EUROPEAN COUNCIL (HANOVER)
The Prime Minister (Mrs. Margaret Thatcher)
With permission, Mr. Speaker, I shall make a statement about the European Council in Hanover on 27–28 June, which I attended with my right hon. and learned Friend Sir Geoffrey Howethe Secretary of State for Foreign and Commonwealth Affairs.
The Council's detailed conclusions have been placed in the Library. The Council dealt with two main issues—progress towards completion of the single market by 1992; and arrangements for progressively closer economic and monetary co-operation in Europe.
First, on the single market—the Council was able to note that over one third of the measures in the European Commission's White Paper on the single market have now been agreed.
Agreements reached in recent weeks cover a number of subjects of particular interest to the United Kingdom—the full liberalisation of capital movements by 1990 for most EC countries, the mutual recognition of professional qualifications and the opening up of the road haulage market by progressive abolition of lorry quotas.
The Council agreed that priority should be given over the next 12 months to decisions on opening up public purchasing; further liberalisation of banking and other financial services; common standards for manufactured products; and registration of patents and trade marks throughout the Community.
The list does not include the harmonisation of indirect taxes, where the Council simply noted the further studies set in hand by Economic and Finance Ministers. The Government's view is that such harmonisation is not necessary for completion of the single market.
In considering the social aspects of the single market, the Council noted that removing the obstacles to growth offers the best prospects for creating jobs and spreading prosperity. It also encouraged better protection for health and safety at the workplace and easier access to training, on which a major initiative was taken during the United Kingdom presidency.
The Council reaffirmed the objective of enabling citizens of European Community countries to move freely throughout the Community but also stressed the need for effective measures to combat terrorism, drug abuse and organised crime. It is very satisfactory that there is growing recognition of the need for effective safeguards in this area.
Secondly, on economic and monetary co-operation, the Council agreed to establish a committee of the governors of the central banks appointed in their personal capacity. Jacques DelorsThe President of the Commission will take the chair and there will also be a second Commission representative, Mr. Andriessen, and three additional members—Mr. Lamfalussy, director-general of the Bank for International Settlements, Mr. Boyer, president of the Banco Exterior of Spain, and Mr. Thygesen, professor of economics in Copenhagen.
The committee's task will be to study and propose concrete steps towards the progressive realisation of economic and monetary union. That goal was, of course, set out in the preamble to the Single European Act, which was approved by this House.[column 526]
The committee will report through the Council of Economic and Finance Ministers to the meeting of the European Council in Madrid next June.
The Council approved unanimously the reappointment of M. Jacques Delors as President of the Commission for a further two-year term from 1 January 1989.
Foreign Ministers discussed a number of political co-operation subjects, concentrating particularly on East-West relations, Afghanistan, the middle east, South Africa and Latin America. The Council conclusions on all these subjects are recorded in the communiqué.
Finally, we were able to note with satisfaction that the important decisions taken at the meeting of the European Council in February on budget discipline and agriculture have now been translated into binding legal instruments. Legislation to give effect to the new arrangements for financing the Community budget, including the new own resources decision, will be laid before the House tomorrow.
Following the Council, I had a meeting with the Taoiseach to discuss a number of current issues in Anglo-Irish relations. We reaffirmed our commitment to the Anglo-Irish Agreement and agreed to maintain, indeed strengthen, co-operation against terrorism.
The outcome of this Council was very satisfactory for the United Kingdom. We have confirmed that the way forward in Europe lies in the creation of wealth and jobs, as obstacles to trade and burdens on business are steadily removed. Thanks to this Government's policies, and the response of those who work in industry and commerce, British firms will be particularly well placed to take advantage of the opportunities that the single market in Europe offers.
Mr. Neil Kinnock (Islwyn)
I thank the Prime Minister for her statement. First, I welcome the reappointment of M. Jacques Delors as President of the European Commission and take this opportunity to congratulate him. I am sure that that view will carry strong support throughout the House. I commend the perception of M. Delors that conditions must be attached to the development of the single market by an insistence on what he calls the social dimension.
With that in mind, will the Prime Minister say whether her concept of the change to a single market concurs with the conclusion of the European Council that “the internal market must be to the advantage of all of its citizens” and that accordingly it is necessary to provide better protections for the health and safety of workers? Will the commitment that the Prime Minister made at the Council result, first, in the reversal of her Government's policy of weakening industrial and health and safety regulations and cutting the number of health and safety inspectors? Secondly, does that commitment mean the withdrawal of her resistance to the proposals of the President of the Commission to change Community law to foster workers' participation in decision making?
It is well known that the Prime Minister is in conflict with her Foreign Secretary and Chancellor of the Exchequer on the European monetary system and monetary union and that she has said that a European central bank is “not on the cards” . However, as she has given in to the other members of the Council and agreed to the establishment of a study group under M. Delors, which will “propose concrete steps leading to Monetary Union” , [column 527]and as it is obvious, as President Mitterrand has pointed out, that a central bank follows from monetary union, is it not clear that the Prime Minister is facing both ways?
What is the Prime Minister's real view? Is she committed to monetary union and what follows from it by virtue of her agreement with the European Council, or will she not accept monetary union and its consequences under any circumstances? Will she give an undertaking that in any event any report from the study group will be debated and determined in this House?
I note that the Prime Minister referred to tax harmonisation. She has, of course, given earlier undertakings about not extending VAT to some necessities. Will she take this opportunity to give an assurance that she will use the veto to prevent the extension of VAT to any items that are currently zero-rated?
On a subject that the right hon. Lady did not refer to but which is of considerable importance, has she resolved her widely publicised dispute with Delors over the subsidies that she wants to give British Aerospace to induce its takeover of Rover?
Twice in the past two weeks, in Toronto and Hanover, the Prime Minister resisted the efforts of partner Governments to insert a commitment to sanctions against apartheid. Is not that resistance further evidence of her appeasement of the apartheid system and of her deliberate refusal to support calls for change and clemency with effective action?
The Prime Minister
I shall try to answer the many questions that the right hon. Gentleman has asked me.
Of course the single market in the European Economic Community will benefit all its citizens, just as rising prosperity, which the single market gives us, benefits us all.
Our regulations on the health and safety of workers are greatly in advance of those of many other countries in the EC; many of them will have a long way to go to catch up with us. The social dimension also includes the training initiative that we agreed in London at the European Council in December 1986.
As for worker participation, we believe that those who get to the board of a company should do so on merit. That is by far the best way to do things. We do not agree with the old-fashioned, outdated approach that the Labour party adopts to these matters.
With regard to a European central bank, we have taken part of the Single European Act, which went through the House and which said that we would make progressive steps to the realisation of monetary union, and we have set up a group to consider that. Monetary union would be the first step, but progress towards it would not necessarily involve a single currency or a European central bank.
Long before European monetary union could be achieved, many other countries would have to come up to the level that we have reached. We have freedom of capital movement; most of them do not. We have no exchange control; most of them have. We have a variety of currencies in our bank reserves; most of them have not. We also deal in the ecu; most of them do not. So they have a long way before they go nearly as far as we have gone on these matters.
We have made our position on the veto on zero-rate VAT clear on many occasions. The recent change was due not to a change in the law but to an explanation of the 1977 directive by the European Court. [column 528]
Rover and British Aerospace are still under consideration in the Common Market by Mr. Sutherland, the relevant Commissioner. Assuming that that goes through, subsidies in future from the British Government would cease, unless they were given under regional development. That would be very much in line with what the Community would wish.
Sanctions on South Africa did not come up.
Mr. Terence L. Higgins (Worthing)
Does my right hon. Friend agree that the change in the own resources basis from a notional rate of VAT to gross national product is an important one? Is she aware of the recent recognition by the Treasury that the GNP statistics in this country are deficient, and that the Treasury has accepted the Treasury and Civil Service Select Committee's report that they should be reviewed, which is welcome? If that is so, it is even more important that the GNP figures for the other countries in the Community should also be checked and shown to be reliable. If they are not, we could pay far more than we should. Will my right hon. Friend ensure that such a review is carried out throughout the Community?
The Prime Minister
I agree with my right hon. Friend that a change from a percentage of VAT to a percentage of GNP is significant. As he knows and has stated, we have set in hand an inquiry into our own statistics. Obviously, I cannot force the rest of the European Commission to do that, but we are making strenuous efforts to see that our statistics are as accurate as we can make them.
Mr. James Wallace (Orkney and Shetland)
Did a few days in the company of other Community leaders and the Foreign Secretary make the Prime Minister any better disposed towards British membership of the exchange rate mechanism of the EMS? Will she explain to the House the apparent contrast between her reluctance for British membership of the EMS and her apparent unbounded enthusiasm when in Canada for encouraging Canadians to join a single unit with their larger neighbour, the United States?
The Prime Minister
When we were talking about Canada and the United States, we were talking about a trading agreement for a free trade area. That is an excellent arrangement and is the same as we are trying to achieve in the single market this side of the Atlantic. It was not a unity of monetary mechanism.
With regard to the exchange rate mechanism, as I pointed out in my previous reply, we have many advantages which many others who belong to the exchange rate mechanism do not have. Most other countries do not yet have freedom of capital movements, although Germany and Holland do. Most other countries still have exchange control. Those things have enabled them often to keep within the limits of an exchange rate mechanism. The question is, will they be able to do so when they have freedom of capital movement and have thus abolished exchange control? We shall have to wait until 1990.
Mr. Nicholas Soames (Crawley)
Is my right hon. Friend aware of the concern in the aviation industry that the liberalisation of air fares may not come about at the same time as the completion of the internal market? Will she assure the House that she will do all within her power [column 529]to persuade other members of the Community to break the cartel on air fares and thus enable the charging of fully liberal air fares throughout the European Community?
The Prime Minister
Yes, we shall. As my hon. Friend knows, we have taken a lead in this matter and we shall continue to be active in trying to bring about the greater liberalisation of air fares to the advantage of the consumer.
Mrs. Ann Clwyd (Cynon Valley)
Does the Prime Minister agree that she is misleading the House when she says that we have greater protection and safety laws for workers in this country than do many other EC countries—for example, West Germany? Does she agree that in the past nine years her Government have reversed many of the laws for which trade unions fought vigorously for over half a century? Will she reverse the legislation yet again to bring us more into line with other EC countries? Does she recall that similar provisions to those contained in the Baking Industry (Hours of Work) Act 1954, for which workers in this country fought for over 50 years, were enjoyed from the beginning of the century in West Germany? Does she further agree that her Government, in arguing the cause of equality, are equalising down rather than equalising up and that they have reversed those protections for workers in the baking industry? Will she promise to reconsider that?
The Prime Minister
I agree with the hon. Lady that Germany has very good health and safety legislation, as have a number of other countries in the Community. However, several countries still do not reach anything like the standards that we and Germany enjoy. Insofar as they are trying to use social cohesion, they are obviously trying to raise their standards to ours. I do not think that we should change our standards because of any European regulations, as we already stand well in that regard.
Mr. Robert Adley (Christchurch)
Is there not a certain divergence of view between the discussions that we all support, which were mentioned by my right hon. Friend, about the encouragement of free movement for goods and people within the EC, especially after 1992, and the intransigence which certain people appear to show towards the elimination of customs barriers, especially on Channel tunnel trains? Will my right hon. Friend note that there was broad agreement in the House during recent Transport questions that the Government must intervene to solve the problem? While she is looking at that, will she also bear in mind the problems that will arise because of the existing arrangements whereby trains in France will travel at an average speed of 145 mph and in England at 53 mph as a result of the Government's investment programmes? Will she look at that whole question?
The Prime Minister
The objective of freer movement of citizens and goods around the Community depends on removing the obstacles and dealing with the bureaucracy, the numbers of forms and the procedures. It must not result in removing all barriers, because then one would have no protection against crime, terrorism, the movement of drugs and many other things. There must still be barriers, which is why we must retain many of the barriers in Europe.
With regard to the Channel tunnel, my hon. Friend is asking for considerable extra investment on this side for an [column 530]advanced train. On the other side, for other reasons, they have undertaken that investment. I can give no undertaking that we will make extra expenditure on that investment.
Mr. Paul Boateng (Brent, South)
The right hon. Lady told the House that the issue of sanctions did not arise at the summit. Did she raise the issue of clemency for the Sharpeville Six? If not, why not? Is she prepared to go along with the West German Chancellor, Chancellor Kohl, and withdraw our ambassador if clemency is refused?
The Prime Minister
Clemency for the Sharpeville Six was in the Toronto communiqué, it is the communiqué from Hanover and it was agreed by all member states. We pointed out that in South Africa all the legal steps have not yet been exhausted. Nevertheless, whatever the result, we asked for clemency. As the hon. Gentleman is aware, I asked President Botha for clemency—[Hon. Members: “How?” ] By the usual diplomatic channels. That is the appropriate way to do it. If the result is that the Sharpeville Six are condemned to death, we shall repeat our call for clemency.
Mr. Jonathan Aitken (Thanet, South)
I congratulate my right hon. Friend on her staunch defence of the rights of this sovereign Parliament and British sovereignty generally against the creeping federalism of the Commission over the central bank and the European common currency. Will she clarify what is meant by having the governors of the national central banks meeting in their personal capacities? That sounds like an elegantly phrased impotent formula that might be useful for employing the services of many EC officials, including Mr. Delors.
The Prime Minister
I understand my hon. Friend's point about governors of central banks. Should there be any change in the governorship of any central bank, the person who started on the committee will continue.
Dr. David Owen (Plymouth, Devonport)
When the European central bank is created and the House is dissolved—as the Prime Minister says it will be—may we assume that the Prime Minister will no longer be a Member of the House or that she will then leave? Will she confirm that, although a European currency cannot be created other than by unanimity under article 236 of the treaty, it is perfectly possible for the study that has just been set up to conclude that under the provisions of article 100A—the establishment and functioning of the internal market and the necessity to achieve free flow of capital movements and exchange—a European central bank could be created without unanimity?
The Prime Minister
The right hon. Gentleman may be correct in theory; I do not think that he is correct in any way in practice. He is being very optimistic if he thinks that, while he and I are Members of the House, there will be rapid movement even towards a single currency. He knows perfectly well that we would have to have a single economic policy to do that. Like many other people who discuss these matters in the European Community, he talks in grandiose terms but does not always take the necessary practical steps forward to enable us to get closer to a monetary unit.
[column 531]Mr. Ian Taylor (Esher)
Was my right hon. Friend able to discuss in Hanover such matters as company structure and law, which I understand will be one of the features of the Greek presidency? Was she able to say, quite firmly, that people in this country reject the rigid structure that was highlighted by Vredeling in the past? Will she put forward more flexible measures about worker-participation in companies, especially through employee shareholdings?
The Prime Minister
There was brief discussion about a European company structure, which, alongside the national structure, in some ways could be helpful to companies starting up in Europe. The structure proposed would be complicated, would consist of the maximum number of regulations and therefore would defeat its objective. My right hon. Friend and I pointed out that a European structure should consist of the minimum, not maximum, number of regulations to enable companies more easily to start up in Europe.
Mr. Tony Banks (Newham, North-West)
It was good to see that the Prime Minister discussed Latin American affairs in Hanover. Why is it that she alone of the Heads of Government of the EC has refused to have a meeting with Vice-President Sergio Ramirez of Nicaragua when he comes to Europe later this month? Why is it that, despite the various statements that she and her Ministers make about the situation in Nicaragua, the Prime Minister remains wholly ignorant of the real situation, and no British Minister has been to Nicaragua? Why is it that the Prime Minister, in respect of Latin America, and particularly Nicaragua, remains a lickspittle for President Reagan?
The Prime Minister
The discussion on Latin America went on in a separate meeting of Foreign Ministers. I met Vice-President Ramirez on a previous occasion and we had a useful discussion, and I imagine that he does not think it necessary to have another.
Mr. Tony Banks
He asked for a meeting and was refused.
The Prime Minister
I am not going to see him, because, as the hon. Member knows, I have an extremely busy schedule. I am not alone in the view that I have taken towards that.
Mr. Robert Hicks (Cornwall, South-East)
In view of my right hon. Friend's encouraging remarks about the development of the single market and her confirmation of the reappointment of the President of the Commission, can the House assume that this excellent precedent will mean the reappointment of Lord Cockfield as one of the United Kingdom commissioners, given the excellent preparatory work that he has undertaken in respect of the development of the single market?
The Prime Minister
My hon. Friend is fishing. No decision has yet been taken on the future of either of the commissioners who represent this country. A decision will be taken shortly.
Rev. Martin Smyth (Belfast, South)
We appreciated the reference in the communiqué to the conversation with the Prime Minister of the Irish Republic and the press reports that the Prime Minister had expressed concern about the level of security co-operation. Has the Prime [column 532]Minister discovered what will be the difficulties in improving security co-operation? Why is it that, while some arms dumps have been found, there would seem to be far more reports of possible hideouts for dumps being found, including those passed by the Department of Agriculture in Dublin?
The Prime Minister
It was generally recognised that, whatever level of security co-operation we may have had, it needs strengthening now; that is why the emphasis, both in those talks and in the statement issued afterwards, was on strengthening that co-operation. I hope that that will please the hon. Gentleman.
Mr. Teddy Taylor (Southend, East)
In the course of this satisfactory Council meeting, in which my right hon. Friend made an enormous contribution to common sense on major issues of policy, did she express any concern about the fact that the Agriculture Council should have just agreed a formula—riddled with green pound changes—which, according to the Commission, will stay within the agricultural guidelines agreed 13 weeks ago by the Council, after substantial but unspecified management economies? Is there anything that my right hon. Friend can do, after the success of this Council, to make sure that the solemn and binding assurances given in February will not turn out to be the sick joke that every other assurance has turned out to be?
The Prime Minister
I am advised that the agreement will stay within the guideline. As I said, those arrangements have been set into a binding legal form, have been passed by the European Parliament and will be laid before this Parliament tomorrow, together with the increase in own resources, so that their effectiveness can be debated before the House gives its approval to the increase in own resources. I am sure that my hon. Friend will have a lot to say in that debate.
Mr. Sydney Bidwell (Ealing, Southall)
Is the right hon. Lady aware that her answers on health and safety at work sound most smug and unsatisfactory? Is she aware that there have been drastic cuts in the number of health and safety inspectors at work? Will she be prepared to consult the trade unions on the matter to see what our standards are like compared with those of other European countries?
The Prime Minister
Obviously, the standards in other European countries are varied. Their standard of living is varied and, obviously, the standard of living that they have reached impacts upon their health and safety regulations. We are very good on health and safety, as are West Germany and a number of other countries, but I do not anticipate specific improvements in that unless there are separate reasons for requiring those improvements.
Mr. David Curry (Skipton and Ripon)
As the object of the creation of the internal market is to liberate companies to compete in the wider market, will my right hon. Friend make sure that we do not proceed to elaborate on social legislation to such a degree that we shackle industry so that it cannot compete in global markets?
The Prime Minister
My hon. Friend has put his finger on the most relevant point. There is a tendency at present in the Commission and the Council to increase the amount of regulation almost to the point of standardisation, rather than harmonisation. Of course, safety standards on products must be clear and, when it comes to setting up [column 533]legislation for a European company, if it is to increase trade, it must have the minimum regulation and not the maximum. The danger is that they are moving towards far too much regulation.
Mr. Dick Douglas (Dunfermline, West)
Will the Prime Minister give us some insight into this unaccustomed unison between the two Front Benches in welcoming the reappointment of M. Delors? Why should we welcome the reappointment of a commissioner who has manifestly shown that he wants the thrust of the Common Market to be related to the Franco-German axis? Why should we, particularly in Scotland, welcome the thrust of the Common Market against an area which has no political countervailing power, as we have in the United Kingdom Parliament? Why should we in Scotland welcome 1992 without the creation of countervailing power in Edinburgh in the creation of a Scottish assembly?
The Prime Minister
We welcomed the reappointment of M. Delors and, with everyone else, voted for it because M. Delors has been an excellent President of the Commission. He started a great deal of the work on the single market for 1992 and we all thought it advisable that he should continue. I assure the hon. Gentleman that M. Delors is very much aware of the strength of the United Kingdom in the debates and discussions in the European Council. Edinburgh and Scotland can welcome the single market because it will give all the industries in Scotland a much larger market to which to export. The industries in Scotland are now, under Tory Government, enterprising and prosperous.
Several Hon. Members
rose——
Mr. Speaker
Order. The House well knows that there is a rare opportunity today to debate foreign affairs. No fewer than 34 right hon. and hon. Members wish to take part. I shall therefore have to limit questions to a further two from each side and then we must move on.
Mr. Kenneth Warren (Hastings and Rye)
I congratulate my right hon. Friend on the encouragement of wider public purchasing, but will she consider pursuing that into the defence industry in Europe where, for far too long, British companies have put up with a share based on what other countries will tolerate, rather than the competitive purchasing that would encourage those industries in their efficiency?
The Prime Minister
The wider public purchasing clause is not directed to defence industries. As my hon. Friend knows, we co-operate with other members of NATO and with France as a political member, although not a military member, of NATO. We operate on a different network.
The real trouble with public purchasing is that, in theory, all the tenders should already have been opened up to the whole of Europe, but in practice they have not. We have been very open, as we usually are. We abide by the rules, but we are not certain whether all other people do and we wish that the whole of Europe was as open to tender—on the basis of the most efficient tender—as we are. It will be our purpose to achieve that.
Mr. Dennis Skinner (Bolsover)
Would it not be welcome, just once in a while, if the Prime Minister, when coming back from these Euro-summits, was able to start [column 534]telling the truth about economic co-operation? Is it not a fact that West Germany, with a $40 billion surplus on its balance of payments, is now ruling the roost and that that economic power is now changing into political muscle, whereas for Britain, with a balance of payments deficit of £12 billion this year and invisibles being scaled down to £5 billion from £7 billion last year, the prospects are very glum indeed? The truth is that we shall be dominated in the Common Market by the Franco-German axis, the people Britain had to sort out in 1940–45.
The Prime Minister
Let us leave the hon. Gentleman to wallow in his own depression. It does not extend to other people. This country has grown far faster than West Germany over the past six years and the degree of subsidisation of Germany industry by the German Government is greater than in this country. That is very damning to Germany because it means that she is not carrying out the restructuring of her industry as she ought to be doing and it means that we have a greater chance to be more competitive than she has. I am quite certain that Germany would love to have the budget surplus that we have in this country.
Mr. Eric Forth (Mid-Worcestershire)
My right hon. Friend said that the ‘burdens on business will be steadily reduced’. Did she take the opportunity to discuss with her colleagues at the meeting the difference in performance between the United States and the Community, particularly in job generation? Did they draw the obvious conclusion that the more burdens one places on business and the more regulations there are, the worse it is for employment generation? Will my right hon. Friend bear that in mind and keep reminding her colleagues that the more they seek to regulate business the fewer jobs will be created in the European Community?
The Prime Minister
I agree with my hon. Friend. The communiqué makes it clear that we have obtained the extra growth through cutting many of the regulations and, particularly, by cutting them on small businesses, which are the real engine for growth. I agree with my hon. Friend that the creation of jobs in the United States is much faster than it is on this side of the Atlantic and we would like to emulate them in that way rather more than we do.
Mr. Nigel Spearing (Newham, South)
On the future harmonisation of VAT, on which the Prime Minister has given some assurances, although not on the future of VAT on water, books, newspapers and public transport, will she confirm that article 99 of the treaty of Rome puts on Governments a requirement for unanimity but that it does not exclude any measure by which national Parliaments can determine what their Governments do? Surely that makes the House of Commons only an advisory assembly in respect of that tax. Would it not be much better for the final decision concerning the Government's attitude to VAT to be determined in this House? Will the right hon. Lady reflect upon what steps should be taken to make that a reality?
The Prime Minister
No. The Government make the decision and come to the House for endorsement of their decision. It is the Government who have the budget and come to the House after debate for endorsement of those decisions. The hon. Gentleman is aware that, on every possible occasion in the Community, we fight the [column 535]harmonisation of taxation and insist on being able to keep a zero rate for value added tax. It was, and remains, my understanding that any fiscal changes will be subject to unanimous vote. We have to come before this House, and we find it of great value that the House takes the same view on these matters as we do.