and if she wants a constructive proposal, why does she not throw the doors open and let those on supplementary benefit, and pensioners, have that food and butter for Christmas?
The Prime Minister
We have been modifying the common agricultural policy, if the hon. Gentleman had not noticed, by such things as milk quotas and the price mechanism. Indeed, farmers have a rather lower income now than they used to have some time ago. In fact, the yields of both milk and wheat have gone up and that is why we have surpluses. If we were to throw open the doors there would be a tremendous increase on the budget, because, at the moment, the rule is that each country finances the storage of surpluses on its own soil. When those surpluses are disposed of it, it is a charge and duty on the budget. As I have already said, we have to do two things at once. If we were just to throw open the doors we would have enormous increases in storage, as people would not buy this year's crop. We have to deal with two things at the same time.
Mr. David Heathcoat-Amory (Wells)
My right hon. Friend's statement that the 1987 European budget must remain within the 1.4 per cent. VAT limit is welcome. Will she confirm a slightly different point, which is that there will be no resort to loans or non-refundable advances or any other devices which might be used by others as a way of breaching that financial limit by covert means?
The Prime Minister
I do not think that the Commission has the right to raise loans to meet a budget deficit. That is why my hon. Friend referred to other devices. If we were to rule those out, I must warn my hon. Friend that it might have a bad impact on the rebates to this country, and we must consider what would be the optimum position for the interests of this country.
Mr. Allan Roberts (Bootle)
What did the other Heads of State think about the Prime Minister and her Government abandoning a foreign policy commitment which used to be shared by all political parties in this country—the commitment to multilateral nuclear disarmament? What did they think of her going to Camp David to persuade the President' of the United States not to reach any multilateral agreement which would reduce nuclear weapons on both sides and which might make the purchase of Trident by Britain unnecessary, or at least not to do it before the next general election? Is it not true that the Prime Minister is in favour of the zero-zero option only [column 31]after the next election because she does not want her keep-the-bomb campaign to be jeopardised for the election campaign? Is she still committed to multilateral nuclear disarmament?
The Prime Minister
Yes. If the hon. Gentleman had been listening, he would have heard that Heads of State and Government generally endorsed the view put at Camp David, which resulted in the communiqué following.
Mr. John Watts (Slough)
Is my right hon. Friend aware that her achievements during the British presidency are very much more substantial than those of the Leader of the Opposition during his humiliating tour of the United States? Is she further aware that agreement on raising the VAT threshold will be particularly welcome to very small businesses as a first step, but that it does not go far enough, and that even if a limit of £50,000 were to be introduced the loss of revenue would be minimal?
The Prime Minister
With regard to the VAT threshold, I think that ours is a turnover of about £20,000, which is higher than some other countries in the Community. If the new proposal goes through, it will give an option to be exerciseable by the Chancellor of each country to take the VAT threshold up to a turnover of £25,000. That does not mean that it will go up automatically, but it gives the Chancellor an option to do so.
Mr. Tom Clarke (Monklands, West)
In view of the tragic job losses announced in the Scottish whisky industry at the weekend, will the Prime Minister tell the House why the Council did not find it possible to consider specific proposals to reduce the appalling figure of 16 million unemployed in the Community and why the Government are resisting reflationary measures which could lead to job expansion?
The Prime Minister
If the hon. Gentleman looks at the whole programme, including, in detail, at the action programme for jobs, and takes into account what we were doing in connection with the Japanese market and with opening up the internal market, he will see that all those measures are directed towards creating more jobs to alleviate the problem of unemployment throughout the Community.
Mr. David Harris (St. Ives)
I congratulate my right hon. Friend on the real achievements of the presidency and of the summit. During the six months that she has been in the chair, has she detected any strengthening of the political will that will be necessary to deal with reform of the CAP? Does she accept that many of us fear that as she will no longer, from the new year, be President, there may be a complete absence of that political will?
The Prime Minister
There is obviously more political will to deal with that matter, or we should never have gone through the difficulties of having milk quotas and a fairly strict price settlement on other products. As my hon. Friend knows, various other schemes are being considered, such as the set aside of certain lands, which could reduce the surpluses which are produced each year. I make no bones about it: it will be very difficult to settle this problem, because there are no easy solutions and, therefore, it will not be an easy year.
Mr. David Sumberg (Bury, South)
In relation to the discussions on arms control and defence, did my right hon. [column 32]Friend find any support among her colleagues for the ditch across Europe, as proposed by the Labour party, to defend us from Russian tanks? Did the Socialist President of France say whether France would be likely to follow the barmy Labour policy of one-sided nuclear disarmament?
The Prime Minister
As I said, Heads of State and Government broadly endorsed the stance that we took at Camp David. Eleven of the 12 of us at the meeting are members of NATO. There was a NATO communiqué to that effect last week.
Mr. William Cash (Stafford)
Does my right hon. Friend accept that some Conservative Members resent the way in which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) dismissed her statement as being a series of platitudes, especially as the right hon. Gentleman has been given recently to using adjectives rather than policies in his statements? Does my right hon. Friend accept that there are those of us who believe that the improvement of small business in the Community, combined with the policies that the Government have been following, will provide an engine of wealth—a point which Labour Members do not seem to understand at all?
The Prime Minister
I am grateful to my hon. Friend. Of course, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) had to say that because he has nothing constructive to offer.
Mr. Colin Shepherd (Hereford)
Did my right hon. Friend notice that, in the debate on the Loyal Address, the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) made what seemed to many of us to be a constructive suggestion, in that he argued for the repatriation of the CAP? He did that as a Member who has supported membership of the Community. Is that not a suggestion which the Government should consider carefully and which we could argue forcefully in the Council?
The Prime Minister
Doubtless that will be one of the proposals put forward. Before we launch into putting it forward, or even supporting it, we should look at the considerable financial burdens that it would impose on our Exchequer. That is why I am glad that Mr. Delors is going to each capital with a series of options. The financial and other consequences should be worked out before people rush into their own methods of dealing with the problem.
Mr. Hattersley
In an answer a few minutes ago, which did not suffer from over-precision, the Prime Minister said that she did not believe in a supplementary budget. Will she tell us precisely whether that means that she hopes that there will not be a supplementary budget, or whether it means that she judges that there will not be a supplementary budget? If it means the latter, how does she think the Community can fund the £3 billion deficit which it will face by next spring?
The Prime Minister
I said that the 1.4 per cent. VAT cannot go up without the agreement of all Heads of State and Government and of all Parliaments. I was not going to rule out absolutely a supplementary budget, for the reason that I gave—it could be highly damaging to Britain. [Interruption] So the right hon. Member for Sparkbrook wants us to do something highly damaging to Britain. I see. It might means that we should not get our rebates or that they would be held up and carried forward. The rebates are of enormous value—they are worth [column 33]about £1.1 billion. The Government think that it might be worth while getting them and that we should not take a specific position on that matter right now.