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With permission, Mr. Speaker, I shall make a statement on the European Council held in Rome on 27 and 28 October, which I attended with my right hon. Friend the Foreign and Commonwealth Secretary. The conclusions of the Council have been placed in the Library of the House.
The Council had to deal in the first place with some urgent items of current business: namely, the Community's failure to agree a negotiating position on agriculture for the Uruguay round of trade negotiations; the situation in the Gulf, and the position of the foreign nationals held hostage in Iraq and Kuwait; and the problems which have arisen in Hungary.
Looking further ahead, the Council also dealt with the preparations for the two intergovernmental conferences, on economic and monetary union and also on institutional reform, which are due to begin in December. I shall report on the Council's business in that order.
The Uruguay round of trade negotiations is due to be completed before the end of this year. The outcome will decide whether world trade becomes steadily more open, or we repeat the mistakes of the past and relapse into protectionism.
The most difficult item is agriculture. All the major participants in the Uruguay round committed themselves to table negotiating offers by 15 October. All except the European Community have done so.
The Community has been discussing this problem since the round began in the autumn of 1986. It gave an unequivocal commitment in April last year to make substantial and progressive reductions in agricultural support. That commitment was repeated at the Houston economic summit in July this year.
The Commission has put forward a proposal for 30 per cent. reductions, backdated to 1986. So what has already been done by way of reduction of support since then will be set against that 30 per cent.
There have been six sessions of European Community Ministers to discuss the proposal. The most recent, lasting some 16 hours, was on Friday last week. But no agreement has been reached. The main opposition has come from France and Germany.
The Community's failure has harmed its reputation. Negotiations between the leading groups of countries cannot start until the Community's proposals have been tabled.
The European Council requested Ministers to meet again and put the Commission in a position to table a negotiating offer. The Netherlands Prime Minister suggested that the basis for this should be the position reached when Agriculture Ministers suspended their work early on 27 October. But President Mitterrand made it clear that France would continue to vote against those proposals.
It remains for Agriculture and Trade Ministers to try yet again to reach a conclusion. If we fail, it will give a signal to the world that the Community is protectionist.
Next, with regard to the Gulf and the position of the hostages, the European Council agreed a firm statement calling for Iraq's withdrawal from Kuwait and confirming Europe's absolute commitment to full implementation of the United Nations Security Council resolutions. The statement makes it clear that we shall consider further steps if Iraq does not comply. The message is that Saddam Hussein must not gain anything from his aggression.
The Council also strongly condemned Iraq for holding foreign nationals as hostages and for using them in an unscrupulous way. This is totally unacceptable. Moreover, Iraq is negotiating over the hostages with the purpose of trying to divide the international community. After considerable discussion, the Council affirmed our determination not to send representatives of our Governments in any capacity to negotiate with Iraq for the release of hostages, and to discourage others from doing so. I believe that the unity of the Twelve, and our determination not to allow Saddam Hussein to divide us on the question of hostages, will send a very powerful signal to Iraq.
The third point is assistance to Hungary. In the course of the Council, member states received appeals from the Government of Hungary for help in dealing with the serious problems that have arisen as a result of the reduction in the supply of oil from the Soviet Union. The consequent price rises have given rise to unrest. The Council issued a strong statement of support for Hungary in pursuing its path towards democratic and economic reforms and the rule of law. The Council also agreed, at the United Kingdom's suggestion, to bring forward and disburse rapidly the second instalment of the ․1 billion Community loan for Hungary which we agreed last year. This will be of direct practical assistance.
Those were the urgent matters on which the Council had to act. Looking further to the future, we also discussed the preparations for the two intergovernmental conferences, or IGCs, which will start their work on 14 December.
For the conference on political union, the Council had before it a report by Foreign Ministers listing a wide range of possible institutional changes which the intergovernmental conference might consider. Heads of Government called for further work to be done on these proposals between now and December.
My right hon. Friend the Foreign Secretary and I argued that it would be wrong to prejudge the conclusions of the intergovernmental conference. We were on strong ground, since the Community's original decision to call the conference specified that it should set its own agenda. Nevertheless, others wished to give specific directions to the IGC. We therefore reserved the United Kingdom's position on, for example, extension of the Community's powers into new areas, greater powers for the European Parliament in the legislative sphere, defining European citizenship, and a common foreign and security policy. All these are issues for discussion at the intergovernmental conference itself rather than to be settled in advance.
On economic and monetary union, I stressed that we would be ready to move beyond the present position to the creation of a European monetary fund and a common Community currency which we have called a hard ecu. But we would not be prepared to agree to set a date for starting the next stage of economic and monetary union before there is any agreement on what that stage should comprise. And I again emphasised that we would not be prepared to have a single currency imposed upon us, nor to surrender the use of the pound sterling as our currency.
The hard ecu would be a parallel currency, not a single currency. If, as time went by, people and Governments chose to use it widely, it could evolve towards a single currency. But our national currency would remain unless a decision to abolish it were freely taken by future generations of Parliament and people. A single currency is not the policy of this Government.
I should like to offer four comments in conclusion.
First, the Community finds it more difficult to take the urgent, detailed decisions than to discuss longer-term concepts. Moreover, no one should underestimate the extent to which national interests prevail among those who most proclaim their Community credentials.
Secondly, Britain intends to be part of the further political, economic and monetary development of the European Community. That is what the great majority of member states want, too. When we come to negotiate on particular points, rather than concepts or generalities, I believe that solutions will be found which will enable the Community to go forward as Twelve. That will be our objective.
Thirdly, we are fighting in Europe for British farmers, for British consumers, for a new world trade agreement, for help to the newly democratic countries of eastern Europe, and for the interests and concerns of our people.
Fourthly, while we fully accept our commitments under the treaties and wish to co-operate more closely with other countries in the European Community, we are determined to retain our fundamental ability to govern ourselves through Parliament. I believe that that is the wish of this House, and we on this side will do our best to see that it is fulfilled.
I thank the right hon. Lady for that statement and welcome the summit statements on, first, the complete solidarity of the Governments of the Community countries against Saddam Hussein and, secondly, economic support for the Soviet Union, Hungary and other central and east European countries.
On the central matter discussed in Rome, is it not clear that last weekend the Prime Minister managed to unite the rest of the European Community against her, to divide her own party and, more importantly, further to weaken the influence that Britain needs in order properly to uphold our national interests in the European Community? Can the Prime Minister tell us why she was apparently taken by surprise by the proposals put by others in Rome? Does she not recall that in 1985 she whipped and guillotined the Single European Act through the House, in June 1989 at Madrid she formally agreed with other heads of Government to be determined to achieve the progressive realisation of economic and monetary union, and at the Dublin summit this year she agreed to intensify the process of European union in economic, monetary and political terms? Those were all steps which raised comment at the time. Did she not know what she was doing on those occasions, or was she living in cloud cuckoo land?
The Prime Minister says that the Government would not surrender the use of the pound sterling as our currency. Perhaps she will therefore tell us how she regards the advice of her fellow Conservative, Commissioner Brittan, when he said:
You don't have to lose the pound sterling under the single currency plan. You can perfectly well have a note or a coin which states its value in pounds … and its fixed equivalent in ecu … It's been agreed that that would be possible.
On the connection between currency and sovereignty, can the Prime Minister, who abandoned her own Madrid conditions before she put sterling into the exchange rate mechanism, tell the House what will be her conditions now
for putting sterling into the narrow banding of the ERM? The Prime Minister could come to a debate and explain all these things from the Dispatch Box if she was willing to do so.
When the Prime Minister conducts herself as she did in Rome this weekend, is it any wonder that she cannot even get agreement for the necessary reduction in farm subsidies? [Interruption.] She has no influence at all. When she conducts herself as she does, is it any wonder that some members of her own party believe that she has undermined the Chancellor's efforts to build support for the so-called hard ecu? Does she not realise that such an attitude makes the Heads of other Governments even less susceptible to listening to the sensible arguments that can be deployed in favour of sovereignty in the Community? Does she accept that it is reasonable to put the view that the determinants of the pace and direction of economic and monetary union should be the realities of economic performance and the degree of economic convergence, not arbitrary diary dates?
Does the Prime Minister not understand that, with her method of conducting affairs, she is throwing away that sound argument and losing both potential allies and necessary influence? Does she not appreciate that, even now, her tantrum tactics will not stop the process of change or change anything in the process of change? All they do is strand Britain in a European second division without the influence over change that we need, the financial and industrial opportunities that we need and the sovereignty that we need.
It is our purpose to retain the power and influence of this House, rather than denude it of many of its powers. I wonder what the right hon. Gentleman's policy is, in view of some of the things that he said. Would he have agreed to a commitment to extend the Community's powers to other supplementary sectors of economic integration without having any definition of what they are? One would have thought, from what he said, that he would. The Commission wants to extend its powers and competence into health matters, but we said no, we would not agree to that.
From what the right hon. Gentleman said, it sounded as though he would agree, for the sake of agreeing, and for being Little Sir Echo, and saying, "Me, too." Would the right hon. Gentleman have agreed to extending qualified majority voting within the Council, to delegating implementing powers to the Commission, to a common security policy, all without any attempt to define or limit them? The answer is yes. He does not have a clue about the definition of some of the things that he is saying, let alone securing a definition of others.
It was not we who stopped unity on agriculture—it was France and Germany. Had the right hon. Gentleman even read the statement, which he had before I came in, he would have noticed—and had he even listened to the statement when I made it, he would have known—that it was Francois Mitterand who said that he would not agree to the Commission's proposal. We are not to blame in any way for not reaching agreement on agriculture. But for the insistence of my right hon. Friend the Foreign and Commonwealth Secretary and me, the chair would not even have had the matter discussed, so urgent was it that it should be. I told the chair over a week ago that, if the farm Ministers did not reach agreement, we must discuss the matter, and I wrote to him. He did everything that he could to see that a matter so urgent was not discussed, but we succeeded in getting it discussed.
As to the right hon. Gentleman's strictures about economic and monetary union, that phrase was agreed by the European Community before we went in. It is one of those things that we inherited. It was agreed in 1972. When it came to defining it—[Interruption.] We went into the Community in 1973, and I had understood that most Labour Members were in favour of that. I wonder today if they are changing their stance for the sake of debating points.
Leon Brittan is a loyal member of the Commission. Yes, the Commission wants to increase its powers. Yes, it is a non-elected body and I do not want the Commission to increase its powers at the expense of the House, so of course we differ. The President of the Commission, Mr. Delors, said at a press conference the other day that he wanted the European Parliament to be the democratic body of the Community, he wanted the Commission to be the Executive and he wanted the Council of Ministers to be the Senate. No. No. No.
Perhaps the Labour party would give all those things up easily. Perhaps it would agree to a single currency and abolition of the pound sterling. Perhaps, being totally incompetent in monetary matters, it would be only too delighted to hand over full responsibility to a central bank, as it did to the IMF. The fact is that the Labour party has no competence on money and no competence on the economy—so, yes, the right hon. Gentleman would be glad to hand it all over. What is the point of trying to get elected to Parliament only to hand over sterling and the powers of this House to Europe? Perhaps the right hon. Gentleman will understand his brief a little better next time.
May I congratulate my right hon. Friend on standing up for the interests of the people of this country and ask her whether she thinks that the eleven are not now both isolated and intransigent in relation to agricultural policy and the GATT round? Does she think that they are deliberately working for the failure of the GATT round in order to achieve their objectives of a fortress Europe? If they are, does she agree that that is not a destination for which we want to board the train?
My right hon. Friend is right. The European community is the only group of nations which, after years of studying the problem, has not tabled an initial negotiating position on agriculture in the GATT round. The United States, Japan, the Cairns group, Canada and Switzerland have tabled theirs, but from the Community—nothing. It really is a disgrace that we have not even been able to agree on a negotiating position, let alone start to negotiate with all the other groups by between now and the end of the year.
Yes, I agree with my right hon. Friend that several countries in the Community are highly protectionist. The common agricultural policy is a protectionist policy, but we will try to reduce the protectionism, first because it would help the third world, secondly because it would mean that we would not have export subsidies—and thereby take business away from other countries—and thirdly because in this country we believe in open trade. This was the most serious matter to be discussed at the European Council, and I most earnestly hope that this time Agriculture Ministers—there will be no difficulty with us, but I mean the French and German Agriculture Ministers—will accept the proposals of the Commission for the negotiating position in the Uruguay round.
Does the Prime Minister realise how welcome it was to hear in her statement that she has at last been forced to admit that the hard ecu proposal can be a transitional mechanism to a single currency? Will she congratulate the Chancellor and the Foreign Secretary on levering her forward towards reality on that matter? Does she realise that that is good news for Britain?
Does the right hon. Lady realise how much of her performance at Rome was bad news for Britain? Does she realise that in a single meeting she has isolated this country in Europe, weakened our voice in Europe, divided the Government and betrayed this country's long-term best interests? Does she realise that if she faced a Labour party that was not equally divided, muddled and confused on this matter, she would today face a motion of no confidence in her failure at this historic moment? Does she realise—[Interruption.]
Oh dear, it seems that there must be quite a lot of late parrots in cloud cuckoo land, judging by the right hon. Gentleman coming out with that stuff. Of course, if there is a parallel currency and people choose to make more and more use of it, it could evolve into a single currency, but that could not be done without a decision coming back to this House and, I believe, to the people of this country. I take it that the right hon. Gentleman's policy is to abolish the pound sterling, the greatest expression of sovereignty. In any event, it would be totally and utterly wrong to agree to that now. That matter is one to be decided by future generations and future Parliaments. Parliament is supreme, not the right hon. Gentleman the Leader of the Liberal Democrats.
In the light of last weekend's discussions, will my right hon. Friend reconsider in the near future the proposal to separate the Bank of England and make it independent so that it may serve as a buttress in this country's battle against inflation?
Independent banks are mostly either answerable to a parliament—as in the United States, where Mr. Greenspan is answerable to Congress—or have a number of politicians on their boards. I do not believe that the structure that this country currently has would be served well by the proposal that my hon. Friend mentions. It is far better to increase democracy than to reduce it, which I believe would be wrong at this time.
What is the point of the Prime Minister trying to wrap herself in the union jack for electoral purposes—[HON. MEMBERS: "Better that than the red flag."]—and then coming to the Dispatch Box to tell the House that she is prepared to sell the working people of this country down the river by opening Britain up completely to free trade without any protectionism whatsoever, destroy the multi-fibre arrangement, and give the emerging democracies in Europe £1,000 million in loans to produce goods on wages of £80 a month, so that textiles in particular will flood into this country, which would destroy hundreds of thousands of British jobs? Is that what the right hon. Lady was elected to do? Is she really protecting this country, or is she only pretending to do so?
The hon. Gentleman probably heard the comment made by some of my right hon. and hon. Friends, "Better to wrap yourself in the union jack than the red flag." The hon. Gentleman's remarks amount to a totally protectionist policy, which would lead to retaliation against us, reduce the capability of our export industries and therefore our standard of living, and make our industries inefficient and therefore cost the housewife a great deal more.
I note also that the hon. Gentleman complains about goods entering Britain from Third world countries where wages are far lower. I have heard the hon. Gentleman say several times in the House that Third world countries need help. They need trade as much as they need aid.
Does my right hon. Friend agree that the mark of a single currency is not only that all other currencies must be extinguished but that the capacity of other institutions to issue currencies must also be extinguished? In the case of the United Kingdom, that would involve Parliament binding its successors in a way that it has hitherto regarded as unconstitutional.
I am grateful to my right hon. Friend. This Government have no intention of abolishing the pound sterling. If the hard ecu were to evolve and much greater use were to be made of it, that would be a decision for future Parliaments and generations. That decision could be taken only once.
It should not be taken in the current atmosphere, but only after the greatest possible consideration. I believe that both Parliament and sterling have served this country and the rest of the world very well. We are more stable and influential with sterling, and it is an expression of our sovereignty. This Government believe in the pound sterling.
I totally agree with the right hon. Gentleman. There are some things for which there was majority voting within the Community when we went in, and we accepted that, and for the specific objective of achieving the Single European Act only, there have been more matters. Now there is an attempt to get far more things passed by majority voting. That means that we would have more laws imposed upon us, even if the House was flatly against them. We expect our people to obey the law, mainly because it has gone through all the legislative processes in this House, and we should be very slow to add to any majority competence on the part of the Community.
Does my right hon. Friend accept that there is wide support in my constituency for the stance that she took at the intergovernmental conference on economic and monetary union? Does she further accept that that support is based not on the niceties of international economics but on the clear and firm belief that those who dictate fiscal policy to the United Kingdom should be fully and directly answerable to its electors?
I totally agree with my hon. Friend. The Delors report is proposing that those people should be answerable to no one. It is very ironic indeed that, at a time when eastern Europe is striving for greater democracy, the Commission should be striving to extinguish democracy and to put more and more power into its own hands, or into the hands of non-elected bodies.
Is it not true that the British Government are far more reluctant than Germany, France or Italy to give economic assistance to the Soviet Union? Is the Prime Minister not aware of the political risks within the Soviet Union if we do not respond generously at this time, and of the long-term risks for British industry if other countries step in and establish aid and trading relationships with the Soviet Union before we do?
The German banks—the Deutsche bank—made a considerable loan to the Soviet Union of some DM6 billion. That had all gone within a matter of weeks. It was guaranteed by the Government of the Federal Republic, and it was all gone in a matter of weeks—used to repay debts which the Soviet Union owed to German manufacturers. That has done nothing to help the economic situation in the Soviet Union.
When we got the request for help, we suggested that we should not consider general loans which would not help a country that was already in difficulties, but should see if we could give specific help in certain spheres—for example food processing, transport and oil exploration. We are studying that, and the International Monetary Fund is judging what it is necessary for the Soviet economy to do to get it out of its present difficulties.
Fortunately, between the Houston economic summit and now, the Soviet Union has had a windfall in the sense that the increasing price of oil has given it a much better balance of payments position on a much greater scale than here, so that has improved its position. We shall make up our minds when the IMF has reported.
If these partners of ours—France and Germany—persist in blocking the reform of the common agricultural policy in December, what useful purpose does my right hon. Friend think that the intergovernmental conference is likely to achieve?
My right hon. Friend puts his finger on it absolutely. Agriculture and trade are two subjects in which, as national countries, we have no competence at all as it is all negotiated through the Community. They can therefore do that—they can even do it in the Agriculture Council—by majority voting. If France and Germany stick together and refuse to have reductions in their subsidies, many of the other countries where farmers are far poorer than those in France and Germany will say, "How in the world can we agree to lower subsidies when the Community's two sets of richest farmers will not do so?"
I hope that the compromise solution that the Commission hammered out with Agriculture Ministers will nevertheless go through, but that is only the start, not the end, of the negotiating position with other countries; otherwise, we shall be responsible for reducing world trade.
Is it not perfectly clear that what was being attempted at Rome was a bounce which led only one way—to a single federal united states of Europe? Is it not vital that, in this House and across party lines, it should be possible for a Prime Minister to make it clear, if necessary, that Britain is prepared to stand alone? We should not relish it, but if we were faced with the imposition by treaty of a single currency and with a situation that prevented the enlargement of the Community to include Poland, Hungary and Czechoslovakia, would not Britain be entitled and right to use the veto?
I totally agree with the right hon. Gentleman. That is precisely the stance that we took. It is the stance that we have taken on many previous occasions. The European monetary system to which we belong is designed for 12 sovereign states, in co-operation with one another, to come to an exchange rate mechanism. What is being proposed now—economic and monetary union—is the back door to a federal Europe, which we totally and utterly reject. We prefer greater economic and monetary co-operation, which can be achieved by keeping our sovereignty.
No. We should like to have the kind of Europe that we believe in and the Europe that we went in to join. If my hon. Friend looks back at some of the speeches, he will see that we were absolutely assured that we should not be giving up sovereignty. That was the basis upon which we went in. On 24 May 1971 the Prime Minister said:
We agreed in particular that the identity of national states should be maintained in the framework of the developing Community. This means, of course, that, though the European Commission has made and will continue to make a valuable contribution, the Council of Ministers should continue to be the forum in which important decisions are taken, … It provides a clear assurance, … that joining the Community does not entail a loss of national identity or an erosion of essential national sovereignty."—[Official Report. 24 May 1971; Vol. 818, c. 32–33.]
Despite what the Prime Minister has just said, is it not clear that it is the wish of our partners that there should be a loss of national identity on currency? Is it not true that even the hard ecu, coupled with fixed exchange rates, would lead inexorably to economic and monetary union and to government either of bankers for bankers by bankers or to a strong political central government that would usher in a new Euro-state? If the Prime Minister is to save Britain as a self-governing nation, had she not better make that clear and galvanise the people of this country and all parties in Parliament to say a very polite no to economic and monetary union?
If I believed that, I would do just as the hon. Gentleman says, but I do not believe that his interpretation is correct. I accept that many in the Economic Community would like to have their version of economic and monetary union, which would lead to passing powers away from national Parliaments to a non-elected body—in fact, to a central board of bankers—to majority voting and to the giving of more legislative power to the European Parliament. That is their version, but it is not the version that we have accepted. The Single European Act defined economic and monetary union as
Co-operation in Economic and Monetary policy".
That is all you need, in my view. The hard ecu is a proposal that does not require a central bank, which would make it an inflation-proof currency and which could be used if people chose to do so. In my view, it would not become widely used throughout the Community—[Interruption.] —possibly most widely used for commercial transactions. Many people would continue to prefer their own currency.
Therefore, I do not believe that the fears of the hon. Member for Newham, South (Mr. Spearing) will happen. I am pretty certain that most people in this country would prefer to continue to use sterling. If, by their choice, I was wrong, there would come a time when we would have to address the question. However, that would not be for us but for future generations in the House.
Will my right hon. Friend take time between now and the conference in December to explain to her European colleagues what any first-year economic student could tell them, which is that the imposition of a single currency, as opposed to a common currency, would rule out for all time the most effective means of adjusting for national differences in costs and prices? Will she explain that that in turn would cause widespread unemployment, which would probably exist on a perpetual basis, and very serious financial imbalances?
Yes, I agree entirely with my right hon. Friend. It would do just that. It would also mean that there would have to be enormous transfers of money from one country to another. It would cost us a great deal of money. One reason why some of the poorer countries want it is that they would get those big transfers of money. We are trying to contest that. If we have a single currency or a locked currency, the differences come out substantially in unemployment or vast movements of people from one country to another. Many people who talk about a single currency have never considered its full implications.
Will the Prime Minister ignore the advice of the right hon. Member for Plymouth, Devonport (Dr. Owen), who talked about the British state standing alone? Will she bear in mind her humiliating experience when she was forced into the ERM against all her instincts and her declaration in Madrid? Is the Prime Minister aware that many people in Europe, not only in the United Kingdom, are aware of the formidable economic, political and social problems inherent in stage 2 and moving to a single currency? Does she not think that she would have a far better chance of getting people to talk about a sensible and cautious approach if, in addressing her colleagues in Europe, she used the moderate language of a 21st-century European and not the intemperate language of a little Englander?
Bearing in mind that the hon. Gentleman was not there, will he tell me of any language that was intemperate? Those who seem to know most about this are the people who were not there and heard nothing of what was said or of the way in which it was done. Radio and television broadcasts are outside and after the finish of the conference.
We have always said that we would join the exchange rate mechanism when the time was right. That was part of our going into the European monetary system, to which we have belonged for many years. We have put some of our reserves with the European monetary system and have the usual swap arrangements that that entails. The completion of the European monetary system is the exchange rate mechanism. All that can be done by nation states co-operating with one another We do not need to have a federal structure at all.
The time came when most of the other countries had abolished their foreign exchange controls and we had led them, way ahead. Yes, I think that it was we and Germany who were isolated in that we got rid of foreign exchange controls first. The others followed, but Spain still has not done so. When they had done that, and when we adjudged that the time was right—I think that every figure that has come out since has indicated that we were right in our timing of joining the ERM and in reducing the interest rate—we completed our obligation to join. That does not mean that we agree with the next stage, which is a totally different definition of economic and monetary union.
Does my right hon. Friend agree that the prospects for the British people enjoying a higher standard of living and sharing in greater prosperity will depend in no small part on securing a currency that is strong and stable—something that has dogged us in the post-war years? Is that not more likely to be achieved if we have a common currency based on the great economies of western Europe rather than relying on our going it alone?
No, I think that many of my colleagues in Europe—in our European Council and certainly in the Finance Council—will say that there is no way in which there can be a single currency until all economies are at the same state of development, the same state of prosperity and in a Europe with one economy right across it. I do not think that there is any possibility of that stage being reached for a very long time. To take a single currency long before that has happened would be to weaken it and not to strengthen it. We will have a stronger sterling, with all its history. Many securities and contracts are denominated in sterling. We shall trade better with the great history behind sterling than we possibly could with a single currency.
There is no majority in the House for EMU, but is the Prime Minister aware that I attended a conference in Italy last year at which an Italian Minister spoke to me about EMU? I said, "What if Mrs. Thatcher opposes it?" Ungallantly, he laughed out loud and said, "We have met Mrs. Thatcher many times—she squawks and makes a noise at the beginning but always comes round and gives way in the end." What assurances and guarantees can the Prime Minister give the House that she will not give way on this issue, as she gave way on the Madrid condition about British inflation before joining the ERM?
That is what they said when I was negotiating for a better budget deal for Britain. Twice, the people in the Commission—our people in the Commission and the presidency of the Commission—advised me to give way. They found out differently.
Does my right hon. Friend agree that there is a grave risk that unless the Community can get its negotiating position together the GATT round of talks may collapse in the next few months? If that happens, it would be no dry, academic exercise but would mean higher costs for consumers in many countries in the next few years. Does my right hon. Friend agree that the Community's compromise proposals on agriculture, which have been rejected, are ludicrously modest? Will she urge our colleagues in the Community to try to reach a solution—if not now, at least during the next IGC?
I agree with my right hon. Friend. If we do not reach a solution in Geneva in the Uruguay round, it will mean retaliation against us, and people's worst fears—that the Economic Community is nothing but a fortress Europe and a protectionist club—will be realised. If we did not get a result on the agriculture round, it would not be our fault but the fault of France and Germany. There are certain protectionist elements in France, as my right hon. Friend knows. Even when we get our own negotiating position, as I hope that we shall within a week, I hope that it will be on the basis that we have been negotiating for six previous meetings. We still have to have negotiations on the other proposals that we put up with all the countries. There is still a tough way to go before we get a conclusion, but the important thing—important for the welfare of all our people—is that that round meets with success.
Will my right hon. Friend make it clear that, if the procrastination about export subsidies by the European Community on surplus food continues, with the result that the Uruguay round collapses and the United States then resorts to a protectionist policy in self-defence, the one country in the EC that will suffer will be the United Kingdom?
As my hon. Friend knows, we always try for open trading. We also try to defend our farmers to see that they get a fair deal because, mostly, the subsidies in Europe go to the smaller farmers. By subsidising the smaller farmers, the efficiency of the larger family farm is undercut. We will do everything that we can to ensure that the picture that my hon. Friend has painted does not come about.
Does the Prime Minister agree that her isolation at the Rome summit will seriously damage Wales's prospects of benefiting under the single market, and from the exports and investment opportunities that will arise? Does she also agree that Wales, which is on the periphery of Europe, needs to be at the heart of the decision-making process in Europe and that a positive approach to Europe is needed? Does not her isolationist stance prove that Wales needs direct representation in the Community institutions?
The hon. Gentleman's strictures would have been better directed to France and Germany, which have taken an isolationist stance on agricultural subsidies for three years. It would have been very much better if they had come along with the rest instead of sticking out for their own farmers against the good of the EC as a whole. It was those countries which were isolated on that most urgent matter.
As for investment, Wales—like the rest of the United Kingdom—has benefited enormously from the economic policies of this Government. We have brought in tons and tons of investment from overseas to Wales, to Scotland and to the north of England, greatly to the benefit of jobs here. People have great confidence in this Government, which is why they invest in Britain. What a pity the hon. Gentleman cannot speak up a little more for his own country.
Next Wednesday, the doors of this Chamber will be closed to Black Rod as a symbol of the independence of this House. What would be the effect on the independence of this House and on the nation that elects it if the power to veto proposals affecting social affairs, the environment and taxation were to be removed?
I hope that, when the next election comes, people who want to come to the House will come to uphold its powers and its responsibilities, and not to denude the House of them. We have surrendered some of them to the Community, and in my view we have surrendered enough.
Is the Prime Minister aware that what we are really discussing is not economic management, but the whole future of relations between this country and Europe? This issue is not best expressed in 19th-century patriotic language or in emotive language about which design is on the currency. The real question is whether, when the British people vote in a general election, they will be able to change the policies of the previous Government. It is already a fact, as the House knows full well, that whatever Government are in power, our agricultural policy is controlled from Brussels, our trade policy is controlled from Brussels and our industrial policy is controlled from Brussels. If we go into EMU, our financial policy will also be controlled. It is a democratic argument, not a nationalistic argument.
However, given that the right hon. Lady is a member of the Government who took us into the European Community without consulting the British people, given that she was Prime Minister in the Government who agreed to the Single European Act without consulting the British people, and given that she has now agreed to joining the exchange rate mechanism without consulting the British people, we find it hard to believe that she is really intent on preserving democracy rather than gaining political advantage by waving some national argument around on the eve of a general election. That is why we do not trust her judgment on the matter.
I think that I would put it just a little differently from the right hon. Gentleman, although I recognise some of the force of some of the points that he makes. When the Delors proposals for economic and monetary union came out, it was said immediately by my right hon. Friend the then Chancellor of the Exchequer that this was not really about monetary policy at all but about a back door to a federal Europe, taking many democratic powers away from democratically elected bodies and giving them to non-elected bodies. I believe fervently that that is true, which is why I shall have nothing to do with their definition of economic and monetary union.
We shall continue the co-operation that we have come to establish, as nation states. The Act that enabled us to go into Europe was passed on Second Reading by eight votes and it was made very clear then that we would not surrender our national identity, that it was a matter of co-operation. It was on the strength of that that many people went in. I am afraid that it would be quite different if we went for a single European currency and a central bank and for their definition of economic and monetary union.
Will my right hon. Friend tell the House how far she believes that, when the moment comes, Germany will be prepared to see the transfer of its monetary policy from the Bundesbank to a European central bank on which it will have one voice out of 12?
I think that it is wrong to think that all the Twelve have similar votes or influence in these matters. I think that some in Germany—only some—are backing the scheme because they know that the dominant voice, the predominant voice, on any central bank would be the German voice. If we did not retain our national identities in Europe, the dominant people in Europe would be German. The way to balance out the different views of Europe, as we have traditionally done throughout history, is by retaining our national identity.
I have not noticed much compassion about Saddam Hussein in Kuwait, about the way in which our hostages, our embassies or the nationals in Kuwait have been treated. There is nothing to negotiate about.
I seem to smell the stench of appeasement in the air—the rather nauseating stench of appeasement.
The United Nations has clearly said that Iraq must come out of Kuwait——
Order. That is very bad behaviour from the hon. Gentleman. He has asked a question and he is getting the answer. He may not like it, but he must not shout in that way.
Prime Minister, may I ask you why you have been so modest this afternoon? In the past, have you not stood alone on European matters and been proved right? I am thinking of United Kingdom contributions, of the reform of the common agricultural policy, of mortgage cartels and of exchange controls. Each time, Prime Minister, you have been right. Why should the House not trust you today?
When preparing the statement on the Gulf that the Prime Minister has said was agreed in Rome, was the right hon. Lady aware of the existence of publicly available estimates by American chiefs of staff that within 12 days of combat there would be 30,000 allied casualties, and that 10,000 of them would be fatalities? If she disagrees with the American estimates, can she tell us what estimates have been made by the British chiefs of staff?
I remember when this country had to send forces down to the Falklands. Chiefs of staff were frequently asked what were their estimates of casualties. No one can make such an estimate.
No one can make such an estimate. There are people who can guess, but those guesses have turned out before to be very wide of the mark. It is not a question that I ask, because I know the impossibility of answering it.
May I congratulate my right hon. Friend on the valiant stand that she has been taking to fight for Britain's economic and parliamentary independence in Europe? Will she emphasise that standing apart from the eleven's plans for European monetary union may bring positive economic benefits to Britain? Does she agree that the country with the strongest currency, one of the highest per capita incomes and one of the strongest financial services industries in Europe, is economically and politically independent Switzerland? Does she also agree, therefore, that economic independence is no barrier to economic success?
I entirely agree. Switzerland has a marvellous record on currency, manufacturing and services, and we too shall continue to do so if others go for a single currency and we stay outside.
The right hon. Lady has referred to the 11 other European leaders as living in cloud cuckoo land. Has it not occurred to her that she may be living in cloud cuckoo land if she thinks that the majority of the British people are likely to go along with her short-sighted proposals on economic and monetary union, which are likely to lead to Britain's being excluded from Europe's first division?
No, I think that that is totally wrong. I note that the hon. Gentleman believes in a single currency regardless of the many consequences that it would have for this country—regardless of how much we would have to transfer, and regardless of the enormous consequences for our securities. I do not believe that his view is shared by many of the people.
Indeed we shall, but I think that the hon. Gentleman will find that most people prefer to have the pound sterling and our Parliament. If he does not wish to have either, why does he want to come here after the next election?
I agree. We can always talk about the generalities. When it came to getting down to a detailed negotiation, they did not even want to address the subject there. They ran away from it. They then said that they should set a stage 2 without having decided on its contents. We do not know what we are going to do in stage 2 yet, but they have set a date for it. That is very different from what Delors said in his report, when he stated clearly:
The conditions for moving from stage to stage cannot be defined precisely in advance: nor is it possible to foresee today when these conditions will be realised. The setting of explicit deadlines is therefore not advisable.
What a pity he did not stick to that advice, but tried to change it at the last meeting in Rome.
On the question of hostages, will the Prime Minister accept that many hundreds of families in this country, including my constituent Mrs. Maggie Ross, whose husband Alistair has been held hostage at a military installation for three months, will have listened with great care to what she said, and in particular to what she said about there being no question of negotiation? Many of those families will have been bitterly disappointed because, although they may understand her reasons, many of them fear that, where military adventurism is concerned, the lives of the hostages are expendable.
I always understand people's anxiety about relatives who are hostages. In my constituency I have perhaps been fortunate in that we were able to welcome home again a young girl aged 12. Of course one understands that anxiety. However, if we were to take it that we could never take action against a brutal dictator because he held hostages, we should never take action against such a dictator and he would be free to continue his ways. He would always take a few more hostages to prevent justice being done and to prevent territory and people's homes being recovered.
Would not my right hon. Friend agree that the prosperity of all the people within the European Economic Community is more likely to be achieved by the successful achievement of a single market without barriers than by dreaming dreams of a federal Europe, as the right hon. Member for Plymouth, Devonport (Dr. Owen) so courageously said earlier this afternoon? Will my right hon. Friend never stop reminding her colleagues in Europe that Britain has actually implemented more of the single market measures than any other country and that we have therefore been the best proponents of prosperity in Europe?
I agree with my hon. Friend. Part of the reason for founding the treaty of Rome was not only to bring down barriers within the six countries which joined it at the time, but to be an example to the rest of the world to bring down barriers without as well, so that we should genuinely have much freer trade and a much freer flow of trade to the benefit of trading countries and also to third world countries.
It is therefore vital that we complete the single market and the Uruguay round. We have got on fairly well with the directives. My hon. Friend's recollection is correct. We and Denmark have not only passed the directives but have implemented most of them. We have only 15 or 16 to implement, while Denmark has 15. As I have said, the record of the rest of the Community varies very much in spite of the grand words. When it comes to the practical deeds, they do not match up to the grand words. The chair was taken by Italy and Italy has yet to implement 62 directives. Perhaps that explains why we went to grand words and not to specific practical suggestions.
In one of the emollient passages of her statement earlier, the Prime Minister said that she believed that solutions could be found for the Community so that it could advance as 12. As the Prime Minister is aware, changes to the treaty are required in order to advance monetary and economic union. Those amendments to the treaty will come forward at the intergovernmental conferences in December. Is she now telling the House that she will not be using her veto power at those conferences?
We have been through one intergovernmental conference before. That was the one which led to the Single European Act, which the hon. Gentleman will recall. It started up with very grandiose and rather vague designs. It finished up as a very much more modest document which we were able to sign up to. I believe that that is what will happen in the intergovernmental conferences here. Many, when they look more closely at it, will not want to have a single currency unless they can have enormous transfers of money, and I do not think that those would be forthcoming.
Many will look at some of the other divestment of powers and not want to do that. Undoubtedly, there are some who are prepared to divest their powers and put them over to someone else. They would prefer not necessarily to have the responsibility for some of the difficult things that have to be done. I believe that most of the nation states would prefer to keep their nationality and their national identity. Therefore, there will be a great deal of negotiating. As the hon. Gentleman said, we can have a new treaty only if all Parliaments ratify it.
Does my right hon. Friend accept that a single European currency is not a soft option but a harsh option and that the introduction of a single currency, without first achieving a single European market and then a single European economy, would be an extremely harsh option? Does my right hon. Friend accept also that it would benefit neither the consumer nor the producer fairly but merely the bureaucrat, and therefore lead us down a trail towards not only a federal Europe but an undemocratic, bureaucratic federal Europe?
I agree wholly with what my hon. Friend has said. When the discussions about the currency and the economic and monetary union get to the Finance Ministers, they will be very much more practical than some of the Heads of Government are about these matters. I am sure that our colleagues will have heard my right hon. Friend the Chancellor say many times that many of his colleagues are very worried about any suggestion of a single currency before we have almost a common economy or an economy with about similar prosperity. It just would not work. Once one goes to a single currency, all the differences would come out in heavy unemployment and in massive movements of people. [Interruption.] Socialist countries such as France already have much heavier unemployment than we have. All the differences will come out in even heavier unemployment and massive movements of people from where they had previously been living to where they work.
Since today the Prime Minister is a great advocate of democracy, will she allow service men and service women the democratic right to join a trade union? If she agrees with that right, she will find that service men and service women in the Gulf would vote against war in that area because they believe in negotiation rather than confrontation.
Does my right hon. Friend agree that in the past 20 years or so many people, particularly young people, have been persuaded to support the Conservative party instead of the Labour party because of our commitment to Europe? In that context, does my right hon. Friend agree that there is increasing sadness among those people about this country's apparent inability to respond in a positive manner to any proposals involving political and financial convergence and environmental issues?
On environmental issues, my hon. Friend will see that we reached agreement yesterday, and he will find that 95 per cent. of our rivers are rated good or fair, which is better than any other European country's record. We have a programme for looking after our beaches and also for improving the quality of water—about £28 billion. We are the only country with such a programme. My hon. Friend will find many places in Europe which have nothing like the quality of water that we have.
My hon. Friend will find also that the question is not whether we are Europeans and key Europeans, as we are, but what sort of Europe we want—that is, whether we want a democratically responsible Europe, or whether we want a Europe of nation states which freely co-operate together. That is every bit as honourable and worthy an objective as trying to make it less democratic and trying to dissolve one's natural loyalties to one's country.
Is it not true that, on Europe, the Prime Minister is in the minority in the Cabinet and is not so much the leader of the Tory party on these issues as the leader of one of its many factions? On the Gulf, does the Prime Minister agree that all those who talk about attempts to resolve conflicts and difficulties arising from the invasion of Kuwait by negotiation, surely what has been demonstrated over the past weekend is that all the efforts of the Soviet representative in his mission to Iraq to try to persuade the dictator to give concessions have totally failed? There is not the slightest sign that Saddam Hussein intends to withdraw from Kuwait. Why should one of the most notorious of all dictators, who has committed a criminal act in the invasion of Kuwait and who has committed untold crimes and atrocities in Kuwait since 2 August, be allowed to get away with it?
Many hon. Members and, I suspect, many people in Europe will have the most profound respect for the discipline and informed pragmatism that the Prime Minister brings to the discussion of these matters. Does she agree that there is a great danger that the vision of a united Europe bequeathed to us by the great founders, including Winston Churchill, whom I believe was a federalist, could be at best blurred and at worst damaged if, in contemplating the complex, difficult procedures of integrating Europe we dare not consider at any stage any change, however small and however slowly achieved, in the balance of powers between this House and the European Parliament?
That is not quite correct. We went in on the basis that was clearly set out—that we were in fact not in any way going to lose our national identity and—if my hon. Friend looks back over the debate, nor would any strong national interest be overriden. That was the fundamental basis on which we got a majority of eight for the Second Reading of the Bill which took us into the Community. I believe that that was a very honourable way to go about it, and I believe that it is a very honourable objective to keep our national identity and have co-operation.
When it came to things like wanting a single market, if we were to get some of the directives through, we had to get a little bit more majority voting. That particular batch of majority voting under that single European Act, should cease when we have the single European market. Apart from that, it is better if we go forward by agreement between us all, because we have to get agreement anyway for changing the treaty. As my hon. Friend knows, we have recently completed the European monetary system by joining the exchange rate mechanism. That is for us an extra discipline for keeping down inflation, and it is also very welcome in Europe.
During her discussions on the Gulf when, presumably, the Prime Minister was pressing for the Baghdad leadership to pay compensation for war crimes in the destruction of Kuwait, did the Prime Minister make any proposals to recompense the victims of the other illegal occupation in the middle east—that of the West Bank and Gaza? In her concern—I paraphrase the Prime Minister—for the unity of the international community on United Nations decisions, did she press the case of the Palestinians for decades have been having their land stolen, their homes demolished and their citizens killed? Why is Kuwaiti blood more precious than Palestinian blood? Is it because it is tinged with oil?
The hon. Lady will be aware that both situations are extremely serious and that both are very different. Kuwait had never threatened to attack or attacked anyone. She wanted only to live in peace. Unfortunately, Jordan attacked Israel. I think that she was begged not to, but she did, and that finished up by Jordan losing part of Jerusalem and losing the West Bank. The West Bank is not annexed to Israel. It has been the subject of many United Nations resolutions, some of which the Arab world did not accept for a long time, but which have been accepted more recently, in the past two years, by the Palestinians and Mr. Arafat. We have been working together, as has the Community for years, from the Venice declaration, to try to find a solution to that problem. It is not easy. It is easier to talk about it than to find a solution on the basis of resolution 242, but we continue to do so.
If the hon. Lady looks at the communique, she will see that we discussed this matter and that we are taking forward our previous policies. When this matter is settled and when Kuwait has been restored to the people of Kuwait, we shall continue to go ahead on the basis of our previous policy, which is negotiation. We have previously said that we would be in favour of an international conference so that the previous policies could be taken forward.
Does my right hon. Friend accept that many people both here and elsewhere in Europe are concerned about the predominance of Germany in the European Community, but that the answer does not lie in a federal Europe because the majority voting system already contains Germany, and to move down the federal route and to go for a central bank would do no more than ensure that that central hank was dominated by the economic realities and the strength of the deutschmark? Does my right hon. Friend agree that we are far better off making sure that we have a wider Europe in which we have a balance of interests, including people from east, west and central Europe?
I am totally against a federal Europe and believe that the overwhelming majority of people in this country are against a federal Europe. We should not take any steps in that direction, but should uphold co-operation between our peoples. Of course, Germany will continue to be a very important country in the Community. Chancellor Kohl is always very European in his approach and very generous in his help to the eastern European countries. It is better that we negotiate with Germany as it is now and with the United Kingdom as we are now and that we do not try to have a kind of united states of Europe. It is one thing to have a United States of America from a newly settled country, but it is a different thing for ancient nation states, each with its own traditions.
Although the Ulster Unionist parliamentary party sits at present on the Opposition side of the House, is the Prime Minister aware that we are shocked at the somersault of policy that has taken place in the British Labour party, which is now prepared to sacrifice the democratic rights of the British people and to accept instead economic policies that are imposed by a bureaucracy based outside this country? In her statement the Prime Minister said that the Government's policy was to oppose a single currency, but I notice that she is now qualifying that with a new adjective and referring to an "imposed " single currency. Has the Prime Minister really shifted her position slightly, and is she now saying that she is prepared to negotiate for an agreed single currency? The matter needs to be clarified.
If the right hon. Gentleman looks at our debate, he will find that it was clearly spelled out that we have proposed a hard ecu, which will be inflation-proofed, and that that is a parallel or common currency and not a single currency. However, by choice, if people used it, it could evolve into a single currency. Before any single currency comes about, it would be for future Parliaments and future generations to decide if they wished to abolish the national currency. This Government are against a single currency, but it is not for us to bind our successors in 20 or 30 years' time.
What evidence does my right hon. Friend have that the bulk of industry and business, upon the success of which our national livelihood depends, is in any way reluctant to see the ordered emergence of a single currency as a logical consequence to the completion of the single market?
A single market and a single currency are two totally different things, as a short study of them would reveal. Some of the great manufacturing nations, such as Japan, the United States and Switzerland, do not have a common or a single currency with anyone else. They have a single currency of their own, and that does not hinder or affect their manufacturing position. Neither does it affect our position as the greatest financial centre in Europe that we are not like the yen, but we are sterling and that we are not like the dollar, but we are sterling. We trade in them all.
Surely the Prime Minister understands that virtually every Member of the House of Commons agrees about the absolute necessity of securing Iraq's withdrawal from Kuwait. Does she agree that the unanimous Council declaration on the Gulf crisis, with its references to "a peaceful solution" and to the importance of maintaining consensus in the United Nations Security Council is to be warmly welcomed? Is it not clear from the declaration that the Governments of the European Community would not support early military action led by the United States? Can the right hon. Lady therefore give us the assurance that the Government's policy will be consistent with that declaration and that they will give mandatory economic sanctions proper time to work?
This matter was dealt with when we debated it in the House. We do not believe in letting any aggressor know what action we propose to take or when. We already have full legal authority under article 51 and through the request of the Emir of Kuwait. The position would undoubtedly be best resolved if Saddam Hussein withdrew totally from Kuwait, if the legitimate Government of Kuwait were restored and if Iraq agreed to pay compensation. Through the United Nations, we could then negotiate with Saddam Hussein about ending the manufacture of chemical, biological and nuclear weapons and about Iraq having a much smaller armed force so that we would never be put in the same position again. Whether this matter can be resolved peacefully depends totally on Saddam Hussein unreservedly accepting the United Nations resolutions.
On a point of order, Mr. Speaker. Yesterday we spent five and a half hours on dogs, but now an hour and twenty minutes seems to be enough to spend on the most important thing that is likely to happen to this country in this generation. Why can we not have a proper sense of balance? Why have you cut short this important issue, when dogs were worth five hours?