Speeches, etc.

Margaret Thatcher

HC Stmnt: [Luxembourg European Council]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [995/263-75]
Editorial comments: 1530 until approximately 1555.
Importance ranking: Major
Word count: 7118
Themes: Agriculture, Defence (general), Defence (arms control), Economic policy - theory and process, Employment, Industry, Monetary policy, Energy, Taxation, Trade, European Union (general), European Union Budget, Foreign policy - theory and process, Foreign policy (Asia), Foreign policy (Australia & NZ), Foreign policy (Central & Eastern Europe), Foreign policy (development, aid, etc), Foreign policy (International organizations), Foreign policy (Middle East), Foreign policy (USA), Foreign policy (USSR & successor states), Foreign policy (Western Europe - non-EU)
[column 263]

European Council

(Luxembourg Meeting)

The Prime Minister (Mrs. Margaret Thatcher)

I will, with permission, make a statement about the European Council meeting in Luxembourg, which, together with my right hon. Friend Lord Carringtonthe Foreign Secretary, I attended on Monday and Tuesday. I have placed a copy of the Presidency's conclusion in the Library of the House.

We were glad that the Greek Prime Minister attended for the first time and we look forward to full Greek participation in the Community from 1 January.

The first matter that we discussed was the tragic earthquake which took place last week in southern Italy. We expressed our deep sympathy with the victims, and of course agreed that the Community would help financially with the formidable task of reconstruction.

The Council then turned to the economic problems facing the Community, foremost of which is the rapid increase in unemployment. We were all deeply concerned about the effect of higher oil prices on our own economies and on the economies and the economic situation of the world as a whole. We agreed that they are the main cause of world recession. We noted the particularly serious consequences which any further increase in oil prices would have on the non-oil-producing developing countries.

We agreed that within the Community reduction in inflation rates and improvement in competitiveness were the most appropriate ways of achieving growth and combating unemployment on a lasting basis. Europe must also have regard to the extent to which the Community has fallen behind in industrial development and innovation. The Council therefore agreed that the institutions of the Community should examine ways of improving incentives to innovation and of making the best use of the Community market. We welcomed the continued use of Community instruments to help reduce structural unemployment, and agreed that special efforts should be made with the training of young people and to assist them to find jobs.

We agreed to extend the present phase of the European monetary system.

We stressed the importance of the work being done by the independent international financial institutions in dealing with the problem created by higher oil prices.

We welcomed the decisions taken recently by the Council of Foreign Ministers on trading relations with Japan. These called for a wide-ranging dialogue between the Community and Japan, based on moderation in Japanese exports in certain sensitive sectors, on allowing the yen to reflect the fundamental strength of the Japanese economy and on improved access to the Japanese market, with the Community being treated no less favourably than other major trading partners.

I drew attention to the problems created for our chemical and other industries by current American policy on oil and gas prices.

I urged strongly that early decisions should be taken on continued access for New Zealand butter. I drew attention to the very slow progress being made on questions such as insurance and air fares where the community has yet to show its readiness to have freer competition in the service sector.

In discussion of future problems facing the Community, we recalled the mandate which would fall on [column 264]the new Commission to produce a report by next June on how the structure of the Community budget should be changed so as to ensure that unacceptable budgetary situations do not arise again for any member State. The United Kingdom, with Germany and France, emphasised that this will have to be done not only within the accepted principles of the Community, but within the 1 per cent. VAT ceiling.

The Council also discussed foreign policy questions, in particular East-West relations and the Middle East. We were all deeply concerned about developments in Eastern Europe and in particular about the position of Poland. We agreed that events there have given special significance to the language of the Helsinki Final Act about the right of every country to choose and develop its political, social, economic and cultural system, free from any outside intervention. The Helsinki principles are applicable to all States in all circumstances.

The nine Heads of Government therefore called upon all the signatory States to abide by the Helsinki principles with regard to Poland and the Polish people. They emphasised that any other attitude would have very serious consequences for the future of international relations in Europe and throughout the world. They also expressed their willingness to meet, in so far as their resources allowed, the requests for economic aid which have been made to them by Poland.

On the Middle East, the Council took stock of the work done since the declaration which we issued in Venice in June. We decided that the Presidency—which from 1 January will be held by the Netherlands—should conduct the next round of contacts with the parties concerned, with the aim of giving more precision to the main questions at issue: withdrawal; self-determination; security and the future of Jerusalem. Our hope is that the sustained diplomatic activity on which the Nine are now engaged will contribute to a narrowing of the differences between the parties to the Arab-Israel dispute. Our objective is a comprehensive, just and lasting settlement based on the two principles stated at Venice: security for Israel, and recognition of the rights of the Palestinians.

In discussing these and other foreign policy issues in Luxembourg, the Council was conscious of the gravity of the various crises now facing the world. The Heads of Government of the Community are aware that they have both the opportunity and the duty to play a significant role in the search for solutions to these problems. To this end they expressed in their agreed conclusions their determination to ensure that the unity of Europe was strengthened and its voice heard.

Mr. Michael Foot (Ebbw Vale)

On the first matter referred to by the right hon. Lady in her report, may we say how eager we are to join in what she said on behalf of the British Government and what was said on behalf of the other Governments there about the appalling catastrophe that has befallen the people of Italy? Is she aware that we join fully in the sentiments that she has expressed on that subject?

It was natural that the shadow of Poland should fall across the Council meeting in Luxembourg, just as it has fallen during this period across the rest of Europe. The civilised world holds its breath to see what may happen after the heroic exertions of the Polish people to establish their just rights. Any attempt from outside to interfere with [column 265]the assertion of those rights and the right of those people to have free and independent trade unions along with other rights would be a tragedy and a crime against the world.

It is in that sense that the entire House approaches the matter. No one should be in any doubt about the serious consequences if that assertion were to be breached. Therefore, I certainly agree with what the right hon. Lady said about the application of the Helsinki agreement—an agreement that was signed by all the parties concerned—in this case. I underline as strongly as I can how much we in the Opposition wish to see the people of Poland and all the other peoples of the world able to express themselves freely through their own institutions and in their own way.

I turn to another item in the right hon. Lady's report—the Middle East. She refers to what was achieved at Venice. Many of us did not think that a great deal was achieved at Venice when Heads of Government met to discuss these matters. We are sorry that in the list of items which the right hon. Lady tabulated about the matters that were agreed there is no reference—not even a proposal for a study—to one subject to which we attach great importance, namely, the question of the supply of arms in that area. One of the most obscene aspects of the whole Middle East situation is the way in which the arms traffic is sustained and increased. I believe that the British Government, along with others, should be taking the initiative in that field to see whether something can be done to reduce the arms traffic and eventually to stop it.

I turn to the economic aspects of what the right hon. Lady has reported to us. I gather that there is a forecast of a very considerable increase in unemployment throughout the Community over the next 12 months, but we can see nothing in this communiqué that suggests any action that is to be taken to deal with it. The right hon. Lady suggests that the countries concerned expressed their deep concern about the unemployment, but in the communiqué there are no positive measures—indeed, no measures at all, as far as I can see—for tackling it. There is the statement that the increase in oil prices is the main cause of the recession, but there is no positive proposal for doing anything effective about it. There is not even the suggestion that the countries should meet to try to effect a common policy for trying to deal with this recession.

If so little is proposed and so little is carried out, as is suggested in this communiqué, is it not a fact that when the right hon. Lady attends another meeting in Europe in six months or so the situation will still be getting worse and we shall still have the same old stale platitudes as are in this report, which offer no prospect whatsoever for Europe escaping from the crisis?

The Opposition wish to see all the countries of the Western world, and, indeed, the countries of the world generally, taking proper action to deal with their own unemployment and with their own economic crises. If they did that effectively, so much more effectively could we assist in protecting the freedom of countries such as Poland and the others that may be under threat.

The Prime Minister

I am grateful to the right hon. Gentleman for what he said about the tragic earthquake in Italy. It was very heartening to see the quick way in which all members of the Community responded to the needs of one of them at a time of disaster. I am also grateful to him [column 266]for what he said about Poland. We are naturally all very pleased that there is unanimity in the House on this vitally important matter.

With regard to the Middle East, the supply of arms is usually dealt with by each country and is usually dealt with when any application for the supply of arms comes before the Government, and we deal with them on an individual basis. We do not discuss those matters with other countries. We deal with them ourselves. [Interruption.] That particular communiqué is trying to sort out some of the phrases about which we have been talking in connection with a solution to the Middle East problem for a long time, about withdrawal within the terms of resolution 242 of the United Nations, about self-determination and about security for all of the States in the area. We have been using these phrases for a very long time, and the next few months are to be spent in trying to give them a very much more precise meaning, in conjunction and discussion with all States and parties in the area.

With regard to the vital question of unemployment and growth and the future of world trade, the communiqué goes into these matters a little more deeply. There are only three possible solutions, and it is not good talking in generalisations, as though there were some magic formulae; there are not. What that communiqué did was totally to reject reflation as a method, because that would aggravate the problem. There are basically three methods, and they are set out to some extent in the larger communiqué.

There is the expansion of trade. The communiqué points out that the whole of Europe has fallen behind in its attitude to innovation and technological change, and that is why others have got the trade and we have not, and that is one of the reasons why we have more unemployment than they have.

There is the second measure of relief for existing unemployment, and that is dealt with by the Community instruments, particularly the social fund and the regional fund.

There is the third matter of seeing that we get a due and proper share of world trade on free and fair trade, and that we dealt with by some references to Japan.

The right hon. Gentleman gives the impression that there is a magic formula. [Hon. Members: “You do.” ] It is precisely that attitude which has led to increasing unemployment and inflation over the years.

Mr. Foot

On the question of the possibility of arms control in relation to the Middle East, the right hon. Lady's answer is quite unsatisfactory. We do not think that it is satisfactory that this matter should be left entirely to the individual Governments. I have no doubt that the British Government exercise control, and I am sure that they try to exercise it in a responsible manner. But I believe that there ought to be some effort towards a common control, because many of the other countries concerned are not exercising the position at all. Indeed, some of the countries in Western Europe are engaged in an arms traffic of an obscene nature. The British Government should be taking the lead in trying to stop that.

As to the right hon. Lady's remarks about economics, no one is suggesting that there are magic formulae. There is certainly no charge against her of having applied any magic formulae. That is not part of the accusation at all. But she should save her simplistic sermons for her own [column 267]Cabinet, because quite a number of countries in Europe do not have unemployment on anything like the scale that we have it here. There are quite a number of countries in Europe—countries such as Austria and Norway—which are not applying the same kind of Hayek economics, or whatever the name is for the Friedmanite economics of the right hon. Lady, and which have managed to keep their unemployment much lower. They have done it partly by exactly the economics that the right hon. Lady has thrown out of her Downing Street window.

I say to the right hon. Lady: save those sermons for the Cabinet; do not bring them to us in the House of Commons.

The Prime Minister

With regard to the Middle East and arms control, I notice that the right hon. Gentleman puts forward solutions which he never practised while he was a member of the Labour Government. As he knows full well, in discussions of arms for the Middle East, the appropriate forum would not be Europe, where there are comparatively few people who supply arms or are in a position to supply arms—[Interruption.] I said that there are comparatively few; I did not say that we were the only ones. Therefore, any discussion would be more between the two of us, and where we had a situation suddenly developing, as we had with Iran, we dealt with it in a very much wider forum than that.

As regards unemployment in Europe, the countries which have the lowest unemployment are the countries which have concentrated on having the lowest inflation and have pursued the relevant monetary policies to that end.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

Will the Prime Minister confirm the general impression given by the communiqué and by her report to the House that there is perhaps a greater degree of unity and cohesion among the Heads of Government than there has been for some little time? If so, that is to be warmly welcomed.

Perhaps I may take up one statement in the right hon. Lady's report, in which she talked about

“the problems created for our chemical and other industries by current American policy on oil and gas prices.”

Has the right hon. Lady studied the CBI survey, published the other day, which shows that British industry is paying higher energy prices than our Community partners, and that the problem lies partly with British policy towards oil and gas prices and not just with American policy?

The Prime Minister

On the right hon. Gentleman's first point, yes, there was a greater degree of unanimity amongst the Heads of Government present in Luxembourg than I have seen in a long time.

We are particularly concerned about oil and gas prices because oil and gas are used as a chemical feedstock as well as a fuel, and prices have a very serious effect on our plastics and synthetic textiles industry. It is that to which I was paying particular regard in raising the problem. I have not yet seen the full CBI report. Comparatively few examples were given in the preliminary report. There were not many of them. We have a tax on oil that brings in quite a bit of revenue.

The difficulty in saying that a tax should be taken off is that we are already borrowing up to the hilt. If we take a tax off one place we have to substitute for it on another. [column 268]Even then, we prefer to get the borrowing requirement down. One of the problems on differences in energy prices between Europe and ourselves occurs in electricity prices for large-scale users in this country in energy-intensive industries. I must point out that one of the biggest costs in electricity is the price of coal. We generate 70 per cent. of our electricity from coal. It is therefore vital to have increased productivity and reduced costs in the pits here.

Several Hon. Members


Mr. Speaker

Order. Now that we are starting questions from the Back Benches, I may indicate that I propose to allow questions to run until 4.15 pm. This will provide 25 minutes for Back Bench questions. It will not be sufficient time to enable all hon. Members who wish to put questions to do so. If questions are short, however, a great many will be possible.

Mr. Peter Tapsell (Horncastle)

Should the House not bear continually in mind the fact that the brutal threat now facing Poland could be faced by other European countries, including our own? Does this not underline the overriding importance for us to give top priority to rebuilding our defences?

The Prime Minister

As my hon. Friend points out, that threat has been felt by other Eastern European countries in the past. That is one reason why we are now so concerned. Most of us recognise that if anything were to happen to Poland it would be even more significant. Poland, because of its history, has a unique place in Europe, and a unique place in our history and that of many other European nations. I agree entirely with my hon. Friend that unless we keep up our defences we shall not be able to deter the strength of other nations. I hope that he will agree that increased priority to defence expenditure has been given under this Government.

Mr. Tam Dalyell (West Lothian)

On the question of improved access to the Japanese markets mentioned by the Prime Minister, will she carry out a case study of what has happened over Rapier and the preference given to the Japanese Tansam missile, which is acknowledged to be inferior? Surely what is protective sauce for the goose of the Japanese infant arms industry is also protective sauce for the gander of the British motor industry.

The Prime Minister

I am not certain to which case the hon. Gentleman is referring. We always make specific decisions on arms sales. We were concerned in the communiqué to endorse the decision previously reached by the Foreign Ministers that because Japan finds free trade and open barriers in the rest of the world, certainly in much of Europe and in the United States, we should have equal access to her markets.

Mr. Julian Amery (Brighton, Pavilion)

Will my right hon. Friend agree that no European initiative on the Arab-Israel problem is likely to make much progress until the problems connected with the Iran-Iraq war and the Syrian-Jordanian confrontation have been resolved? Will she further agree that the PLO boycott of the Arab summit and its identification with the pro-Soviet Syrian regime makes it an even less attractive negotiating partner than it may have appeared at the time of the Venice meeting? Will my right hon. Friend turn her mind to promoting a settlement between Israel and Jordan and leave the Jordanian [column 269]Government to decide at what level and to what extent, if at all, the PLO, should be associated with the negotiations?

The Prime Minister

In regard to my right hon. Friend's first point, I think that we can make some progress in elucidating some of these phrases, which have been used for a long time. We have talked of security behind certain well-established borders. We have talked about withdrawal. We have talked about self-determination. No one has worked out precisely how these could come about if we were to get agreement. That work can be done by contact between the parties in the next few months. That was our objective. This will mean that we no longer talk in generalisations but know how the things that we are talking about could be brought into effect.

With regard to the summit in Amman, I am aware that there is considerable disappointment that it was perhaps not attended by as many people as had been hoped. In the Venice statement, we said that there should also be contacts with the PLO as it was one of the factors in the settlement and, ultimately, if any settlement was to stick, the PLO would have to be associated with it. I believe that this still makes good sense. We want a full, complete settlement in the Middle East. We must therefore work towards one which would provide a satisfactory solution for the legitimate rights of the Palestinian people. None of us would recognise the PLO as the sole representative of those people.

Mr. Douglas Jay (Battersea, North)

Does the Prime Minister agree with the recent speech of the Minister of Agriculture in which he said that there was no need for major reform of the common agricultural policy?

The Prime Minister

Peter WalkerMy right hon. Friend makes quite a lot of speeches. I think that I recognise the one to which the right hon. Gentleman refers. We are out for reform of the common agricultural policy within the principles laid down in the treaty. It is possible to reform it well within those principles.

Sir Hugh Fraser (Stafford and Stone)

Will my right hon. Friend go further in regard to the Middle East initiative? One might have hoped that it had been sunk without trace because of other matters, but the gondola seems to be still floating from Venice. Will my right hon. Friend explain how it is possible to negotiate with the PLO when the PLO says that in no circumstances will it regard Israel as a State that should exist and is determined on its destruction? What my right hon. Friend has said only adds to the confusion about the initiative. This would be better undertaken if the Western European Powers were to be involved in some limitation of arms supplies to the Middle East, which Sir Anthony Eden and others did with some success 15 years ago. That would be a really worthwhile initiative.

The Prime Minister

As we pointed out in the Venice communiqué, there can be no settlement at all unless each side recognises the other's rights—unless the Palestinians and the PLO recognise the right of Israel to exist behind secure boundaries, and, unless the Israelis recognise the legitimate rights of the Palestinian peoples. We have been talking in those generalisations without trying to work out the steps that would lead to a solution. We believe that we can do a good task in working them out.

[column 270]

Mr. John Grant (Islington, Central)

I hope that the Prime Minister did not talk down to the Heads of Government as she did to the unemployed in her broadcast at the weekend. Is she aware that several hundred members of the EETPU are lobbying Members this afternoon because they fear for their jobs in a technologically-based industry, namely, consumer electronics? They are asking for temporary import controls on a Community basis. Did the right hon. Lady raise this question with the Heads of Government in her discussions about imports? If not, will she give an assurance that she will raise it in the future?

The Prime Minister

The question of Europe's falling behind on electronics and engineering products was raised and discussed at some length. It was pointed out that Europe, which used to export far more electronics than it imported, now only breaks even whereas Japan exports nine times as many electronics as she imports. We were very much aware that we have not had the right approach to innovation and to technological change. One of the factors that we discussed was the attitude of unions towards innovation and technological change. The hon. Gentleman is asking what we discussed. I am replying to his question and telling him. Unless he accepts that we must have a new approach to innovation and technological change and compete with the Japanese and others, and newly developed counties, we shall not get the products or the jobs.

Mr. Terence Higgins (Worthing)

In view of the importance of deterring Russian aggression and cutting public expenditure, will my right hon. Friend say whether there was any discussion of the absurdity of continuing to offer the Russians subsidised export credits? If not, will my right hon. Friend set an example by stopping it and, in that way, make sure that we improve the public sector borrowing requirement?

The Prime Minister

We always make our views known on this. As my right hon. Friend knows, we are absolutely against subsidised exports to Russia from the intervention stocks in Europe. The matter is dealt with in a management committee on which the veto does not apply. I am afraid that we are in a minority on this matter in Europe. But we shall continue to make our views felt.

Mr. Dick Douglas (Dunfermline)

If the right hon. Lady looks back over the speeches which she has made in this House on returning from summit conferences she will note that repeatedly reference is made to oil and oil prices and that the Community has done nothing to embark upon a dialogue with the OPEC nations. Would she consider sending the speech of her right hon. Friend the Member for Sidcup (Mr. Heath) to the members of the Commission and her other European associates, because in that speech the right hon. Gentleman indicated a framework of reference whereby this dialogue could commence?

How does the right hon. Lady expect to get technological innovation in this country when she is carrying out policies which deepen and widen the recession?

The Prime Minister

First, there have been attempts to get a Euro-OPEC dialogue going. Those countries do not want a dialogue on oil prices, and that is the fact of the matter. Therefore, we make most of our contacts through bilateral means and hope to influence our many contacts in the OPEC countries. However, there are a [column 271]number of countries in OPEC which have done their level best to keep down oil prices because they know the effect that they have on world recession and on the newly developed countries.

Mr. Churchill (Stretford)

Does not the mobilisation and massing of many Soviet divisions along the Polish border constitute a prima facie threat to peace which should be raised as soon as possible at the United Nations? Will not my right hon. Friend agree that it is now time for Britain to embark on a major programme of rearmament to safeguard the peace while time remains?

The Prime Minister

At the moment, along the East German-Polish border there has been declared a temporarily restricted area. This is not a new development. It is unusual, however, to have a temporarily restricted area of such a size at this time of the year, although they are otherwise known and exercises connected with them are known. Of course, if there were any movement across the border it would be a totally different matter. At the moment, we wait to see what further developments, if any, there will be and hope that there will be nothing beyond that temporarily restricted area and that it will soon come to an end.

With regard to our defence policies, last year we increased our defence spending by 3 per cent. It will probably come to almost 3 per cent. this year, and it will be increased next year. We must have regard to our resources. Within our resources, we have given top priority to defence.

Mr. Robert Parry (Liverpool, Scotland Exchange)

The Prime Minister mentioned youth unemployment in Europe. Is she aware that over the weekend in Liverpool tens of thousands of young people marched for the right to work? Is she further aware that in Merseyside, of 102,000 people unemployed more than 30,000 are under the age of 20? What plans do her Government have for reducing this figure?

The Prime Minister

My right hon. Friend James Priorthe Secretary of State for Employment announced certain relief measures for helping young people and also for improved training. At our Council meeting, we were very conscious of what I call the three factors. We have to get an expansion in world trade if we are to solve the unemployment problem. We also have to have relief, and relief against structural change in the meantime and some assistance to youth. In that connection, this country has an allocation from the European social fund for 1980 of £135 million and from the regional fund of some £170 million. So both we and Europe are playing constructive parts in trying to relieve the unemployment that exists right across Europe.

Mr. Raymond Whitney (Wycombe)

Will my right hon. Friend and her colleagues take every opportunity to publicise the important conclusions of the European Council on the very damaging effect of oil price increases on the economies of non-oil-producing developing countries? This is an issue which the Brandt report, whatever may be its other merits, dealt with in a singularly inadequate manner.

The Prime Minister

Yes. I shall certainly do that. We had a long discussion about it. It is quite clear that, [column 272]whereas there was a good deal of recycling done from the first oil price increase through the banks, we are now in a position where the underdeveloped countries cannot possibly borrow any more money, because they have not the finances to service that money. What they really need now is aid. That is a state of affairs of which we are very conscious. It has to be done partly through the international financial institutions and partly through bilateral measures, but also through bringing the matter very much to the attention of the OPEC countries themselves.

Mr. Kenneth Marks (Manchester, Gorton)

With reference to the Italian earthquake disaster, we all strongly support the expressions of sympathy and the offers of finance for rehabilitation, but is the Prime Minister really satisfied that the Community and its member Governments acted urgently enough and strongly enough after the disaster? Were not they put to shame by the voluntary organisations?

The Prime Minister

On the contrary. I was in Italy at the time of the earthquake. We offered immediate help, but for the first two days the Italian Government did not require the help that we offered. After all, they can mobilise a good deal of their own resources. The moment that they asked us for blankets and tents, plane loads were sent. The difficulty is not merely in getting help there. It is in seeing that there is an organisation properly to distribute it. In Europe, we were concerned not only with immediate help. I think that almost every country has given immediate help, and there have been some resources—nearly £1 million—from the Community as well. We were concerned with help for long-term reconstruction, because that will be both a long and an expensive job. We were concerned to offer loans at very favourable rates of interest.

Mr. Robin Maxwell-Hyslop (Tiverton)

Ought not the economic burden resulting from the failure of Socialism in Poland to fall upon Soviet Russia, which imposed that system on the Polish people, and not upon the free world, which needs to devote its own scarce resources to its own people and to the Third world covered by the Brandt report?

The Prime Minister

I agree entirely that the economic system of Socialism in the Warsaw Pact countries has failed totally to produce not only freedom and dignity but any reasonable standard of living. There is an argument for saying that the burden should fall on the Soviet Union, but that again is a Socialist country, and that, too, does not produce a reasonably prosperous standard of living for its people.

Mr. Foot

It is not Socialist.

The Prime Minister

I remind the right hon. Gentleman that it is the Union of Soviet Socialist Republics.

Mr. Foot

It is still not Socialist.

The Prime Minister

Marxism is the logical end of Socialism, as the right hon. Gentleman knows and is painfully aware. In the present circumstances, we feel that we might help Poland by offering economic aid, and we are considering that both as individual countries and as a Community.

Mr. Leslie Spriggs (St. Helens)

Is the Prime Minister aware that, despite her report about the discussion held by [column 273]the Nine on the increased cost of oil and its effect on the economy and on unemployment, she has the power in her own hands to supply British industry with cheaper oil all round and thereby help to get down mass unemployment? That is within her power. Why does she not do it?

The Prime Minister

For a start, because it is not wholly within our power. The only fact that is within our power is the small tax on oil which is imposed by the Exchequer and which brings in about £300 million a year. Certainly that makes oil slightly more highly priced than in some places in Europe, and the hon. Gentleman may argue that that should be taken off. But I am also worried about the extent to which we are already borrowing, and substituting that tax by another. Beyond that, the system that we were left with is that North sea oil must be bought by the British Government at current world prices. Those are the terms upon which exploration and production were done, so that it is not in our hands just to cancel that system. Moreover, as we belong to Europe we cannot have preferentially low prices for oil in this country. That would be contrary to the European Treaty.

Mr. Nicholas Winterton (Macclesfield)

My right hon. Friend has stood up strongly for British interests within the EEC. Does she still agree that we are making too big a contribution to the EEC budget? If she does, can she tell me and the House which countries will pay for the accession of Greece and the other countries—Spain and Portugal—which are shortly to join? What action is the EEC likely to take should the worst come about and the Soviet Union occupy Poland?

The Prime Minister

The answer to my hon. Friend's first point is that in respect of our contributions this year we are having a return of about £710 million to this country. That certainly is not the whole of the contribution, but it is far more than anyone has ever managed to get for Britain before.

There are at present three net contributors to Europe—Germany, by far the biggest net contributor; next, ourselves, a long way behind; and then France. They feel very strongly that they are contributing to some other countries whose income per head is higher than theirs. That is one reason why we are going for restructuring the budget. A major report is due next June, and we shall consider it later.

With regard to movement on Poland, I think that we should have to impose both political and economic measures. It would, of course, be the end of detente, and I should think that we could not possibly carry on with—for example—the conference in Madrid.

Mr. Bob Cryer (Keighley)

The Prime Minister mentioned Greek participation in the EEC from 1 January. What particular measures, such as emergency action, has she discussed, to be taken should Greek accession severely damage the already ailing textile industry?

Secondly, the right hon. Lady mentioned support for free trade unions in Poland. Does not she accept that her view on that matter would have considerably more credibility if she were not busy attacking trade unions in this country, binding them with legal shackles and trying to deprive trade unionists' dependants of supplementary benefit payments?

The Prime Minister

In his latter point the hon. Gentleman is talking nonsense. I do not find that unusual.

[column 274]

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Will my right hon. Friend tell us more about the discussion that she had about the plight of the European motor industry, brought about by the Japanese car industry not keeping its word over its quotas? Does she agree that there are well-founded rumours that the Germans and the French are considering—in my view quite rightly—unilateral action to make sure that the Japanese keep their word? Has my right hon. Friend seen the report which shows that, if the situation is allowed to continue, by 1985 another 560,000 jobs in Europe will be lost directly because of the Japanese encroachment on the British and European motor car industries?

The Prime Minister

Because several countries of the Community are in a different position with regard to Japanese imports, we felt that the Community countries together should take action—that they should approach Japan as a Community. Apart from that, Japan has been dealing with the European countries on an individual basis. Indeed, our motor industry has been dealing with the Japanese motor industry; I believe that the director of the Society of Motor Manufacturers and Traders is in negotiation at present.

My hon. Friend is right. Under the voluntary agreement, which has lasted for several years, the Japanese penetration of our car market varies between 9 per cent. and 11 per cent. a year. The Japanese have adhered to that agreement, but the percentage will be exceeded this year, rising to about 12 per cent. and possibly more. The motor industry is in consultation with the Japanese now.

The penetration into Germany is also considerable. It is not so big into Italy, which had a pre-accession agreement. France seems to have ways of keeping out these imports. We believe that the matter should now be dealt with on a European basis.

Mr. Michael English (Nottingham, West)

On a point of order, Mr. Speaker——

Mr. Speaker

Order. I do not think that the hon. Gentleman was here when I said that I would let questions on the statement run until a quarter-past four. If he was, he knows that he is taking time out.

Mr. Andrew Faulds (Warley, East)

Does the Prime Minister accept, and did she urge upon her European colleagues, that the pro-Western regimes of the Gulf and Saudi Arabia are becoming increasingly impatient over the lack of real progress in the European initiative, a fact which all those of us who keep close contact with the representatives of those countries, and who occasionally visit the area, can well attest? Will she urge her European colleagues to agree that progress must be made on the Palestinian issue, particularly as regards recognition of the Palestine Liberation Organisation, without waiting for President-elect Reagan to settle into the saddle?

The Prime Minister

The Nine countries assembled in Luxembourg felt very strongly that we must continue the diplomatic activity and contacts that we started in Venice, and that we could best continue them along the lines that I have indicated. We were also very much aware that there would have been a very sharp reaction in some of the countries of the Gulf had we decided to terminate that initiative. We all believe that we shall not secure a permanent settlement in that region until the Palestinian [column 275]problem is settled. We are very much aware that the Palestinian people must also accept the right of Israel to exist behind secure borders.

Mr. Eldon Griffiths (Bury St. Edmunds)

Having watched at first hand the Soviet Army putting down a workers' revolt in Budapest and then in Prague, I should like to ask my right hon. Friend whether she accepts that those who make the decisions in the Kremlin are far less likely to be impressed by the words, however strong, from the EEC summit than they are by NATO action. We decided to do many things over Afghanistan—the grain embargo, the trade and credit embargo, and the rest—but, in the event, for the most part we have not done them. Therefore, does not my right hon. Friend feel that actions are more likely than words to prevent the over-running of Poland?

The Prime Minister

It is for that reason that we gave defence the first priority in our expenditure. When we had to economise on a number of other expenditures we increased defence expenditures, although we faced a very difficult economic situation.

With regard to action, not words, I feel that a combination of words and action taken over Afghanistan had an effect on the people in the Kremlin. When there was a massive vote against them in the United Nations, twice—104 the first time and 111 the second time—they recognised that the mobilisation of the opinion of a large proportion of the world against them undermined their position throughout the non-aligned countries. That was the first time that they had had such an adverse reaction. I agree; we need action, but opinion on that massive scale also has an impact in the Kremlin.


Mr. Cryer

On a point of order, Mr. Speaker. You will have heard me put two questions to the Prime Minister. The right hon. Lady failed to answer the first question, about the textile industry. I know that you are not responsible for Ministers' answers, but surely there is a degree of accountability to the House, even for Prime Ministers. I should have thought that it was in order for us to draw the conclusion that the Prime Minister could not give a damn about the textile industry——

Mr. Speaker


The Prime Minister

Further to that point of order, Mr. Speaker. The hon. Member for Keighley (Mr. Cryer) was a little acid in the second half of his question and I quite forgot the first half. With permission, may I answer now?

Mr. Speaker

I think not. With respect to the Prime Minister and to the hon. Member for Keighley (Mr. Cryer), we have moved on. I think that I gave a good run this afternoon for any Minister who had to answer such questions.