European Economic Community

1962-06-07 - Harold Wilson


The debate yesterday has, I think, thoroughly justified our demand that the House should debate the Common Market before the Brussels negotiations reach the crucial stage. I think it is fair to say, first, that the debate has shown a great deal of realism. On the one side, there has been far less of the suggestion that we must go in, at whatever cost—that this will solve all our economic problems—and that we shall be bankrupt if we do not go in. Equally, there was little of the completely anti-European xenophobic line that we sometimes get. This was exemplified the other day by a gentleman who said during the very long cold spell, "I knew we would get all this cold weather once the B.B.C. started giving temperatures in centigrade".

I think that the debate has justified, too, the view that we on this side of the House have taken, as re-affirmed by my right hon. Friend the Leader of the Opposition yesterday, that it really is senseless to decide our attitude to Britain's entry until the terms are known. We have the speech yesterday of the Lord Privy Seal, which was a very far cry from the wishful optimism of last August when Ministers could say that it really was not going to be a question of having to choose between Europe and the Commonwealth. That was clearly said last August. Now the right hon. Gentleman, after many months of hard negotiations, knows perfectly well that such a choice may become inescapable. My right hon. Friend showed, quite clearly on which side, in his view, if that choice had to be made, this House would have to come down. But while the negotiations still continue, while we have still not reached a point of no return, it is absolutely right that the House should debate these issues and make clear our anxieties and the safeguards on which the Government must insist. So far from weakening the hands of the right hon. Gentleman in negotiations, as he seemed to suggest, 677 he should realise not only that the House has a right and a duty in this matter, but that his hands will in fact be immeasurably strengthened by this debate.

I cannot avoid the feeling that the Government have negotiated throughout from weakness. First, they were panicked into their decision last July by the economic crisis. Secondly, they have talked all along as though there were no viable alternative. Once negotiations start from that assumption our whole bargaining position and ultimate freedom of decision are lost.

The debate has ranged over a very wide field—sovereignty, law, foreign policy and agriculture. I should like to begin with the purely economic question, because there was an idea about a year ago, when the Prime Minister made his announcement, that these were purely economic negotiations. Most people have now turned their back on that idea. I shall talk about that in a moment. So far in the debate there has been far less extravagant talk about the economic effects of going in—the idea that British industry is so incurably flabby and degenerate that only the cold douche of European competition will restore us to vigour and vitality.

We must face the fact that in the three years from 1958 to the first quarter of 1962, owing to the Government's policy of liberalising imports of manufactured goods, the import of those goods rose from the monthly average of £26½ million to £52.7 million in the first quarter of this year. That means that they were practically doubled. There was a cold douche of imports of manufactured goods without any notable effect on our competitiveness. I do not know whether it is suggested in any quarter that we are likely to see a much bigger build-up of imports of manufactured goods from Europe, but what we have had so far, particularly from America and Europe, has not had very much effect.

I think there is more general agreement that, in the long term, while on balance Britain's industry may gain, which is the view I take, we also face a serious risk that our industrial cost structure will be raised through dearer food and the effect of dearer food on wages, and that in the short-term we are 678 virtually certain to face rather serious financial consequences, especially as British investors and speculators become free to transfer their capital abroad. In terms of trade, I feel that we face a bigger danger from diversion of investments if we do not go in than from diversion of trade. Certainly we have to balance against any possible gains in the Common Market—likely gains but limited—the inevitable loss of markets in the Commonwealth and certainly in East-West trade as well.

I still take 'the view, too, that while some of our more progressive business men are ready and keen to take advantage of longer runs in a larger market, there are still many employers who are looking to the Common Market primarily as a means of strengthening their hands in a show-down with labour. [HON. MEMBERS: "Oh."] It is no good groaning about it. Hon. Gentlemen opposite really must read the report issued by the British Employers' Confederation last August. They will find full justification for what I have just said.

When one looks at the whole sorry, miserable history of the pay pause over the last year, I wonder whether there is not some reason for thinking that there are some Ministers at least who regard Europe as the means of enforcing the general wage freeze which the Government have been trying to get ever since the Prime Minister was Chancellor of the Exchequer.

The whole House knows, as we have argued many times—there is no disagreement about this, I am sure—that in Europe or out of it this country can achieve economic strength and virility only by our own efforts, by our skill, ingenuity and our capacity for organisation, and also by our sense of purpose and the ability to manage our national economic affairs with a good deal more intelligence and vision than have been manifest in the last few years. I am glad that 'the Lord Privy Seal yesterday stressed the point that there will be opportunities for us in that market—but only opportunities.

Last year, when we stressed the need for Britain to be free to plan her industry and her economic expansion, that was regarded by hon. Members opposite as rather making a party point. 679 There is also the point that now the Prime Minister tells us that he is going to fight the next election on "Conservative planning works". Indeed, he has gone further. In his message to the Conservative candidate in West Derbyshire, he followed his earlier take-over of the Gladstone and Disraeli tradition by putting in a bid for the 1945 Election spirit. The Conservative Party now represents itself in that way. I can appreciate the Prime Minister's trying to get on the band wagon. We are making not a party point but an all-party point when we come to the question of planning. It is we who have always put forward the conception of planning. The Conservatives are now moving in this direction.

The plain fact is that the whole conception of the Treaty of Rome is anti-planning, at any rate anti-national planning in the sense that either hon. Members on this side of the House or the Government understand it with the National Economic Development Council. The title and chapter headings of Part I of the Treaty and the whole philosophy of the relevant articles show a dedication to one principle, and that is the principle of competition. Herr Hans von der Groeben of the Commission says: "The Treaty is founded on the principle that the course of economic events in the Community is to be guided by competition." What planning is contemplated—a tremendous amount of planning is involved in the Common Market—is supranational, not national, but it is planning for the one purpose of enhancing free competition.

Let us look for a moment at some of the instruments of national planning in Which some of us in this House believe. First of all, there is public ownership. The Lord Privy Seal rightly says that there is nothing in the Treaty of Rome to prevent public ownership as such. I agree. But one cannot then use the public sector for planning purposes, for the establishment or enforcement of priorities, for anything which involves discrimination. The Treaty says: "Member States shall in respect of public enterprises and enterprises to which they grant special or exclusive rights neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular" 680 "to those rules provided for in Article 7 and in Articles 85 to 94 inclusive." In other words, one can have the form but not the substance of purposive public ownership.

My hon. Friend the Member for Houghton-le-Springs (Mr. Blyton) last night drew attention to recent decisions of the Iron and Steel Community. I would go further. I do not think that the Minister will deny this. Even the Government's chosen instrument for regulating the steel industry, an instrument which we regard as grossly inadequate—the Iron and Steel Board— could not, in fact, survive if we joined the Common Market. I think this view is now generally accepted, but the Lord Privy Seal will perhaps give us his own view.

I turn to the distribution of industry. This is a vital control for securing full employment, which we shall be debating the day that we come back. My fear is that our powers, such as they are, for distribution of industry could become a dead letter. A grant of the size given by the Government to get Fords to go to Merseyside or B.M.C. to Bathgate would undoubtedly be regarded not merely as a location inducement but as a State subsidy favouring British car production. While industrial development certificates would remain, one must ask what use they would be if a firm which was refused permission to develop in London or Coventry were then free to go anywhere it wanted in Western Europe.

Take the question of take-over bids. At the last election, faced with a major take-over scandal in the middle of the election, the Government promised urgent reform. Subsequent action has proceeded with rather elephantine caution. There is now, I suppose, rather less than a 50/50 chance of action being taken before the next election. But we must ask whether under the Treaty of Rome we should be free to take action to regulate take-over bids. I and my hon. Friends have proposed that where there are important take-over bids or mergers affecting some vital industry the State should have the right to interfere, and perhaps veto if a foreign concern sought to take over a vital British interest or to sanction, with safeguards for the public interest, of course, or in other cases where a monopoly was 681 created, public ownership to ensure that it was a public and not a private monopoly.

Looking at the Treaty of Rome, I feel that these measures would be precluded in many important cases because of the freedom of establishment guaranteed by the Treaty. Equally, our proposal from this side of the House for new publicly-owned industries based on new scientific research, extension of the powers of N.R.D.C. to cover manufacturing, research and development contracts in the civil field, and so on, might well fall foul of the provisions about subsidies and State intervention. Even Conservative specifics, such as the 7 per cent. Bank Rate that we get halfway between elections, the credit squeeze and other deflationary exercises, would have to be subject to challenge in the Common Market, so—I think this is vital to both parties—would emergency action to control speculative capital movements, because in my view purposive direction of our national economic affairs without power to control capital movements is an illusion. What would happen would be that the price mechanism and the markets of the City would then reign supreme.

I will spend only a moment on the question of tax. We are enjoined in the Treaty—I know it involves a unanimous vote in this case, though I would feel that its importance will be over-ridden by the rather vague provisions of Article 101—to harmonise our system of indirect taxation. This not only means a sales tax, which has been rejected by every Chancellor, Labour and Tory; it will also certainly mean a drastic re-deployment of our entire tax system in favour of indirect against direct taxation and regressive against progressive taxation.

Even today—we have criticised this— 47 per cent. of our Revenue in this country comes from direct taxes against 24 per cent. in France, 26 per cent. in Italy, and 39 per cent. in Germany. In Britain half our social services are financed out of general taxation, in Germany 15 per cent., in France 10 per cent. and in Italy 7 per cent. The question has been put—I do not know the answer to it; I hope the Lord Privy Seal will tell us—whether our Health 682 Service could survive financed as it is today.

The question of selective investment allowances would be ruled out despite their relevance to purposive investment policies. As to estate duties—I know there is no universal enthusiasm for this form of taxation on the other side of the House, and many of us have said that it has become rather a voluntary tax—with the higher rates that we levy compared with many European countries, once the freedom of capital movements was introduced, they would become virtually a dead letter. I know that that will not worry some hon. Members opposite.

So I think it is clear that planning as we envisage it, and even as hon. Members opposite see it, would be subject to severe restriction under the Treaty of Rome. I think the House is entitled to be told by the Ministers who are going to speak today what protocols or reservations the Government are insisting on, or are they imperceptibly moving to the concept of supranational planning by a talented but, in the constitutional sense, irresponsible commission in Brussels?

So far I have been talking of Government responsibility for planning. But what of the responsibility of this House for our economic legislation? There are important questions that we have to look at here. I do not claim to know the answers. If my interpretation of the Treaty is wrong, I am sure the Lord Privy Seal will tell us. I think it should be frankly recognised that acceptance of the Treaty might well mean a fundamental change in the position of Parliament. We are committed under the Treaty to assimilate our code of law to the requirements of the Treaty. Under Article 169, if a member State fails to comply with an obligation to alter its code of law, the Commission may refer the matter to the court, and under Article 171: "If the Court of Justice finds that a member State has failed to fulfil any of its obligations under this Treaty, such State shall take the measures required for the implementation for the judgment of the Court." Article 189 refers to the power to make regulations, directives, decisions, recommendations and opinions. I am concerned here with regulations, some of 683 which, on my reading, can be made with a simple majority, with no veto. The Treaty provides that the "Regulations shall have a general application. They shall be binding in every respect and directly applicable in each member's State." I emphasise "directly applicable". Regulations made in Brussels, then, become part of our domestic law. This is what I hope we shall have explained. We should like to know how this would work under the conditions of our Parliament.

It will, of course, require legislation. To that extent we shall go through, at any rate, the motions of preserving the sovereignty of Parliament in these matters. But the Government must tell us how they and the Six interpret this requirement. Is it the proposal that we pass a blanket Act saying that hereafter all regulations made in Brussels shall become British law, enforceable in British courts without even a nominal scrutiny by the House? Is that proposed? Since two entirely different systems of law are involved—the right hon. and learned Gentleman has made this point before—we should like to know how it would work out in practice. Or does it mean that we bind ourselves in advance immediately to legislate in order to give effect to these regulations? This might cause a lot of difficulties.

I see the Leader of the House looking a little anxious. He will not be there much longer, and so he does not have to worry. Suppose there was, for example, a decision promulgated in the last week before our Parliamentary Recess. I do not often feel sympathy for the Patronage Secretary, but I should have thought that he would be in a very difficult situation. Suppose a regulation were promulgated during a Recess. Should we have to be recalled? Since we are bound to give effect to regulations—we are not "asked" to give effect; we are "bound" to give effect —does it mean, as it appears to, that Amendments in Committee or on Report will be inadmissible, out of order and precluded; or is it to be done, perhaps by Statutory Order? These are the points that we ought to know about.

If it is done by Statutory Orders, would they require an affirmative resolu- 684 tion? But has that phrase any meaning if they cannot be negatived? Alternatively, could they be prayed against? If they were successfully prayed against, what advice would Ministers then have to tender to the Sovereign on receipt of such a Prayer, when the Sovereign is a signatory of the Treaty, after the House had carried a Prayer? Before we are rushed into a decision this July—and this is another reason for emphasising the wisdom of what my right hon. Friend the Leader of the Opposition said yesterday—we are entitled to have these questions answered. There may be fundamental changes in the position of Parliament over a very wide range of our legislation, and as Members of the House we are trustees not only for our constituencies but trustees for all who have sat and who may hereafter sit in this place.

I do not intend to weary the House by going into all the five conditions which we have laid down. They were very fully dealt with by my right hon. Friend yesterday. For that reason, I do not propose to repeat what he said about E.F.T.A., and I hope that the House will excuse my hurrying rather rapidly over the subject of agriculture on which last night we had a conscientious, valiant and even informative speech by the Minister of Agriculture. We were all grateful to him for the trouble he took to explain these very difficult problems.

Perhaps the right hon. Gentleman will forgive me for drawing a contrast between his speech and that of the Lord Privy Seal. Whereas the Lord Privy Seal said that he would not deal with confidential matters which were subject to negotiations, the Minister of Agriculture drew aside the veil for us and in ringing tones proclaimed his views of what should emerge from the negotiations. The Lord Privy Seal has talked in terms of problems to be solved—he is a cautious man—but the Minister of Agriculture has talked in terms of categorical imperatives and other things which must be accepted in the negotiations. This, that or the other thing must be done, whether in terms of price reviews or the safeguarding of horticultural imports and the rest. They are brave words. Have they any gold backing? Have the Six agreed, and what happens if they do not? We are, of course, grateful for his 685 elucidation of these mysteries of the E.E.C. agricultural agreements and the distinction—he called it sophisticated— between target prices, import prices, guide prices, threshold prices, sluicegate prices, reference prices, intervention prices and the rest—I am not claiming to be exhaustive. His intervention on this was very helpful, but the plain truth is —[Interruption.]—does the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) understand these things?

I intend to come to that point in a few minutes. The hon. Member has a point there.

After forty days and forty nights of agricultural negotiations in the Six, with the clock and the calendar stopped at five minutes to twelve, 31st December, 1961, after that agreement had been reached, it took the Six nearly two months to agree on the exact drafting of what they thought they had agreed, and impatiently we waited in the House for the English translation; and after sax more weeks it was vouchsafed to us; and now we have it, for my part it might as well have been in Sanskrit. I have the feeling that that was the Minister of Agriculture's first reaction when he saw it. Yet we all know that certainly the future of British agriculture and horticulture and the future of Commonwealth food imports and so of Commonwealth trade in general depend on the interpretation of those tablets.

I should like to put one question to the Minister of Agriculture. Of course we recognise the different treatment in the agricultural arrangements for what we in this country call deficiency payments and what we call production grants. Can he tell us what is the position with fertiliser subsidies and the lime subsidy? Will they be allowed, or are they to be on the index of prohibited practices? Can the right hon. Gentleman tell us?

The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames)

At the moment, all the countries within the Six have certain grants to agriculture, but in the fullness of time the Community is to have to decide what types of grants will be eligible for payment 686 and which will not, and these will apply to the Community as a whole.

§ Mr. Wilson

That answer was very helpful, and I am grateful to the right hon. Gentleman. In other words, we do not know. What is important is to realise that we do not know, because it means that in this respect, too, we are being asked to sign on the dotted line to be told afterwards what it is we have signed.

I will now turn, as my right hon. Friend did, to the problems of Commonwealth trade. I shall certainly not repeat all that he said, although he was clearly right, as was the Lord Privy Seal, to say that there was no one Commonwealth problem, but six, or eight, or ten, or twelve depending on how they are defined. For British Colonial Territories and ex-Colonial Territories it is, as we have repeatedly urged, utterly inconceivable that we should accept a solution which treats those territories less favourably than ex-French or ex-Belgian territories, yet here again there is still no agreement within the Six on their policy for associated overseas territories beyond the end of this year.

In this connection, I should like to refer briefly to two special problems exemplified by the West Indies, although not confined to that area. The first is that of the Sugar Agreement, which we raised in the debate a year ago. Destroy that and we have undermined the prosperity and the very life of important British territories; and it would be quite wrong to talk about the Communist menace and terrorists and the rest of it if we sign a treaty which in this respect would create the very conditions in which Communism could so rapidly breed and develop. Nor, I hope, shall we be answered by pious references to international commodity agreements. It was the Labour Government which negotiated the International Sugar Agreement, 'but we still needed the Commonwealth Sugar Agreement to supplement and to give security to the sugar-producing areas of the Commonwealth. Even the present Government, when Tory freedom triumphed and public monopoly was replaced by private monopoly, had to continue the Sugar Agreement with Heath Robinsonian arrangements of levies and subsidies and rebates. The Commonwealth 687 Sugar Agreement is still in force and vital, perhaps we shall be told by the Secretary of State for Commonwealth Relations, but if Article 234 has any meaning it would have to go, and we want to know what the Government are going to do about it.

The other question is that of oil, and here I think of Trinidad, 80 per cent, of whose export earnings come from oil and oil products, but also of Borneo and other areas of the Commonwealth. We remember that in 1956 the Prime Minister presided over the sale of the Trinidad Oil concern. I shall not repeat the arguments which we had then. But one point made by the Prime Minister, then Chancellor of the Exchequer, was that he was agreeing to this sale only on condition that the production and the finding of oil there was developed very rapidly as a result of the sale. What we want to know is how that commitment is to be honoured if so vital a market in Britain and Europe—I think that it accounts for about one-third of Trinidad's oil exports—is lost. On this we shall expect an answer this afternoon. There may be an answer and we hope that there is, but we should like to know more about it before we commit ourselves.

My right hon. Friend dealt with the problem of Commonwealth manufactured goods. All of us feel that the answer to the problem of industrial products from low-wage countries, as he said, is a widening of the market in all the advanced countries of the world. In this connection, although I disagree with much of what he has said about the Common Market, I very much welcome the initiative taken by Mr. George Ball, the American Under-Secretary of State, in G.A.T.T. to get the world-wide textile agreement, and we wish it well.

The other point raised by my right hon. Friend was the immediate reaction of the Australian and New Zealand Governments to last week's agreement about manufactured goods. I would agree that probably this is a decision on which we could not die in the last ditch. I know that this view is not fully shared by hon. Members sitting on the Front Bench below the Gangway opposite, but some hon. Members opposite have been finding last ditches in which to die for years, 688 and this is another. This is what the Common Market is really about, and if we decide that the terms are right for going into the Common Market, I think we must accept the fact that because it is primarily an industrial customs union at any rate this problem is one which has to be faced. What we are concerned to ensure is that this should not become a precedent for the settlement of the problem of Commonwealth agricultural products.

We must make it plain again that a temporary easement, a temporary relief, is not a solution. We believe Commonwealth foodstuffs to be almost the most vital issue, at any rate on the economic side, but we are not concerned with the choice between slow strangulation and sudden death, not with the process or time in which we reach an ultimate solution, but with what the ultimate solution is. Australian and Canadian grain and meat and New Zealand dairy produce are the most mentioned, but we do not need to remind the Government of other important Commonwealth products. I remember that when we had responsibility for these things the Australian Government attached almost equal importance to dried fruits and canned fruits as to some staple products. Canadian apples represent the mainstay of important communities in Canada, and we must not think entirely in terms of big volume of trade.

We have said that the test is not words, not a question of formulae and solutions, but whether x years from now, whatever x is, the volume of these goods from Commonwealth countries imported, if not into Britain, at any rate into an enlarged community, is maintained and preferably increased. This is the test and there is no evading it. Here we have seen the Government pushed from one untenable position to another. First, we were to secure an agreement maintaining the position of Commonwealth producers in the British market. That was the hope last August. The Government have slender hope of that now, and I do not believe that they would expect that ten years from now, if we joined the Common Market, there would be as much Commonwealth temperate foodstuffs coming to the country as now.

689 Then we had the second scheme. It was said that joining the Six would mean some replacement—a substituted replacement—of Australian grain or meat, or New Zealand dairy produce, by European produce, so that we were seeking an equal compensating outlet in Europe. The Government are absolutely right to seek it, but this hope seems to be growing dim. Now the Government are putting up a third proposal and we have seen the activities of the public relations officers this week.

It is now said that we shall expand our domestic market as a result of joining the Common Market and that although the Commonwealth countries might have to face losing part of the share that they have in the market, expansion of the market would make up for that. In other words, what we are asked to believe is that although the proportion of Commonwealth wheat Which is coming here will be reduced by the working of the import levy and replaced by French wheat, nevertheless, as a result of our likely prosperity, we shall so stuff ourselves with bread and biscuits and cake, that the total volume coming
from the Commonwealth will be maintained. This argument would not fool a seven-year-old child and certainly has little hope with Mr. Menzies.