Question
The Strasbourg Summit seemed to be a rather harmonious Summit in many ways and I wonder whether your own approach to it and indeed your own approach to the development of the Community has changed at all in the light of recent events, particularly in Eastern Europe, has your approach to the integration of the Community altered at all?
Prime Minister
No, I think perhaps your reading of events is changing. After all, it was all set out in the Bruges speech. The Community is only one manifestation of Europe. We in this country regarded Warsaw, Prague, Budapest, as great European cities, practically ignored at the time. [end p1]
But it was of course the historic manifestation of Europe and of course the wider historic manifestation of Europe and the very principles which Europe stood for and which are accepted now as the principles of civilisation were all there, coterminous with Christendom, with democracy, with the rule of law. The second Constantinople, the second Roman Empire, all of these were the manifestation of the wider Europe. But you ignored them, the whole lot, and now you are just looking back and seeing them.
The second thing I think, with great respect, that you ignored is that we started the Single Market, we reckoned that one of the reasons we joined Europe for was the Common Market, the Single Market. We started it off during my Presidency, we got the first forty-eight Directives and set in motion something to finish by 1992.
Why people, externally, are suddenly looking at Europe now with renewed eyes are two things. First, because of what has been happening in Eastern Europe, but that is the more modern thing. Second was that already, before Poland for example went non-communist, before that people all of a sudden were beginning to look 1992, this is going to change Europe, you are going to have a Single Market, it is going to alter the world's pattern of trade, alter the world's pattern of power, it will alter the world's politics. [end p2]
And so you had people coming in, sitting where you are now, suggesting that they too set up other power blocks, other trading blocks. The Japanese were in here, should they set up a Pacific one because they were worried as to what the effect would be.
Now all that was going on before your eyes. That was the real change, one is the political change in Europe which we had already, we already were on to and, Heaven knows, it was 1984 I went to Hungary and then more recently to Poland; and the effect of the Single Market which was ours, we started it.
And why Strasbourg was very harmonious is the fact that some of our things are coming to pass and it was in the report right at the beginning that the two nations that led on the Single Market, and are leading on implementing, are not Germany and France, they were Denmark and Britain. So no-one could argue.
So if I might say so, I think you have not necessarily got your cornerstones right and they really are the biggest possible cornerstones. You have been looking at some of the smaller things when in fact we have been way ahead on some of the bigger things for quite a time. Just go back and read the Bruges speech. And also, if I might say so, in the Bruges speech we said very, very firmly that we are not interested in having many, many extra bureaucratic things. Do not forget, we knocked out that Social Charter and when it comes back as detailed things people will take a very different view. [end p3]
Some of the things which we have been working for, they have suddenly begun to move. For years we have led, as you know, on trying to get cheaper air fares. We have not succeeded until it suddenly moved this week and we had to go bilaterally. Ourselves, Holland and Denmark probably are more forward-looking in these matters so we had to have a bilateral agreement with Holland. Now that has moved.
We have been trying to get the French to free up on French telecoms as we have freed up on British Telecoms. All of a sudden it happened last week. Some things happen you know just before you have a Summit. And a lot happens, you have a look to see who is in the chair, and quite a lot of objections will suddenly move and they did.
But it is happening, but it is happening on our pattern. And I think you just might look at that.
Question
No country is a completely free market. If I can take a British example, the Governor of the Bank of England a couple of years ago made a speech in which he said he would not welcome an overseas takeover for a major clearing bank. Now would that still be policy and would that be policy after 1992? [end p4]
Prime Minister
We have had a major takeover—Morgan Grenfell—not a major clearing bank. And after all, something went of course as you know to the Monopolies and Mergers Commission. I do not know, but on the whole we are much freer and much more open and our banks are more open to takeover by German banks than German banks are to takeover by ours. I do not have to tell you that.
Question
Is the Single Market though the consummation of what the Community is about?
Prime Minister
No, it was right in the beginning. Let us face it, the Single Market, the Common Market, if you look right at the beginning of the Rome Treaty, the preamble, Common Agricultural Policy was one thing but so was the Common Market.
Now the Common Agricultural Policy got off much faster and of course was much more difficult. That too had to be reformed and we played a large part in that. But if you look, altogether it was actually a fundamental part of it but the barriers were not coming down and there are still a lot to come down.
Sam BrittanSam is right in one respect that there are a lot of people who are very very pleased to have some barriers down because it suits them but are doing their level best to keep other barriers up because it suits them. [end p5]
Now we hope to get the beginning of a life insurance freeing up on the 21st. That has been very very difficult, we have been on to that for a long time, on to the Banking Directives, but we have not started on the freeing up of the investment financial services work at all. There are many objections to freeing up some of those things which we are particularly good at.
Let me give you another example—cabotage, shipping—any shipping company can pick up cabotage around our coast. We cannot pick it up through the Mediterranean, so much so that I did have to say this time: “Look, we have regretfully had to take reserve powers to close down cabotage in this country because we have not been able to persuade you to open up yours.”
The same thing on lorries, that started to move, ridiculous that our lorries cannot pick up loads coming back across Europe, ridiculous.
But they hung on to their protectionism and much more so than we do. We are much more open and now it is working.
Question
Do you make a firm link between these industrial subsidies where investigations are going on about activities in various countries and the financial and monetary area? [end p6]
Prime Minister
Competition is an essential part, Sam BrittanSam. Competition on a fair basis is an essential part of a Single Market, there cannot be a Single Market unless you have fair competition. Italy has more industrial subsidies than any other country in Europe. How can you compete with a country that subsidises its goods heavily—you cannot. It is vital to the Single Market.
Question
Are you saying that it will not be possible to enlarge the ERM to take …
Prime Minister
I thought you were coming to that, I laid down the conditions.
Question
With respect, Prime Minister, I am not exactly sure what the conditions are. Is satisfaction on areas such as cabotage a condition of Britain joining the ERM or not?
Prime Minister
Very considerable improvement in competitive terms is important, of course it is.
Question
Outside the financial area? [end p7]
Prime Minister
Very considerable improvement in competitive terms, a reduction in State aids is part of the Single Market, it is part of Stage I of Delors and it is important to anyone, but anyone, who feels that Britain too is entitled to a fair deal and I do.
I am not laying down precisely what will happen and when so there is no point in cross-examining me about that. What I am saying is either you believe in a Single Market and everything in Delors Stage 1 or you do not. I have laid down our position and we too are entitled to have freeing-up in those areas which have been very resistant for the time being. [end p8]
Question
There is a word used, I think, in international discussions of political and nuclear matters of “linkage” . I am still not certain how much linkage there is between these … .
Prime Minister
I laid down the precise terms, Sam BrittanSam. I have nothing to add or detract.
Question
Do you think that it is either possible or desirable or both that the conditions that you laid down at Madrid could be met before 1992?
Prime Minister
That depends upon how the people themselves move. There will be no difficulty, for example, in France getting rid of her controls on foreign exchange. President Mitterrand, at the end of the meeting, said she hoped to do it not by July but January. [end p9]
I do not know whether Italy will have any difficulty. She has got particular problems. She has got, I suppose, the biggest budget deficit in proportion to her GDP of any country in Europe—a very large one. She is fortunate in the sense that she has quite a large savings ratio and her people use their savings to buy Italian paper. It seems, from one or two things that were said, that she is a little bit more nervous about it.
I personally just think that once people know they can move their money out freely and that that is irreversible, the sort of pressure to do it goes, if you see what I mean. If you know you can move it out at any time you want to, you do not have to dash to move it out and therefore, it would not surprise me if it went rather more smoothly than some of our Italian friends are fearing, although they are talking about distortion of capital movements and I say: “Well what does that mean, distortion? If it merely means something that you do not particularly like, what you are challenging is the freedom of capital movement!” I personally think, as I say, that once you can move your money out, you no longer have to do it quickly. You can take your time and I would have thought that that would have gone more easily. [end p10]
Spain is still worried, obviously, about distortion, but she does not come up until 1992.
It just depends upon how they move.
Question
Would you like, though, to be in a position before 1992 when you can stand up and say: “The conditions have been fulfilled, so we are going in!” ?
Prime Minister
We will look and see precisely what has happened, with an open mind.
Question
But how much influence would an early French decision to remove exchange controls have on your attitude?
I have personally been asked by people near to the French side what effect an early removal of French exchange controls before June 1990 would have. I have had to say I cannot speak for the British Government. [end p11]
Prime Minister
I really cannot say it makes any difference to us as to whether it is January or June. What we have said is that the things upon which, if I might again respectfully say, we have been ahead, of which you have taken no account of at all … we have been ahead on these things. We have free capital movement; we have no foreign exchange controls; we have been ahead. I hope they will catch up with us and then it makes things easier.
We are also not as good as them at keeping inflation down, certainly. It is remarkable that Germany has always been able to keep her inflation down by the same levers as anyone else has but she succeeds and we have not, but we have been ahead on the other things without any credit for it at all.
Question
But is joining ERM simply a concession on our part or is it something from which we could derive benefit perhaps even in helping our inflation rate down?
Prime Minister
You do not need to join an ERM to keep an inflation rate down. Germany did not have to join anyone to keep her inflation rate down. You do not have to join an ERM to keep an inflation rate down—you simply have to do the things which are necessary to keep an inflation rate down—as Germany does. [end p12]
We are obligated to join the ERM, as I have indicated, so that question does not really arise. We are obligated when the terms and conditions we set down at Madrid are, if I might put it this way, broadly met. I am not looking at it as taking a whole page of graph paper and making a dot in each little square. Life is not like that. It is when they are broadly met. We entered into an obligation and that obligation will be met.
Question
It was reported at one time …
Prime Minister
By whom? When?
Question
I thought you had actually said this yourself. I am putting it this way to give you a chance of correcting it if you have been misreported, but I thought it was your view at one time that the ERM would break down with the end of exchange controls. Did you think so and do you think so now? [end p13]
Prime Minister
I do not think it will break down with the end of exchange controls. We do not know what will happen when you have got the whole of Delors Stage 1 in operation and when a currency as big as sterling joins the ERM because, as you know, far more trade is done in sterling and far more trade is done through London than is done through Frankfurt and I would have thought that the conditions which obtain with one major currency and the others attached to it—which is the deutschmark and the others attached to it—will be different when you get two major currencies which are heavy trading currencies and it will be very different and I do not know how different and I would not forecast because I do sometimes say to them that most of the world's trade is done in non-Euro currencies, in non-ERM currencies. Of course, a lot is done in the deutschmark but not as much as in sterling. Of course, the biggest amount is in dollars and also in yen. So you have still got a very limited stability and, of course, you have still got quite wide bands applying both to Italy and to Spain. But I do not know.
All one can say is that these things will be such that it may well not go smoothly or that it may go differently. I think it would be a very rash person who would suggest how it would go.
Question
We do not know either, you will be surprised to hear, but have you thought of putting a toe in the water by doing what the Italians and the Spanish have done, that is joining with a wider margin with the intention eventually of adopting the normal Community margin? [end p14]
Prime Minister
No, we have not yet considered precisely how we would join because we first have to get that inflation down and it is proving more difficult, I think, than we expected because it does not take a genius to see that with an inflation rate as ours is compared with the deutschmark and a trade deficit as ours is compared with the colossal trade surplus of the deutschmark, it is not a recipe for exchange rate stability whichever way you look at it.
Also, if you look, Sam BrittanSam, at the beginning of the Exchange Rate Mechanism, you will find very considerable devaluation of course on the part of the French franc. It is only recently it has been more stable. I watch what other people say about it with the greatest possible interest.
Question
It is for all these reasons that quite a few people have suggested that we start off with a wider margin and narrow it as experience develops, which might be more suitable than the succession of realignments that the French had at the beginning.
But you have mentioned the current deficit which the previous Chancellor thought was important, mainly as a sympton of domestic inflation. Two questions here:
Do you attach more importanced to it than he did? [end p15]
Prime Minister
I am not getting into any questions … . it is no good, Sam … you are trying to ask questions to separate me from Nigel LawsonNigel or from John MajorJohn.
We have that trade deficit. The action we have taken on inflation will, I hope, hope to get that particular deficit down, but it is no good you asking questions to put any water between Nigel and myself. Both John and I regard that deficit of that size as important and significant, of course we do, and so did Nigel. How else could you deal with it?
Question
I really am concerned with your own attitudes. I only mention personalities by way of illustration and no more.
In the various conditions for joining the ERM—interpretations of conditions—the current balance of payments has not so far featured. Are we to understand that getting a lower current account deficit by … .
Prime Minister
I am not going into that. What I am merely pointing out is the obvious, Sam, that as we are now it is not necessarily a recipe for exchange rate stability with a currency with very different things and the action you take to get down the inflation should also be the action you take to get down the other thing and as we have always said and continue to say, we have to get down the inflation before we can go in. [end p16]
I cannot go on and add to that because Sam, I suspect that what you are trying to do is to put water between Nigel and myself or John Major and myself. Sam will have his own views as to why he is asking. You must also permit me mine.
Question
I wanted to ask you an overseas political question before we get stuck into the domestic economy in which we can all get buried.
You were talking about the two great events in Europe—the internal market and more recently, the wider Europe.
There is a connection between the wider Europe and the European Community and can you envisage the area of what is now the GDR becoming part of the Community, either by joining with the Federal Republic or itself as a separate entity?
Prime Minister
We were already on to the consequences for the wider Europe and the first person who was, if I might say so, again was me by saying that we have a whole list of the type of agreements that we can make with these countries. We have a straight trading agreement, as we have for example with Hungary and Poland and do not forget, again it was we who first said that we would be instrumental in trying to get rid of some of the quota restrictions both in Hungary and Poland and we were the first. We have other cooperation agreements which can go more widely. They may be with cultural [end p17] cooperation agreements, they may be with joint ventures; and we have association agreements which are not a sort of Table A association agreement—each one is done differently; it is only the Turkey one that carries with it a kind of undertaking for eventual membership. The others, with Yugoslavia and Cyprus—I think we have one with Malta—they are different and again, it was we who raised that and we raised it again at the Paris Summit. We put in a Paper to the Commission and they are now looking at it.
So we are going step-by-step and you are trying to get a crystal ball out to foresee what I think cannot yet be foreseen because we just have to look at the wider context for the time being. But already we are putting out a bigger network of contacts but trying to keep the broader structures for security in position.
I do not know what will happen, but we are very much on to trade agreements. East Germany, as you know, has her own very special inner German agreement, which enables the Federal Republic of Germany to have some of the semi-fabrication processes put through to East Germany and come straight back in—go out and in without any tariff barriers—so we are on to this. I did remind colleagues actually in Paris although I think President Mitterrand gave a broad hint after that Paris meeting—whether we enlarge the membership or not and probably because it is difficult to say, but Turkey has had an application in now for I think over two years and requires a basic reply by the end of this year. Austria has put in [end p18] an application. We did not discuss it this last time but I myself raised it in Paris because frankly, it seems to me that we have got so much on our plate at the moment—an enormous amount—particularly with the Common Market and the Stage 1 of Delors, that it will be as much as we can digest. Also, we have not fully digested Spain and Portugal financially yet. Without taking another leap, but that does not mean that we will consider it. On the contrary, we will consider it when this big indigestible bit has been digested, so I do not know and I think it is a very unwise person who tries to get their crystal balls out. We could not actually have foreseen the speed with which Europe is changing now although as a matter of fact, I thought Czechoslovakia would go quicker than it has, but it has gone quickly now.
Question
You mentioned earlier, Prime Minister, that we have not succeeded in getting a grip on inflation in the way that the Germans have done. After ten years in office, isn't that a great failure, as it were? You could blame inflation in the early years on the Labour Government in the 1970s, but now to come to a position after ten years in office where we have inflation quite a lot higher than our European partners and the Japanese and Americans—and they also had the stock market crash as well and lowered interest rates—so what is the explanation for our inflation being so much higher? What can you do about it? [end p19]
Prime Minister
You heard what John Major said at the Treasury Select Committee.
Yes, we did have, in retrospect, monetary conditions too loose and that obviously is why we have now got inflation and now we have got it we have got to get it down.
You will also notice that our unit labour costs are going up slightly more than some of those in Europe and certainly than those in America. It is part of the same thing and therefore we have got the problem.
We were growing faster than they did and now we have a problem—we were growing slightly too fast because we got monetary conditions too loose and we have to get them down. There is no point in arguing about it. It is there and it is now that we just have to deal with it.
I think, if you were to ask and look back, you will find that historically Germany has a horror of any renewed sign of inflation because she went through a period of what I would call “suitcase money” . You got the money in the morning and at lunchtime it would not borrow (buy?) what it did at breakfast so you had to get rid of it. That experience is etched in the minds of all Germans still and therefore they are much more ready automatically to accept whatever is necessary to keep inflation down. [end p20]
Question
Are there structural problems here, Prime Minister? Is it that we have not tackled the labour market? That all the trade union reforms that you have carried out have not been enough to get people here to do what they do in Germany?
Prime Minister
No. I think it is that monetary conditions were too loose and as John MajorJohn said, in retrospect they were. It is very easy to look at it from the viewpoint of hindsight but now they are there we have to get the inflation down and there are not any easy options.
There are some people who think that joining the ERM would be an easy option—it would not be in any way. The levers we have now are the same levers as Germany has had, the same levers as anyone has who wants to get it down and we shall just have to operate those levers—as we are. [end p21]
Question
You are prepared to go through the political pain of lagging in the Opinion Polls by ten points perhaps all through next year, because at the end of next year inflation still, according to the Treasury, will be nearly 6 per cent, you are happy to keep the squeeze on mortgage payers and borrowers?
Prime Minister
Yes, they would be astounded if we did not. They expect us to get inflation down and they are quite right, it is an expectation that I prefer them to have of us. And I foresee industrialists also saying that is the most important thing and they recognise that it is the most important thing and it must be done, it must be done. The consequences of the reverse would be too horrific to consider and would be wrong. [end p22]
Question
Do you think the exchange rate has any relevance either as an index of domestic monetary conditions or to the behaviour of unit labour costs? We are talking about signs and causes of inflation, do you think the exchange rate has any relevance?
Prime Minister
Sam BrittanSam, you know the answer to that, you saw the answer John Major gave and you know it does, of course it does. You cannot ignore the exchange rate, the exchange rate is one of the factors you must take into account. You also know that what you can do about it is limited but it is one of the factors you take into account. I do not have any different comment from what John Major said about that.
Question
But you had a slightly different comment in your interview in the Telegraph, if that was correctly reported, when you said that people think that interest rates are high because of sterling, they are not, they are high because of domestic inflation.
Prime Minister
I am sorry, I cannot take what I said second-hand or third-hand, although I respect what you are trying to say. [end p23]
I am saying inflation is there. When you look at your monetary conditions, obviously exchange rate is one of the things you take into account, but as you know there is no strict mechanical relationship between any of these things. And people who try to look at these things on the basis of graph paper will never get it right. You look at a whole range of factors and of course the exchange rate is one of them.
Question
Yes, but I am not asking you for a mechanical formula but I am asking you how worried are you by the way in which sterling has gone down recently and its general behaviour over the last few years where, despite what happened in 1988, its trend has been much more downwards than upwards?
Prime Minister
My recollection, Sam, is that it is about where it was two years ago. That is correct, it is about where it was two years ago.
Question
To turn to another subject, if we can, because I think it is about the right time to do it … [end p24]
Prime Minister
I think it is where it was when we won the 1987 election.
Question
I wanted to turn to the environment, about which you have certainly taken a lead in this country, and the question is this. Most people who are very concerned about the environment, including Jonathan Porritt including in his own way Pearce and others, [sic] say at the end of the day the kind of economic growth that we have been accustomed to may have to be sacrificed if some of the fears that people have about the various threats to the environment, which I will not go into the details of, are true. Do you see that as a possibility taking a fairly medium to long-term view rather than next year?
Prime Minister
No, not necessarily so. Let us just divide the environment into three things. Let us take the biggest first—the eco-systems—which you just cannot leave. The fact is that the eco-system, we had under a billion population for millions of years, we had all the carbon fixed down in the earth as coal, oil, peat, gas, for millions of years. We have now gone up from one billion to nearly six billion over a matter of about 150 years and it has been double in the last, and all of the carbon that has been down there for millions of years is in a matter of decades being put up there. [end p25]
Prime Minister
That obviously is totally new in the earth's experience and it would be very surprising if there were not some quite considerable consequences although we do not know quite what those are bearing in mind that we have had Ice Ages before and slight heating up, sometimes with the slight tilt of the earth's axis or its procession round the sun, and we have to decide what is a natural consequence, which we can do nothing about, and what we can do something about. There is that one.
There is then the regional things which have one foot in the eco-system and one foot in the other because the seas are very important in fixing carbon and you simply must keep the food chain going there and the sea's capacity also to fix carbon. So your regional development—namely the North Sea Conferences and so on—have a foot in both camps.
But insofar as there are chemical pollutants pouring in, we can deal with those chemically. So that is I think a plain straightforward scientific question, much more straightforward than the eco-system and we are taking action. And that actually, ironically enough, is almost a function of prosperity because it is the East European block, their chemical factories, that have been pouring stuff into the Rhine.
I remember going to Bulgaria years ago to a chemical factory and just looking up at the stacks and saying: “Look, you have got nitric oxide pouring out of there, what are the lungs of the people like here?” “Oh yes, we must do something about it.” [end p26]
But it is the wealthier countries that can now afford to do something about it and must do something about it, first because they know we have to, but so too will people in the market place demand it. And so too it is a matter of health. So there are those things which really is a matter of us getting the right directives. We are not incinerating in the North Sea any more.
You then come to the third thing which is that in a highly prosperous community, the packaging industry, you know there is so much more packaging that you see people throw things down in the street. In my young day there was not such a thing as a coca cola tin, we had bottles and we saved them and we took them back and got one penny return on bottles so it was very convenient for your pocket money if you collected them and took them back.
The packaging is really very very different and I myself tend to buy as little packaging as possible. So it may well be that that is important.
And also aerosols, we did not have anything. But ironically enough, a great breakthrough of the 1930s, the CFCs, which were discovered I think around about mid-1930s, which made many things possible on refrigeration, dry-cleaning. It is the very stability of those compounds which made them very safe for people to work with, very safe from the viewpoint of Health and Safety Executive and so on, that actually enables them to stay stable until they get up into the global system and do untold harm because it is a chain reaction. So one molecule does untold harm. [end p27]
So that is a combination of science. And the packaging, yes I do think that we are now looking much more carefully and closely at how to deal with the massive tonnage of stuff that we all put out from daily life and seeing how far we can recycle it—recycled paper—because you cannot go on recycling it forever, as you know.
And I just asked my people to do a calculation of how many trees came through our letter box in the form of newspapers each week.
Question
Far too many.
Prime Minister
You know, you have a role to play in this. How many trees come through our letterbox? All right, we parcel them up and we put out our newspapers. But then there is quite a bit of science to be done because you have your plastic bottles and you have your glass bottles, you have your newspapers, you have your textiles, you have your metal, and you have to decide how to separate the aluminium from the tin plate, you can do that by a magnet.
But there is quite a lot of scientific work being done. And also the infill, the amount that goes down into infill, I just do not know that we can go on doing that. But this is a matter for a great deal more scientific work. The bio-degradable plastics, again you have to be just jolly careful that the whole thing does not just disintegrate at the wrong moment because you could get real problems there. [end p28]
But I do not necessarily know that if we get those things sorted out and much more economical, which you should do on an ordinary Victorian “waste not, want not” , basis anyway, I do not know that you will necessarily find that we cut the rate of growth.
It may be growth in different directions because we are learning a great deal, for example, that you can get growth and a very good standard of living from the tropical forests because they are an absolute hive of chemicals if you actually work on them that way.
But I am very suspicious and you probably saw in a speech that I did at the Parliamentary Scientific Committee, people bring out a phrase, “sustainable development” , and they are quite pleased with themselves, they have brought out a phrase and that has solved it. We do not know yet whether that is possible and so we are just a little bit wary.
And so you have got, I think, the three things to think about and the market place will help because people are demanding, no-one goes and buys aerosols unless they know they are ozone-friendly.
Question
The market place will help but I have never heard, even from you, a more Jonathan Porritt exposition than that, if I can put it that way. [end p29]
Prime Minister
Jonathan PorrittHe might have got some of it from me.
Question
He might have got some of it from you, but if that is the case …
Prime Minister
He is very good actually, he is not unreasonable. You know some of them want us all to go back to a village life.
Question
… but if that is the case, then it means that in the review that you are chairing the Committee of and that Chris Patten is doing all the going around bit on, there have to be, apart from price mechanisms designed to encourage people with chemical waste to do the right thing or to encourage this kind of packaging or the other, at the end of day there have to be some regulatory frameworks as well as price controls?
Prime Minister
Of course, there always are for health and safety and for pollution, there have to be.
Now point four, you just have to be jolly careful that you do not solve one chemical problem at the expense of creating another. As, for example, with the three-way catalyst in Europe which has in fact done a good deal to reduce the nitric oxides [end p30] but has worsened the carbon dioxides because you have to use more petrol, 10 per cent more, if you have a three-way catalyst and so we have to look very carefully at the lean-burn engine.
Question
There is another follow-up on that which is having said those things and expressed that view there are some things in the Government's programme which seem directly contrary to it, of which electricity privatisation is the leading example. Because it is very difficult to say to people, “Buy shares in electricity companies but we are going to have a ten year plan for the environment which seeks to reduce the consumption of electricity.” It presumably has to do that if it meets the exposition you have given on any of the three levels, well certainly on the first two.
Prime Minister
Not necessarily. Again, let us look at nuclear, coal and oil and gas. Nuclear, we have not yet, although we were first in the nuclear field, got a PWR. One is now being built at Sizewell and you know that the decommissioning costs of PWRs are thought to be very much smaller than the decommissioning either of Magnox, France started with Magnox and then went PWR, or this terrible thing which I think was really Anthony Wedgwood BennWedgy-Benn went AGR. Again heavy decommissioning costs. And we have got Sizewell only coming on stream. [end p31]
I think actually the Torness and the Heysham will be much more efficient AGRs. But at the moment we are not going ahead further until 1994 but they are still keeping the Hinkley Point in. But that should be a lesser decommissioning cost when it comes on and of course it gives you no CO2 effect.
The next ones are your coal and again it is a problem that we are taking out the sulphur and of course all the effort of doing that might mean that we use more CO2, you are quite right about that, but the important thing was to deal with the acid rain.
And the third thing is gas. Now gas, as you know, does not put up as much CO2 for calorie as the others. Now my guess is that as we go privatised you will find that you get more of the generation of electricity coming from gas through the private sector than you do from coal. My guess is that it will go that way and so you will get the reduction there.
In the meantime, we have to take maximum advantage in the next decade of the nuclear we have now got in Scotland which means putting up a bigger interconnector so that we can get more of that non-CO2 generation. And also you will get, I would think, some of your gas turbines can come in, they can come in much much more quickly and you can do it on 150 megawatt instead of the big ones. My guess is that is where the private sector actually will come in. [end p32]
Even next year you know we are not on nil growth. But do not forget, looking backwards, I cannot quite remember the figures, though I know them on Tuesdays and Thursdays because I look at them again, but you do know the answer, that I think we are producing with 25 per cent more production we are actually using less generating capacity—25 per cent more production and we are using 4 per cent less.
And the real reduction of course came with the four-fold increase in the price of oil and then with the double increase, so it became an eight-fold increase in the price of oil. It took your industry about seven years to re-equip with the economical use of power. Because when things are cheap people are extravagent with it, they should not be, but they are.
And also we have got the interconnector from France too for the nuclear. So we have got two, we have got the capacity to have that. But again, do not forget that the Magnox will gradually go out so there is quite a lot of scope for the new generation to come in and my guess is that will come in the early years from gas which is more economical.
Question
To move on to the fourth topic—domestic politics—we tried to get some view of what your agenda for the 1990s is. Is it more of the same radical Thatcherism, i.e. liberalisation, tax cuts, taking on interest groups that we have seen through the 1980s, or are we coming to the end of that phase? Are you shaping, if you [end p33] like, a new Thatcherite agenda for the early 1990s?
Prime Minister
Look, if I might put it this way, the liberal economy does not really change when you have got it. The liberal economy is the back-up to political freedom and without the liberal economy you would not have the political freedom. And the liberal economy is to enable things, to get the enterprise going.
Let me put it this way, as I happened to put it as I sat oppositie Lee Kuan YewHarry Lee and it suddenly dawned on me at the Commonwealth Conference, a country is not wealthy according to its natural resources, it is wealthy according to the spirit of enterprise of its people.
Look at Singapore when it became independent it had nothing, it is wealthy. Look at Hong Kong, look at Japan, look at Switzerland. But for that you have to have the things pretty well freed up.
Now Japan, if I might say so, is different because they have a history and a discipline which does not apply to anyone else. But for the others you have to get things freed up. But, in your freeing up, it is a great mistake to think that you do not need a framework of law. You do and this is Toryism which is a strong framework of law, not only in a highly sophisticated economy a framework of law about fraud, but a framework of law about matters of pollution, about certain basic standards, about making certain that people cannot produce things which are unsafe. [end p34]
It is safety, pollution, and also about making certain that some of your manufacturers do not set up cosy cartels and frustrate competition because it is all of a piece.
So yes, but you have a liberal economy within a strong framework of law within which your industry has to operate. So you do have health and safety. [end p35]
Yes, you do have certain fundamental rights of people. They cannot just as suddenly be dismissed without good cause, etc. So you have that strong framework and then, the other part of your liberal economy is that the Government serves the liberties of the people. Its best expression in the English language is set out in the American Constitution, which is really one of the most beautiful and correct expressions of liberty in the English language. So you have constantly to keep your framework of law. It must be relevant to contemporary times, so if you get new chemicals obviously you have to take those into account; if you get new problems of pollution, you have to take those into account; so it is not a static thing at all. In fact, if I might put it this way, our way is the most rapid response to modern things because people respond naturally far better than bureaucracies have done. [end p36]
What has happened in the Soviet Union is their central command, control economy has collapsed, as everyone should have known who had faith in what they believed, that it ultimately would collapse. They do not know what their inputs are, they do not know what their outputs are—they have no idea.
So a liberal economy within a framework of law which constantly has to be updated. Your Merchant Shipping Act of 1894 will not do for today; your Monopolies and Mergers will not do for today, particularly in the international sphere in which one is working—you judge your competition by turning to relevant things.
The thing I wanted to say to you about the American economy is that the role of Government is to do basically those things which only Government can do and not to enlarge it because it likes the acquisition of power for the sake of power. That is contemptible.
It has to have a sound defence and the sound defence you must calculate with the unknown probably happening at some time.
It is our job to have a sound currency. It is our job to see that the taxation is not so high that there is no motivation for people to create more for their families, for their communities, to do things for themselves. That continues, of course it does.
It is not the task of Government to take as much from the people as they can. It would be a pretty oppressive Government which did. [end p37]
Then, it is also real Toryism to try to see that capital ownership is spread as widely as possible. People tend to forget that private property has become really quite a fundamental human right because it is that which enables you to back up your liberty.
So yes, the extension of private property. We are doing quite well with it. People are preferring it and also they get much more sense of responsibility. A person who wants their own house wants their own street to be clean, wants their own neighbourhood to look nice, wants a good hospital, wants good schools, wants the standard in schools the same as they have got at home, so it goes right out, it ripples throughout the whole community.
So we get the wider spread of ownership and also it has always and will always be a fundamental part of Conservatism to extend ever more widely opportunity. Our thing is that people pull themselves up, they pull their nation up, they pull themselves up by their effort, by their work and this is why we for the first time have gone into a curriculum at school because what was happening was that some of the public services were being run on: “Look! this is state; you take it or leave it! You do not query what happens in school; you do not query what happens in hospital!” That is not correct and it is a thoroughly impertinent, totally wrong reading of state services. They should be as reactive to the consumer and the private sector and that is what we are trying to do. [end p38]
If people are dissatisfied with education or dissatisfied with their hospital, they are entitled to have their views heard—they are paying for it. The fact that they are paying out of their taxpayer or ratepayer's pocket is not relevant—they are paying for it and those are meant to respond to them, so we are putting a great deal of much much more consumer or people power—genuine people power—into their local schools and seeing that the children get the right education and the right opportunity and a bigger proportion, if they wish, go on to higher education and that they are having the education which is necessary for an industry which is going to be knowledge-based, science-based, enterprise-based much more and we need more of that manufacturing industry here. So it is spreading opportunity.
In the hospitals, the idea that they are run only by the bureaucrats and doctors and nurses—no. We want them to be much more responsive to the place where responsibility and decision-making is exercised. You know, it really would be very ironic if, having spent a fortune on education—and we are going to continue to spend a fortune on education—people run away from exercising responsibility. That is not what life is all about. They take the freedom; they must exercise the responsibility and they must be highly responsive to people for whom the public services are run. [end p39]
It is quite absurd that people should be expected to go an out-patients department, told to be there at nine o'clock in the morning and still have not had attention at three o'clock in the afternoon. It only requires a little thought which should have come about and a little good management at any rate to say: “Look! We cannot say precisely when we will see you because there are always emergencies but it will probably be within a couple of hours!”
So it is enlarging opportunity, it is making the public sector just as much more responsive. You cannot have choice only in the private sector. It is our task to get choice in the public sector as well.
Over to you!
I am sorry. It is all of a piece and it matters to me that it is all of a piece. It is not a miscellany of “Now what have you got for the next manifesto?”
Question
Prime Minister, is it fair to say that having, if you like, put the framework of a liberal economy mostly in place, the emphasis now will be on getting the rest—i.e., the public sector—up to the standards that you have come to expect in the private sector? [end p40]
Prime Minister
As I have indicated, the rules within the framework of the law within which you have the private sector always have to be kept up to date, but do not forget also the other tremendous thing which it is Government's task to do, with the drugs, the terrorism, the law and order, but we cannot do the law and order alone, we just cannot.
I suppose it is no accident that it is at its worst in the big cities because people somehow lose their identity in a big city and you do not get the automatic balances of what the local community feel. In a small town they have their own taboos, they have their own standards and people understand it. It may be the British Legion, it may be your local trade union, your local friendly society. There are certain things that are not done and they exercise their taboos. Some of those have gone and really, sometimes I think the ethical basis was not necessarily taught in schools. I feel very strongly that you have to teach children the best and that many people do not mind what sort of religious school they go to so long as they are taught the best.
Now if they wish later to reject it, that is for them but you simply have got to put the best into them. Of course, they will not obey everything. Who did? You often flout things when you know full well what is right or wrong. But some of them just do [end p41] not have those sort of corner—stones and as I did say, when I was young so many people thought that by the time you got good housing, good education and health and a reasonably good standard of living, people would react in a very much better way—you would have got the material things out of the way as it were, you would have solved those—and then the other things would be much easier. It is not so because, as I said at a “Good Housekeeping” dinner, you are actually up against the problems of human nature. Why do people want to flout every known rule? Some of the social workers, I just long to say sometimes: “Look! The real reason you have these rules is out of consideration for your neighbour! That is why you have them, out of consideration for your neighbour.” The old person who is your neighbour, the young person who needs protection because they have more temptations than we ever had. They have more money, more freedom, so they need more standards and more support from people and not people opting out and saying: “It is not for me to get involved!” So there is a great deal. You are moving into a different area. [end p42]
Ironically enough, you are moving into an area where the influence of each and every person matters more than ever before. Because you are saying: “Look, you are taking the liberties, those will not work unless you live up to responsibilities” .
I wish we could find a more jazzy way of saying it. But that is what it is. You know they do sometimes, the young people, get a programme on Ethiopia and they will all come up with money, not necessarily for the Hospice round the corner or for the child in desperate need. Why are people so cruel to children? The worst blot on the face of humanity.
Question
It is a peculiarly British disease to be cruel to children.
Prime Minister
But that does not excuse it. [end p43]
Question
No it does not excuse it at all. As you know, Prime Minister, I have taken an interest in this and sometimes though excessive cruelty to children starts in the name of excessive discipline.
Prime Minister
Oh, but not always so, yes sometimes, yes chastise the child, that may be one reason. But some of the other is terrible.
Question
Can I ask you another humanitarian question and I am sure this is not a subject on which we disagree but I am just worried that British foreign policy got itself into a rut, from which we may be leaving, on Cambodia?
Prime Minister
We have not got ourselves into a rut in Cambodia. I wish to goodness people had been half as active about it when the terror was happening. But we could not do anything, to do the Labour Party justice, at that time there was nothing we could do. Because I felt very guilty then and now that these people were murdered, those United Nations, no-one could do anything, and we did at that time and since during our Government too flew in as much relief food as we could. [end p44]
We knew that half of it went I am afraid to people whom it was not intended to, but the other half one tried to get it to.
Well, go on.
Question
It is rather a long subject but I am in touch with people who are interested in Cambodia and they say that one of the problems is the American desire not to give any help whatever to the present government of Cambodia, which they think is linked to Vietnam, and there is a whole syndrome of the American defeat in Vietnam operating there.
Prime Minister
I would not say that. The fact was that that government is also strongly linked to Khmer Rouge and a lot of the people were members of the Khmer Rouge—the Hun Sen government—they were members of the Khmer Rouge, just as guilty as the Khmer Rouge.
And in the United Nations it is the Democratic Alliance, we have to work, we have Prince Sihanouk and that Democratic Alliance, we have to work with whom we have got. And the United Nations Credentials Committee has not brought forward any.
Hun Sen has considerable roots in Khmer Rouge. I cannot stand the Khmer Rouge any more than you can. The Democratic Alliance has part of the Khmer Rouge with it. You have to work with what you can. [end p45]
We are trying to support Prince Sihanouk as the only hope of getting it through. But Sam BrittanSam, yes it is almost civil war again there.
Question
But what do you think of the proposal of the US Congressman, which is now supported by Australia, which is that there should be a return to UN supervision in Cambodia and that neither of the alternative governments should be recognised for the time being?
Prime Minister
I do not know whether it is possible. I do know that we give a great deal of help to the non-communist resistance and I have been into those camps. The one I went to, called Site B, is run by the United Nations. It costs $40 million a year and we are very active in helping.
They no longer give help, have not for a long time, to the Khmer Rouge camps further along because they could not get in to see what was happening, could not get in there to see that the food and relief was going to the people for whom it was intended.
But you can have an idea. The question is whether in fact you can get it. And what you got there, you have got the very considerable forces of Hun Sen and you will also have some of the other soldiers from the Khmer Rouge and the other. [end p46]
On the whole, the United Nations are peace-keepers and really with that going on it would not be very easy. It is a terrible problem, it really is.
Question
As we are short time, if I were to ask somebody in Trinity College, Oxford, who really knows a great deal about this problem, if I were to ask him to put on one sheet of paper what he thought could be improved in British policy, would you have a moment to look at it personally?
Prime Minister
Yes. But we work very carefully, and we insist on working through the United Nations. The last conference in Paris was a great disappointment, we did not get as far as we had hoped. The previous one in Jakarta, I must say that I was horrified at the proposal they came up with. The idea that you could have at the top of every Ministry, four Ministers at the top of every Ministry. They say that you will never get anywhere without having the Khmer Rouge involved.
Question
That is what is horrifying a lot of the people involved in the aid effort on the ground. [end p47]
Prime Minister
Yes, I think it probably is, I think it probably is. We, as I say, work through the Prince Sihanouk Democratic Alliance. But if you then have to think of Hun Sen and his people who were prominent in the Khmer Rouge. And we have been helping, and got no credit for, the non-communist resistance which is those under Prince Sihanouk in that big Site B camp.
Question
But as you know Prime Minister there is a question mark about Prince Sihanouk and how far he might have been brain-washed by the Khmer Rouge and whether he is the same person that he was ten or fifteen years ago. It is a tragedy, it is not a debating point. The question is, are we not relying too much on him?
Prime Minister
In politics, Sam, the question is what is the alternative?
Question
But is it not possible that the present government is the lesser evil, despite its roots?
Prime Minister
Sam, you are accusing one of the Khmer Rouge and you are then saying go to another Khmer Rouge. [end p48]
Question
Many of the leaders of Eastern Europe now …
Prime Minister
One page!
Question
OK, I will send you one page.
Prime Minister
On recycled paper!