EUROPEAN COUNCIL MEETING

The Prime Minister (Mr. James Callaghan

With permission, I should like to make a short statement on the meeting of the European Council, which concluded at lunch-time today. Two statements have been issued on growth, inflation and unemployment and on the Middle East, and both have been placed in the Library of the House.

The European Council reviewed economic developments since our meeting [column 544]in Rome and recognised the need for a sustained expansion of world economic activity consistent with a further reduction of the rate of inflation and of unemployment.

Unemployment was a leading theme of our discussions, particularly employment of young people and of women, and I was able to report to the other Heads of Government details of the youth opportunities programme which was announced to the House yesterday by my right hon. Friend the Secretary of State for Employment. This initiative was very much welcomed.

Following the last European Council, I wrote to the Chairman of the Governors of the European Investment Bank asking for proposals from the Bank to promote investment and employment. I reported to the Council that in reply the Chairman has given a positive indication of an immediate expansion in the Bank's activities which could lead to lending within the Community of about £750 million in 1977 and £1 billion in 1978.

Members of the Council emphasised the importance of the commitments made by some Heads of Government to the achievement of specific growth targets in 1977 and emphasised the need to promote stability and to seek expansion through export-led growth.

We invited the Commission to study certain sectors of industries in our countries which are adversely affected by structural changes in the economy, whilst adhering to the view that a liberal commercial policy was in the best interests of the Community and of the world as a whole.

I was able to bring other Heads of Government up to date on the passage of events in Southern Africa, including an account of the discussions at the Commonwealth Heads of Government Meeting. It was agreed that the situation is growing in seriousness, and the Foreign Ministers will continue to exchange views in order to achieve a concerted policy.

There was a useful exchange of views on East-West relations and President Giscard reported on the recent visit to Paris of President Brezhnev.

The statement on the Middle East affirmed that all aspects of Security Council Resolutions Nos. 242 and 338 must be taken into account and our statement reflects the leading rôle which the United [column 545]States has in promoting negotiations for a peace settlement. It was, nevertheless, the view of the Heads of Government that a statement by the Nine at this stage would make clear our view of the need for progress in further negotiations.

This was a useful but not dramatic meeting which enabled us to review existing policies and, where necessary, to adapt them to a changing situation.

Mrs. Thatcher

That statement was made at breakneck speed.

May I ask James Callaghanthe Prime Minister two questions? First, in regard to JET, which I do not think was mentioned in the statement, we are disappointed that there has been no attempt to secure JET for Culham, because we believe that that is the best place to have that project. The research at Culham is among the foremost in the world, and it is important for us to seek further to develop nuclear fusion at Culham. Will the right hon. Gentleman say whether there has been any advance on that situation?

Secondly, does he remember that the first statement which he made on this year's summitry, the Downing Street summit, finished up with the intention of those who signed the communiqué to secure the momentum of economic recovery? Is he aware that that momentum already appears to have been lost, since the growth that was forecast has been revised downwards, and our growth forecast appears to have been revised the most downwards of all?

The Prime Minister

On the question of JET, the right hon. Lady is aware that for a long time now the Government have been making the case for Culham against strong opposition. This needs agreement, and we have not yet achieved it. There are other areas which are regarded as being as good.

I believe that we are losing a great deal of time and that if Europe is not careful the team of scientists will be dispersed and will go to the United States or elsewhere. I pointed this out vigorously at the meeting. If Europe is unable to agree on this project, I fear that no individual country in Europe can handle it on its own, and the Government should then try to get, if possible, a trilateral or quadrilateral arrangement among some other countries—I do not know whether it [column 546]would be possible—so that at least we could keep the project within Europe even if it were not a European project. I do not want to be over-optimistic on that aspect, however. We have asked the Foreign Ministers to consider this matter in July with a view to reaching a final conclusion then. I ask the scientific team at Culham to wait for a further month in hope that we can push the project through. But this is one of the areas where the Nine have to agree.

I was asked about economic recovery. I agree that much momentum seems to have been dissipated. The countries which should be maintaining a high rate of growth have not deliberately slowed down. The reason for the loss of momentum is probably not within their full comprehension. [Hon. Members: “Oh.” ] These factors in the world today are beyond understanding in traditional terms. But the view was brought home to those countries which provide the motor of the Western economy that the faster the growth they can achieve, the better the chance of reducing unemployment. But at the moment I cannot see unemployment being substantially reduced throughout Europe as a whole through those means.

Mr. John Mendelson

My right hon. Friend said that problems of unemployment and economic policy were at the centre of these discussions. Has he had an account of a statement made publicly this morning on the radio by Mr. Len Murray, General Secretary of the TUC, that he was bitterly disappointed at the effort made in the Common Market to deal with the problem of unemployment? In view of that view, expressed responsibly by the TUC, is it not time for Britain to take action on its own by cancelling the IMF loan and supporting a policy of reflation without delay?

The Prime Minister

I do not know when Mr. Murray was on the radio, but I discussed this matter with him and members of the European TUC at 8 o'clock this morning. He gave me his personal views on the situation. If I can go on blowing my modest trumpet, I met the European employers at 8.30 this morning and they, too, expressed disappointment about the rate of recovery. However, my hon. Friend wants me to go a great deal wider on the [column 547]matter of the IMF loan. That did not come up at the meeting today. Perhaps I may say, in passing, that before we cancel any further aspects of that loan, we need to consider the effect of so doing on international confidence in Britain, which is now very high indeed.

Mr. Amery

Will the Prime Minister comment on reports from New York that our delegation has been instructed to support the provision of material assistance to the armed forces of Mozambique? Does this mean that we shall send arms to fight against Rhodesia? Will instructors—civilian, if not military—go with them? Has the right hon. Gentleman considered the full implications of all this?

The Prime Minister

This matter did not come up at our discussions today and I am not in a position to give the right hon. Gentleman an answer on it.

Mr. Roper

Did the Prime Minister have an opportunity to discuss with his colleagues, formally or informally, the progress of direct elections in their countries and the chance of meeting the target date of June next year?

The Prime Minister

Yes. We all gave an account of where we had got to. I drew the deduction that we were as far ahead as any of the other countries.

Mr. Thorpe

Although I welcome recognition that the Palestinian people must be present to put forward their viewpoint on the Middle East, may I ask whether there was general acceptance that this would be unlikely to happen unless and until the sovereignty and independence of Israel were first recognised by the Arab States and by the PLO?

Secondly will the right hon. Gentleman say whether the three applicants—Greece Turkey and Portugal—have had their applications accepted in principle and that it is merely a question of the timing of the machinery? Thirdly, did he deduce from his eight partners that they were as resolute and determined to move towards direct elections as is the Prime Minister? If so, which were more so and which were less so?

The Prime Minister

At my request a sentence was inserted in the document on the Middle East to the effect that it remained our firm view that all aspects [column 548]must be taken as a whole. That referred to matters such as the respecting of sovereignty, the territorial independence of Israel and living within secure borders, as much as to the question of the Palestinians and the prospect of a homeland for them. In our view all these issues are a ball of wax and they must be taken together. That is my strong view.

Applications for membership have been received from Greece and Portugal and both are now being processed. The Greek application is further advanced than the Portuguese application, on which a vue d'ensemble will be taken in the near future. It will be for the Community to decide how the negotiations will be conducted thereafter. Portugal is bound to have a long transitional period, and that is recognised by the Portuguese Government.

Mr. Molloy

Can the Prime Minister say whether, when he had discussions with his EEC colleagues on the problem of youth unemployment, he found that they had any proposals comparable with those announced by the British Government a few days ago? Will it be possible for the TUC and CBI and their counterparts in Europe to see what united action they could endeavour to undertake to assist youth unemployment, not only in this country but throughout the EEC?

The Prime Minister

It is fair to say that the bold and imaginative scheme which was put forward yesterday, and which I described to the Council, was received with considerable satisfaction. Other countries have schemes, but not on that scale. At the tripartite conference last week between the trade unions, employers and Government, a proposal was made that we should co-ordinate our efforts in this direction. At least Britain can claim to be in the lead in the task of ensuring that young people who are out of work will be given a period of training or further education.

Mr. Hugh Fraser

Is the Prime Minister aware that the comparative failure of this conference has in no way been relieved by the dangerous and explosive statement about the Middle East? Is the right hon. Gentleman further aware that many people believe that what has been said is way outside Resolution No. 242 and that it sets up new stresses which could be a great danger and which could lead [column 549]to a heightening of tension in the Middle East?

Hon. Members

No.

The Prime Minister

It is clear from hon. Members' comments that there is more than one view on that. I beg the right hon. Gentleman, as one who has great influence in Israel, to take my word that the statement does not involve any new language. It puts a number of things together that have been set out on different occasions in the past, but it should not excite anyone in Israel, in particular, to think that the basic situation has changed. A period of negotiation is needed. The purpose of the statement was not to excite people on either side but to indicate our view of the conditions under which negotiations should be conducted.

Mr. Noble

The Prime Minister said in his statement that discussions took place about industries adversely affected by structural change. Did my right hon. Friend discuss with the French President the measures that have been taken in France to deal with the short-term crisis in the textile industry, pending the next phase of the Multi-Fibre Arrangement? In view of the similar serious situation in respect of developments in the British cotton textile industry, will my right hon. Friend give consideration to similar measures to provide short-term help for that industry?

The Prime Minister

My hon. Friend emphasised the words “short-term” , and I understand his point, because the real solution is to re-negotiate the MFA. I did not discuss this with the French President, and it might have been a sensitive subject for him, since his measures have been ruled out of order by the Commission and, presumably, he will have to make some changes. If my hon. Friend has some other proposals to put forward that would enable the industry in the short term to continue, for example, with the temporary employment subsidy, I suggest that he should see the Secretary of State for Trade.

Several Hon. Members

rose——

Mr. Speaker

Order. I propose to call only three more hon. Members from each [column 550]side, because there are two other statements to follow.

Mr. Fletcher-Cooke

In his report to the conference on his conversations with Marshal Brezhnev, did the President of the French Republic say what sort of reaction he had had during his conversations with the Marshal on the subject of Basket III of the Helsinki Agreement and, in particular, on the treatment of those citizens of the Soviet Union who have been monitoring progress on human rights since the signing of the Helsinki Agreement?

The Prime Minister

Yes, Sir. President Giscard d'Estaing gave some account of his conversations with President Brezhnev on a confidential basis, and I regret that, therefore, I cannot undertake to indicate what was said by him on this matter.

Mr. William Hamilton

Can the Prime Minister say whether there was any discussion about the threat to employment in the Community arising out of Japanese exports to the Community from a whole range of industries? Can my right hon. Friend say whether any progress in this matter can be expected in the near future?

The Prime Minister

There was discussion on the general matter and discussion of countries not only paying lip service to the idea of free trade in these areas but being as willing to accept free trade on the import side as they are on the export side. I cannot say whether we shall make any progress, but this is one of the issues that the Commission has been asked to consider in connection with some of our sensitive industries in Europe.

Mr. Eldon Griffiths

What progress did the right hon. Gentleman make in persuading his Common Market colleagues about specific reforms of the common agriculture policy? Did the right hon. Gentleman achieve a common front on the Belgrade Conference? How did he explain to the other eight Heads of Government that a significant number of his colleagues in the Cabinet will shortly be voting against direct elections to Europe?

The Prime Minister

We did not discuss the CAP on this occasion because it has been discussed recently and will be discussed again by the Agriculture [column 551]Ministers. On Belgrade, there is a common front among most—and probably all—European countries. There are differences in nuance, but basically we do not want a polemical exchange at Belgrade. We want to put our position firmly on human rights and the freedom of people to move into and out of their countries.

We discussed direct elections, and there was great interest in the matter. I do not want to be unfair to any of my colleagues in other Governments, but I have a feeling that their parliaments—and not just their parties—are much more docile than this one.

Mr. George Cunningham

Did the Prime Minister discuss direct elections, and has he carefully studied paragraph 50 in Schedule 4 to the European Assembly Elections Bill, under which it would be possible for a candidate to stand in an election, get not one single vote from any voter but nevertheless be declared elected? Did the Prime Minister point out to his European colleagues that the British public is likely to think that that is something of a flaw?

The Prime Minister

That is an interesting point that had previously escaped me. However, I am sure it will be deployed eloquently and at length during the course of the debates on the Bill.

Mr. Marten

In the course of his statement the Prime Minister referred to a loss of economic momentum in the world, and, equally, inside the Community. Are not the Council and the Prime Minister concerned that the accession of Spain, Portugal, Greece and possibly, one hopes, Turkey will delay the economic recovery of the Community? Therefore, did the Community take a broader look at its future direction and where it is going? If not, is it not time that it did?

The Prime Minister

The hon. Gentleman spoke of the accession of four countries but two have not yet even made application so it is not worth while spending time and consideration in the middle of the present recession on what would be the consequences if those countries [column 552]now belonged to the Community. Neither Greece or Portugal will be a full member of the Community for some time.

As to the future shape of the Community, this is a serious and important problem. As the Community stretches and becomes larger, its character will inevitably change. This is not a new thought. I have expressed it constantly in the House. The Community is open to accession by any democratic country, and these consequences will inevitably follow.

Mr. Atkinson

Will the Prime Minister clear up the scientific and economic nonsense implicit in his statement that the JET project can stay in this country only if we make a bigger contribution to the European budget? Does he not agree that with world leadership in this area established by our brilliant engineers and scientists, Britain can go it alone if necessary and does not need the partnership of European nations? Why do we not turn, if necessary, towards the United States and establish further development at Culham on that basis?

The Prime Minister

My hon. Friend is mistaken. There is nothing in the statement that relates the destination of the JET project to an increase in our contribution to the European budget. My hon. Friend must have misheard that. In regard to going it alone, this is a scientific and technical matter, and my advice is that, in terms of cost and perhaps technology, it would not be possible for us to go it alone. Therefore, I do not recommend that. The United States has its own research project and, although I am among the first to wish to link with the United States, it is an area, especially in view of Europe's shortage of energy and its over-extended reliance on Middle East oil, where Europe should be getting down to the project as quickly as it can, even though it is not likely to come to fruition until the end of the century. It needs an act of wisdom and generosity by the other EEC countries for this to be done—otherwise, we must see what we can negotiate. I am doubtful whether we shall be able to make an arrangement, although I should regard it as the Government's responsibility to try.