Prime Minister
Ladies and Gentlemen, if I make a brief opening statement:
The European Council has been preoccupied with one thing which is money, as a Community which—not to put to fine a point on it—is facing bankruptcy. It has rightly concentrated over the last two days on its financial future. Unfortunately I am sorry to say that after a great deal of hard work and hard argument we have not found it possible to reach total agreement on an action programme to achieve that. This is a great pity but it is not necessarily disastrous if the broad measure of agreement reached is acted upon. One thing is sure: the problem of financing the Community will not go away and it will get worse the longer it is left. Nor does the lack of agreement on conclusions affect what is required of the Commission over the next five months. What is required was spelt out in those parts of the text we were able to agree, namely bringing forward mechanisms by which the Community ensures that agricultural spending rises less than the growth in the Community's financial resources, gets control of agricultural spending by introducing methods of stabilising production and expenditure, commodity by commodity, applies budgetary discipline which is effective and binding and applies to all Community spending and all community institutions. This will involve a great deal more tough very detailed work by the various specialist councils. Their job along with the Commission's is to put the next European Council [end p1] in Copenhagen in a position to restore the Community to solvency, building legally binding controls over Community spending into the system. But let us not exaggerate the problem especially since the pressure for reform from overspending remains acute. The lack of unanimity stems from the United Kingdom's refusal to accept two things:
first, that the level at which we start to calculate agricultural spending in the future should be the bloated level of current overspending,
and second, a decision now to increase the Community's resources before we had established effective and binding control over the use of that money. Those were the two things we refused to accept: a bloated level of overspending for the agricultural spending in the future and the decision now to increase the Community's resources before we had established effective and binding control over that money.
If the Council is really serious about getting its expenditure properly under control then it cannot possibly take decisions now on raising more money before it has demonstrated beyond any possible doubt that it is ready, willing and able to install foolproof mechanisms to prevent overspending. The proper time for those decisions is after a great deal more work within the Community by specialist councils and the Commission. The time for those decisions will, I hope, still be December in Copenhagen and I trust that in spite of today's tendency to fudge the issues which we were not prepared to go along with, we shall still keep to that timetable. I still hope that 1987 will go down as the year in which the Community put itself on a sound financial footing to enable it [end p2] to progress with confidence. The world needs a strong, a vigorous and self-confident Community but you can only be strong, vigorous and self-confident if you are solvent. Future solvency must therefore be the Community's top priority. [end p3]
Richard Owen (The Times)
It has been a long European Council, perhaps longer than people expected, and by all accounts a contentious one. It has been characterised by some other delegations as an “eleven-to-one split” with you holding up a consensus and in effect resulting in a package which has been delayed certainly for six months and possibly for even longer.
Could you comment on that characterisation?
Prime Minister
First, we have had, I think about four times, the same discussion on oils and fats tax—four times over the same discussion, the same arguments, the same people blocking four times. Remarkable.
We spent about two hours doing a very ordinary little draft guidelines to the Budget Council on the 1987 budget, but in the end I was bound to ask what it was alleged that we had agreed to because it was so confused. [end p4]
So if you think it has been eleven-to-one the whole time, it has not. There was more than a blocking minority against oils and fats tax every time it was re-discussed and, as some of us said: really, we simply cannot tell the Budget Council how to do their work. We could only give them guidelines. If you saw the quarrels over what those guidelines should be, with the Geoffrey HoweForeign Secretary and I just really sitting back and seeing other people disagree with things we would disagree with and then bringing in things whose legality sometimes we questioned, because as you know, there are certain problems about loans, then I do not think you would have had that impression.
Question
Prime Minister, by your own account, you failed to convince your key Community partners on two of the most important issues that you believe are necessary to be resolved.
I would like to ask you why you think that you were not able to convince more of the Community's leaders—perhaps including the Federal Republic, which is an even bigger net contributor to the Community than the UK—and whether, in the light of retrospection, the UK underestimated the power of a Franco-German coalition which I notice, among other things, has secured a rather costly further increase in this year's agricultural budget. [end p5]
Prime Minister
Which one are we going to take first?
Shall I put your first question rather differently, if you would not mind?
Is it not the fact that eleven others were totally unable to convince the Geoffrey HoweForeign Secretary and I that we should agree to an entire document without in fact closely examining what it said? Especially as the two matters upon which I have absolutely refused to agree were matters which were not discussed in any detail and upon which at least one or more than one, for example the thing which said that the ceiling on contributions shall be determined by GNP … had the same doubts as we did. We said: “This must be further studied!” If you look at what they agreed to it is that something should be adopted.
Now, I am not prepared to accept things without discussing them. They were. This sort of thing was lifted up: “I can agree to the whole of this document!” That is not the way to do things, especially where money is concerned, nor is it the way our Parliament does things.
Another text we had just a few minutes ago: we managed to change every word “adopt” at the beginning of various clauses into “prepare” . We had to look it and say: “Look! Do you not realise it is inconsistent if you say at the end you are going to adopt everything at Copenhagen, but you have got four clauses saying you adopt things before you get to Copenhagen!” So I think you might find it is rather our careful looking at it is perhaps more [end p6] responsible, more exactly in tune with our parliamentary provisions than some of the rest, because what in fact we have succeeded in doing really is getting everything open still to Copenhagen. What they wanted to do was to pre-empt things which we had not properly discussed.
Then you went on to the other thing—the Franco-German—on MCAs. It is highly complicated. We had to stop and have a lesson on it from one of the Commissioners. What was “swishing” ? Oh yes, it was quite Gilbertian at times! We had to have quite a lesson on it and some of us said we were not really competent to give advice to the Agricultural Ministers on these things.
We knew, in fact, that the first thing in it, namely dealing with the present MCAs, was virtually what had been proposed at the Agricultural Council and we could agree with it.
Then there were the MCAs in future which will arise from natural causes as there has always in the past, and then those that arise from artificial causes when we have one of those week-end ransammies (phon.) where things are valued. Now that, I think, is the one you are referring to, which I agree is very very worrying indeed because it means that our German friends absolutely refuse to accept a cut in prices when otherwise they should, and that could be expensive.
What we did with that was to say: “Look! We really cannot leave it like this. It could be expensive. It could be inflationary” So it is only going to be in there for a year, until 1st of July 1988, and by that time, both the Agricultural Ministers [end p7] and Finance Ministers will have produced a report.
I agree. What I saw in some of those arguments over agricultural things going hotly between France and Germany was less than a willingness to put considerable restraints on agricultural expenditure, and you are quite right.
Question
Could I ask you what political conclusions you draw therefore from that situation, Prime Minister, about the very different ways in which people work? Do you not feel an incompatibility of approach emerging, quite apart from the concrete detail of the specific issues?
Prime Minister
My tendency to look, if it is ever about money, at both sides of the balance sheet and exactitude, has stood Britain in very good stead, and will continue to do so. It is not for the Geoffrey HoweForeign Secretary and me to say: “Look! I can agree with this whole document!” without going over it very very carefully and actually expecting to raise the things which we thought were worth raising with other people, but there was this feeling. It may be a different method of work, but before I agree to anything do not forget I have to go back to my own Parliament and explain what it is I have agreed to, what the effect is going to be on our own farmers, what the effect is going to be on the Budget and how it is that, having got undertakings at Fontainebleau and at Stuttgart before that the agricultural budget would rise within the limits of own [end p8] resources, and having seen that flouted, how it is that I agreed to anything less than a legally binding undertaking for that in the future. Well, of course, I did not agree to anything less than a legally binding. We have got “legally binding” in several cases in this script, which I was very concerned to get, but then, it is quite a step from saying it must be legally binding to actually getting details of the stabilisers which you will know from here is the “in” word now—stabilisers in each of the commodities—and how they work.
There is a long step from getting a legally binding measure on agricultural spending to say what it is and how it will work, and those decisions have not yet been taken and they will have to be. That is exactitude and the exactitude we looked at this document with will stand us in very very very good stead at Copenhagen, when it comes to turning things into legally binding regulations, financial and otherwise.
Quentin Field (Financial Times)
Prime Minister.
Prime Minister
I cannot see you; maybe you can see me.
Quentin Field (Financial Times)
Well, neither of us can see each other. [end p9]
Prime Minister
Well you sound all right! (laughter) Come on, I cannot hear. Go on!
Quentin Field (Financial Times)
I wanted to ask you about an issue which has caused some distress and sadness in the eleven other member states, indeed in the European Commission and the European Parliament, that is to say, the British blockage on the research framework programme, and there were some hopes that you would in fact be able to come here and lift the British blockage on that programme.
We understand that you did make a suggestion that the finance should be kept going at the same rate as it is at the moment, but you were not prepared to go any further.
Can you tell us why that should be and whether you did not think that there was at least a case for making one gesture and indeed, what happens now, because presumably, without agreement on the totality of this there is no agreement on that.
Prime Minister
Let me tell you why we were not prepared to go immediately to the full framework programme under the Single European Act.
The framework programme, there was some doubt as to what it was. The Geoffrey HoweForeign Secretary and I said it was 5.6 billion, Mr. Delors said it was 6.4 billion. I think the difference arose from an overhang of something like 860 million ECU in the year 1992, but there was some difference about that. [end p10]
Why we did not agree to it is this: the Community is broke and already overspent—heavily overspent on agriculture—and we do not quite know how we are going to get through. Now, when you are heavily overspent you do not promptly say: “Right! I agree to spend more on another programme!” and this is all in just exactly what I am trying to get here. We really must have some financial discipline, know the total, and within that total, what we are going to spend on agriculture—and that must be less than the increased resources—what we have then got left over to spend on the social and structural funds and on R and D. Frankly, I would far rather spend more on R and D than some of the agricultural surpluses, but that was not the decision I was able to get, and my position is this:
I am not agreeing to expenditure while we are overspent until we have got strict financial legally binding discipline.
Nevertheless—it is highly complicated; you might know it better than I do—because the Single Act comes into operation today, or tomorrow, we could not just carry on with this year's budget, although it is provided for in this year's finances; and I said: “Right! What we have got in this year's project and we have already got in our budget we are prepared to go straight through with and what we have got in for next year's budget, which is also our … prepared to go straight through with!” So there is no difficulty about money for this year or the same amount of money, which is just over 1 million and 47 ECU this year and next year. We are perfectly happy for both of those to go ahead to get over this difficult problem. [end p11]
Then it was suggested that the actual money was not the problem, but a decision on the framework programme … been perfectly prepared to have agreed the content of the programme; it is the speed at which we completed which is in doubt.
Then, there was a good deal of discussion about what we did about that, but I was prepared for the money this year, same amount of money next year, and eventually said: “All right! Over the five years, the same amount of cash as we have got now and agree the content of the programme!”
Just at the end, a few minutes ago, they actually agreed that, but it is partly because of the Single European Act coming into effect tomorrow that the actual money is not enough. You have to technically agree the framework programme, so what we have agreed is the framework programme, the same amount for five years as this year and the content, and the rest—as to whether we should go up—at Copenhagen, which of course will depend upon the overall financial discipline.
The real thing we come back to is whether can control the agricultural expenditure within the guidelines which we have tried to insist on so often, but which have never been able to come about, because I would like more on R and D certainly and less on other things.
Alan Osborne
Prime Minister, it might be inferred from what you have said so far this evening and from the reports of what you have said at [end p12] the Summit so far, that yours has been a pretty negative and certainly critical attitude towards the Community and the fact that you end up in opposition to eleven other members on some vital aspects of future financing might suggest to some people that you have less of an interest in the evolution of the Community than others.
I wonder if you would be prepared to comment on that, especially in the light of your beginning a third term as Prime Minister.
Prime Minister
It is a sort of repeat of term 1 and 2, what you said, is it not, both in term 1 at Dublin and in term 2. And in term 2 we were in very considerable difficulty because Britain was not getting a fair deal.
I think a way in which to put any community or any organisation which you respect and want to flourish on to a sound footing is to get sound finance. That in spite of everything. And we have had two goes at it now. It has not yet been achieved and it is because hitherto the approach which my colleagues bring to Community finance is totally different from the approach they bring to national finance.
They are around that table: you have Mr. Martens, for example, having to very substantially reduce his deficit in Belgium; you have Mr. Haughey very substantially having to reduce his deficit in Ireland; you have Mr. Lubbers who had previously very substantially to reduce his deficit and reduce their borrowing—all of [end p13] them knowing what budgetary stringency is like in their own separate countries—and yet, when they get here, when there is a difference of opinion the ruling, prevailing doctrine has been: “Well you have the extra you want and I will have the extra I want and he can have the extra he wants!” and it actually has gone up and up, the expenditure, and no-one has looked to see if the Community can afford it. And in particular, that has been true on agricultural surpluses so that we have two years supply of butter, about four months of cereals, seven or eight weeks of beef—surpluses that we do not want and cannot eat. That has been a lack of discipline and if the Community is going to flourish we have to get in that requisite discipline and that is doing it a service. We are not there yet but we shall have to try at Copenhagen.
You see, we went up from 1%; to 1.4%; at Fontainebleau for a Community of twelve, not for a Community of ten. That has gone. We are told now that they are already spending at the rate of 1.7%;. You cannot do your home finances that way and I respectfully submit that you cannot have a sound Community, a sound agricultural system, doing it the way it is now. We have to get away from that.
Same Questioner
I can see that. If I can just follow that with the point that there has not been, as it were, a positive contribution from you towards the development of the Community, and in that context, I wondered if the question of membership of the European Monetary System's exchange rate mechanism had been raised with you and anyway, what your reaction is. [end p14]
Prime Minister
It has not been raised with us at this meeting but, you know, we do point out to our colleagues that we actually have free movement of capital between the United Kingdom and any country in the Community and any country overseas. We actually have free movement of capital because we have no exchange control, but those who wish me to join the EMS do not all of them have free movement of capital, so sometimes we have far more of the things which are entrenched in the Community treaty—free movement of capital is right in the beginning of the Rome treaty. France has not got it yet. Germany has it. Holland has it. We have it. So we have got the no exchange control, we have got the free movement of capital. Some of the others in the exchange rate mechanism have not got that and it makes it very very much more difficult.
We are, of course, a much bigger reserve currency, as you know, and having the no exchange control and free movement of capital I think would add a different currency to the EMS from any other currency save that of Germany, and so that is why we still take quite a long time to consider it and one day we will join, but they have got to come up to us on things like capital movements, etc., and no exchange control.
David Osborne (The Independent)
The news from Luxembourg is bad on Gibraltar. Spain seems to have dug its heels in. If it insists on Gibraltar being withdrawn from the air liberalisation package, will you simply let that package fall apart when it was so near completion? [end p15]
Prime Minister
I must tell you, the Heads of Government did not discuss this once, nor was it raised with me in the sidelines at all. We discussed nothing in foreign affairs except about three minutes on the Middle East, Chancellor Kohl and myself wanting to support an international conference as a framework for Middle Eastern negotiations, but then they all went back to oils and fats tax, but they did raise it in the Foreign Secretaries Council. He will have a word with you about it.
Geoffrey HoweForeign Secretary
Not in fact in the Council. It was raised in the course of other discussions with the Presidency and elsewhere.
The position is that, as you know, we have been working very hard to get an agreement to bring cheaper air fares to the whole of the Community. They have been agreed after eighteen months hard slog. They have been blocked at the last moment by Spain. That is not a problem between ourselves and Spain. It is a problem between Spain and the Community as a whole, because it has been clear for a very long time that Community law on civil aviation does extend to Gibraltar. It has been confirmed yet again by the Community's own legal advisers. We have been ready to do everything we can to help the Presidency, frankly, digging the Spaniards out of the predicament in which they find themselves. We suggested a whole range of solutions. They have so far all been rejected by Spain.
The thing we cannot contemplate is anything that undermines Community law or undermines the legitimate rights of Gibraltar [end p16] as part of the European Community.
We want an aviation agreement. We want it on the basis of Community law as it has been understood up to now.
Question (Irish Times)
I was wondering if you could give us some details about your discussions this morning with the Taoiseach and also if there was any discussion about a conference to devolve administrative rights in Northern Ireland.
Prime Minister
No. There was no discussion about that. Charles HaugheyThe Taoiseach and I met this morning for about twenty minutes. It was one on which we issued one of those little statements that we had a useful, constructive, discussion of current issues. It was a cordial, useful and constructive discussion. “They committed themselves to continued cooperation within the framework of the Anglo-Irish Agreement and would do all possible measures to defeat terrorism.”
I must say that just actually reflects accurately the twenty minutes discussion.
Question (Irish Independent)
Could I ask you, Prime Minister, for your evaluation of the possibility of having a devolved government in Northern Ireland? [end p17]
Prime Minister
It is something which we would like to see. It is, of course, provided for also in the Anglo-Irish Agreement and insofar as you get devolved government, the issues which can come within that devolved government cannot be discussed under the Anglo-Irish Agreement, but at the moment I do not see our way clear to getting devolved government. It would have, as you know, to be agreed between all the main parties in Northern Ireland.