(c) crown copyright
Catalogue Reference:CAB/128/56/10
Image Reference:0001
rtS D O C U M E N T I S T H E P R O P E R T Y
OF HER BRITANNIC MAJESTY'S
GOVERNMENT
COPY NO
;C(75) 10th
85
inclusions
CABINET
C O N C L U S I O N S of a M e e t i n g of the Cabinet h e l d at 10 D o w n i n g S t r e e t o n T H U R S D A Y 27 F E B R U A R Y
1975
at 10. 30 a m P R E S E N T
The Rt Hon H a r o l d W i l s o n
Prime
;he Rt Hon E d w a r d S h o r t M P
Lord P r e s i d e n t o f t h e C o u n c i l
MP Minister
The R t Hon James Callaghan
Commonwealth
he Rt Hon L o r d
Lord C h a n c e l l o r
Elwyn-Jones
(Items
JThe Rt Hon D e n i s H e a l e y
MP
S e c r e t a r y o f S t a t e f o r F o r e i g n and
Affairs
The R t Hon R o y Jenkins M P S e c r e t a r y of State f o r the H o m e D e p a r t m e n t ( I t e m s 1-4) 1-4)
MP
Chancellor o f t h e E x c h e q u e r
The R t Hon Anthony Crosland M P
S e c r e t a r y of State f o r t h e E n v i r o n m e n t
The Rt Hon M i c h a e l F o o t
The R t Hon E r i c V a r l e y
Secretary o f State f o r
MP
Employment
S e c r e t a r y of State f o r
The R t Hon S h i r l e y W i l l i a m s M P
Secretary of State f o r P r i c e s and
Consumer P r o t e c t i o n
The Rt Hon A n t h o n y W e d g w o o d B e n n
Secretary o f State f o r I n d u s t r y
The Rt Hon R e g i n a l d P r e n t i c e
MP
Secretary of State f o r E d u c a t i o n and
MP
Energy
The R t Hon Barbara Castle M P
S e c r e t a r y of State f o r S o c i a l S e r v i c e s
MP
The R t Hon Roy Mason
S e c r e t a r y of State f o r
MP
Defence
The R t Hon William R o s s
S e c r e t a r y of State f o r
MP
Scotland
Science
The Rt Hon John M o r r i s Q C
Secretary o f State f o r
Wales
MP
The R t Hon Merlyn R e e s M P
S e c r e t a r y of State f o r N o r t h e r n I r e l a n d
The Rt H o n F r e d P e a r t M P
The Rt Hon Harold L e v e r
Minister o f A g r i c u l t u r e ,
C h a n c e l l o r of the Duchy of
Fisheries
jnd Food
(Items
Lancaster
1-4)
the Rt H o n L o r d S h e p h e r d
T h e R t Hon R o b e r t M e l l i s h
Lord P r i v y S e a l
Parliamentary Secretary,
T h e R t H o n John Silkin
MP
MP
Treasury
MP
M i n i s t e r f o r P l a n n i n g and L o c a l
Government
SECRETARIAT
S i r John Hunt
Mr
Mr
Mr
Mr
Mr
Mr
P
B
H
P
J
R
D Nairne
C Cubbon
F T Smith
Benner
Roberts
J 0'Neill
(Item 4)
(Item 4)
( I t e m s 1, 2 and 5 )
( I t e m 1)
(Item 5)
(Items 2-4)
CONTENTS
Item
Subject
1
PARLIAMENTARY AFFAIRS
2
FOREIGN
Page
1
AFFAIRS The Chilean Debt
2
3
COUNTER-INFLATION POLICY
3
4
EEC
RENEGOTIATION R e g i o n a l A i d s and S t e e l
5
STATEMENT
5
O N T H E D E F E N C E E S T I M A T E S 1975
ii
s y
r
10
PARLIAMENTARY
1.
T h e C a b i n e t w e r e i n f o r m e d o f t h e b u s i n e s s t o b e t a k e n i n the
AFFAIRS
H o u s e of C o m m o n s d u r i n g the f o l l o w i n g w e e k .
It w o u l d b e
n e c e s s a r y t o m a i n t a i n a running t h r e e - l i n e W h i p throughout the
p r o c e e d i n g s on t h e R e p o r t S t a g e o f t h e F i n a n c e B i l l , w h i c h w o u l d b e
occupying the H o u s e f r o m 3 t o 6 M a r c h ,
It w a s e s s e n t i a l t h a t t h e
B i l l s h o u l d r e a c h t h e Statute B o o k n o t l a t e r than 14 M a r c h ; but i t
w a s u n c e r t a i n h o w f a r the g o o d w i l l of the Opposition could now be
r e l i e d on and t h e r e f o r e t h e t i m e t a b l e m i g h t p r o v e v e r y d i f f i c u l t .
It
w a s r e p o r t e d that i t w o u l d be d e s i r a b l e to find t i m e f o r the C o m m o n s
c o n s i d e r a t i o n of t h e L o r d s ' a m e n d m e n t s t o t h e S o c i a l S e c u r i t y
Benefits Bill,
U n t i l t h e s e had b e e n dealt with it w o u l d not be
p o s s i b l e to f i n a l i s e the S o c i a l S e c u r i t y C o n s o l i d a t i o n m e a s u r e
although this ought t o be p u b l i s h e d in advance of the Second R e a d i n g
of t h e B e t t e r P e n s i o n s B i l l , w h i c h , f o r o p e r a t i o n a l r e a s o n s , s h o u l d
n o t t a k e p l a c e l a t e r t h a n t h e w e e k b e g i n n i n g 10 M a r c h .
The Cabinet
w e r e h o w e v e r i n f o r m e d t h a t t h e r e w o u l d b e g r e a t d i f f i c u l t y in f i n d i n g
the n e c e s s a r y t i m e d u r i n g the f o l l o w i n g w e e k ; m o r e o v e r , t h e r e
w e r e s i g n s that s o m e r e a r r a n g e m e n t o f t h e b u s i n e s s t e n t a t i v e l y
p l a n n e d f o r t h e w e e k b e g i n n i n g 10 M a r c h m i g h t p r o v e n e c e s s a r y .
2.
T H E C H A N C E L L O R O F T H E E X C H E Q U E R s a i d t h a t in t h e
p r e v i o u s y e a r t h e C a b i n e t h a d a g r e e d t o t h e c o n c l u s i o n o f an
a r r a n g e m e n t t o r e s c h e d u l e C h i l e ' s d e b t s f o r 1973 a n d 1 9 7 4 .
He
p r o p o s e d that w e should r e f u s e t o f o l l o w a s i m i l a r c o u r s e t h i s y e a r .
I n f l a t i o n i n C h i l e a p p e a r e d r e c e n t l y t o h a v e b e e n r u n n i n g at a b o u t
600 p e r c e n t a y e a r .
T h e C h i l e a n r e g i m e w e r e c o n c e r n e d about
international v i e w s of their c r e d i t - w o r t h i n e s s .
If we could
p e r s u a d e s o m e of the o t h e r W e s t e r n c r e d i t o r s , p a r t i c u l a r l y
G e r m a n y , to j o i n u s i n r e f u s i n g t o e n t e r i n t o a r e s c h e d u l i n g
a g r e e m e n t this y e a r , C h i l e ' s c r e d i t w o u l d b e a f f e c t e d in the e y e s
o f t h e W o r l d B a n k and o t h e r i n t e r n a t i o n a l o r g a n i s a t i o n s .
This
c o u l d p r o v i d e u s w i t h a m e a n s o f p r e s s u r e on t h e C h i l e a n r e g i m e
to amend their oppressive domestic policies.
T h e amount of m o n e y
w e w o u l d f o r g o in the c u r r e n t y e a r w o u l d b e only o f the o r d e r of
£1 m i l l i o n .
W e would not be p r e c l u d e d f r o m r e s u m i n g rescheduling
a r r a n g e m e n t s next y e a r if this then s e e m e d d e s i r a b l e ,
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that the
U n i t e d States w a s u n l i k e l y t o j o i n us in the p o l i c y w e p r o p o s e d ; and
if Chilean hopes of a substantial loan f r o m Iran w e r e r e a l i s e d , the
action which it w a s p r o p o s e d w e should take would have little e f f e c t
H e n e v e r t h e l e s s supported the
on C h i l e s c r e d i t - w o r t h i n e s s .
p r o p o s a l and i f i t w e r e a p p r o v e d h e w o u l d e n c o u r a g e o t h e r W e s t e r n
c r e d i t o r s to take a s i m i l a r l i n e .
1
T H E P R I M E M I N I S T E R , s u m m i n g up a b r i e f d i s c u s s i o n , said that
the C a b i n e t a g r e e d that w e should not t a k e p a r t in r e s c h e d u l i n g
C h i l e ' s d e b t s i n t h e c u r r e n t y e a r , and t h a t t h e F o r e i g n and
C o m m o n w e a l t h S e c r e t a r y w o u l d s e e k the support of o t h e r W e s t e r n
creditors.
The Cabinet
-
T o o k n o t e , w i t h a p p r o v a l , of the P r i m e
s u m m i n g up of t h e i r d i s c u s s i o n .
Minister's
HUNTER­
3.
T H E P R I M E M I N I S T E R s a i d t h a t e a r l i e r in t h e w e e k t h e
3IFLATION
?0LICY
M i n i s t e r i a l C o m m i t t e e on E c o n o m i c S t r a t e g y h a d r e v i e w e d t h e
G o v e r n m e n t s c o u n t e r - i n f l a t i o n p o l i c y a n d h a d a g r e e d upon a n e w
d r i v e t o g e t down the r a t e o f pay i n c r e a s e s .
This posture, which
w a s c o n s i s t e n t with the f r e e d o m of c o l l e c t i v e b a r g a i n i n g i m p l i e d b y
the S o c i a l C o n t r a c t , m e a n t that the G o v e r n m e n t w o u l d h a v e t o g i v e
m o r e l e a d e r s h i p on p a y , t a k i n g a r a t h e r b i g g e r p a r t o f t h e
r e s p o n s i b i l i t y i t a l r e a d y s h a r e d with the T r a d e s Union C o n g r e s s
(TUC).
M i n i s t e r s w o u l d n e e d t o m a k e r e n e w e d r e f e r e n c e in p u b l i c
s p e e c h e s to the d a n g e r s of e x c e s s i v e p a y i n c r e a s e s f o r e m p l o y m e n t
at h o m e and c o m p e t i t i v e n e s s a b r o a d .
The Government would have
t o i n s i s t that the T U C g u i d e l i n e s should b e h o n o u r e d in the s p i r i t
a s w e l l as in the l e t t e r : in p a r t i c u l a r the e x c e p t i o n s a l l o w e d b y the
g u i d e l i n e s should not be u s e d to m a k e n o n s e n s e of t h e i r m a i n
p r i n c i p l e t h a t any g e n e r a l s e t t l e m e n t s , i n c l u d i n g t h r e s h o l d s , s h o u l d
be sufficient only to c o v e r the i n c r e a s e in the R e t a i l P r i c e I n d e x in
t h e p r e c e d i n g 12 m o n t h s .
T h e C h a n c e l l o r of the E x c h e q u e r , in
a g r e e m e n t with the S e c r e t a r y of State f o r E m p l o y m e n t , w a s
p r e p a r i n g b a c k g r o u n d n o t e s on w h i c h M i n i s t e r s c o u l d d r a w f o r
t h e i r s p e e c h e s and w o u l d s e n d t h e s e t o t h e L o r d P r e s i d e n t i n g o o d
t i m e f o r the w e e k e n d .
It w a s i m p o r t a n t h o w e v e r t h a t , i n s p e a k i n g
on t h i s s u b j e c t , M i n i s t e r s s h o u l d a v o i d a n y s p e c u l a t i o n a s t o w h a t
t h e G o v e r n m e n t w o u l d d o i f t h e i r a p p e a l w e n t u n h e e d e d and
s e t t l e m e n t s c o n t i n u e d at t o o h i g h a r a t e .
Suggestions w e r e
a p p e a r i n g in t h e P r e s s t h a t s o m e M i n i s t e r s f a v o u r e d an a l t e r n a t i v e
p o l i c y : b u t n o such a l t e r n a t i v e p o l i c y w a s i n s i g h t .
A statutory
p o l i c y h a d b e e n s h o w n n o t t o w o r k and m a s s i v e d e f l a t i o n w a s
unacceptable.
T h e r e w a s a l s o t h e f a c t t h a t s p e c u l a t i o n about
alternative fallback policies led inevitably to attempts to forestall
them.
T h i s a p p l i e d both t o talk of a s t a t u t o r y i n c o m e s p o l i c y
w h i c h e n c o u r a g e d u n i o n s t o put in l a r g e c l a i m s n o w and t o
a r g u m e n t s f o r i m p o r t d e p o s i t s w h i c h s t i m u l a t e d i m p o r t s in the
short run.
M i n i s t e r s should t h e r e f o r e a d h e r e s t r i c t l y to
e m p h a s i s i n g t h e G o v e r n m e n t s e x i s t i n g p o l i c i e s and s h o u l d n o t
s p e c u l a t e about a l t e r n a t i v e o n e s : i f any M i n i s t e r w i s h e d t o g o
f u r t h e r than the n o t e s b e i n g p r o v i d e d b y the C h a n c e l l o r he should
c l e a r h i s s p e e c h w i t h the l a t t e r .
In d i s c u s s i o n t h e f o l l o w i n g p o i n t s w e r e m a d e
a.
­
It w o u l d b e h e l p f u l t o the G o v e r n m e n t s n e w p o s t u r e
i f i t w e r e p o i n t e d o u t t h a t the b r e a k d o w n o f t h e S o c i a l
Contract would lead inevitably to increased
and a statutory p o l i c y .
unemployment
On the o t h e r hand i f this point w e r e
m a d e e x p l i c i t l y it w o u l d e n c o u r a g e s p e c u l a t i o n of the k i n d
mentioned.
It s h o u l d b e p o s s i b l e t o t a l k p o s i t i v e l y
about
the p r o b l e m of i n f l a t i o n and the G o v e r n m e n t s e f f o r t s t o d e a l
w i t h i t w i t h o u t s e e m i n g t o e n v i s a g e a l t e r n a t i v e and
unacceptable
solutions.
b,
T h e r e should be s i m i l a r r e s t r a i n t f r o m speculation
about the f o r m w h i c h t h e B u d g e t w o u l d t a k e .
The latter
c o u l d r a i s e m a j o r i s s u e s of e c o n o m i c s t r a t e g y and
M i n i s t e r s w o u l d h a v e an o p p o r t u n i t y o f d i s c u s s i n g t h e m
c o l l e c t i v e l y : but t h i s d i s c u s s i o n m u s t b e k e p t w i t h i n
Government.
c.
in conducting t h e i r n e w d r i v e to g e t down the r a t e
of pay i n c r e a s e s M i n i s t e r s w o u l d n e e d to a v o i d a p p e a r i n g
t o c r i t i c i s e the e f f o r t s w h i c h the T U C w e r e m a k i n g t o
a d h e r e n c e to the S o c i a l C o n t r a c t .
secure
T h e G o v e r n m e n t had in
f a c t r e c e n t l y h a d an e x c e l l e n t m e e t i n g w i t h t h e T U C i n the
Liaison Committee:
and t h e r e w a s r e a l e v i d e n c e t h a t
m a j o r union l e a d e r s w e r e n o w a c t i v e l y lending t h e i r
t o the G e n e r a l S e c r e t a r y ' s
do
some
support
efforts.
T h e d i s t i n c t i o n and t h e r e l a t i o n s h i p b e t v / e e n t h e
s h o r t - t e r m p r o b l e m o f p a y i n f l a t i o n and t h e l o n g e r
term
p r o b l e m of insufficient i n v e s t m e n t had to b e b o r n e
carefully
in m i n d :
and t h e r o l e o f the N a t i o n a l E n t e r p r i s e
Board
could be usefully s t r e s s e d h e r e .
T H E P R I M E M I N I S T E R , s u m m i n g up t h e d i s c u s s i o n , s a i d t h a t t h e
C a b i n e t e n d o r s e d the d e c i s i o n o f the M i n i s t e r i a l C o m m i t t e e on
E c o n o m i c S t r a t e g y and e n c o u r a g e d M i n i s t e r s t o s p e a k p u b l i c l y on
the n e e d t o get down the r a t e of pay i n c r e a s e s subject to c l e a r i n g
w i t h t h e C h a n c e l l o r o f t h e E x c h e q u e r any p o i n t s n o t c o v e r e d i n t h e
n o t e s w h i c h h e w a s p r o v i d i n g and t o a v o i d i n g s p e c u l a t i o n a b o u t any
alternative policies.
The Cabinet T o o k n o t e , w i t h a p p r o v a l , o f the P r i m e
s u m m i n g up o f t h e i r d i s c u s s i o n .
Minister's
4.
T h e C a b i n e t had b e f o r e t h e m a m e m o r a n d u m b y the
Prime
£NEGOTIATION
M i n i s t e r ( C ( 7 5 ) 2 3 ) on t h e i s s u e s o f r e g i o n a l a i d s and s t e e l i n t h e
wional A i d s
:i Steel
Economic Community
r e n e g o t i a t i o n o f t h e t e r m s o f B r i t i s h m e m b e r s h i p o f the E u r o p e a n
evious
;ference:
(74) 34th
:n elusions
;
(EEC).
T H E P R I M E M I N I S T E R s a i d t h a t t h e C o m m i t t e e on E u r o p e a n C o m m u n i t y
S t r a t e g y ( E C S ) had r e v i e w e d the p r o g r e s s m a d e in r e s p e c t of
r e g i o n a l a i d s and t h e s t e e l i n d u s t r y i n p u r s u i n g t h e G o v e r n m e n t s
r e n e g o t i a t i o n o b j e c t i v e of "the r e t e n t i o n b y P a r l i a m e n t of t h o s e
p o w e r s o v e r the B r i t i s h e c o n o m y n e e d e d t o p u r s u e e f f e c t i v e
r e g i o n a l , i n d u s t r i a l and f i s c a l p o l i c i e s " .
T h e Cabinet had d e c i d e d
i n S e p t e m b e r 1974 t h a t C o m m u n i t y r u l e s f o r t h e c o - o r d i n a t i o n o f
national r e g i o n a l aids w e r e in our i n t e r e s t , p r o v i d e d that t h e y w e r e
c o m p a t i b l e with the n e e d to be f r e e t o f o l l o w the r e g i o n a l p o l i c i e s
we required.
T h e Cabinet had laid down five s p e c i f i c p r i n c i p l e s
which the C o m m u n i t y r u l e s should s a t i s f y .
W e had h e l d intensive
d i s c u s s i o n s w i t h t h e E E C C o m m i s s i o n on t h e n e w r u l e s , and t h e s e
h a d b e e n a d o p t e d b y t h e C o m m i s s i o n on t h e p r e v i o u s d a y .
Member
G o v e r n m e n t s would s h o r t l y be invited to r e c o r d t h e i r a g r e e m e n t to
a C o m m u n i c a t i o n s e t t i n g o u t t h e r u l e s , b y p a s s i n g a r e s o l u t i o n in
the C o u n c i l of M i n i s t e r s ,
T h e n e w r u l e s m e t the five p r i n c i p l e s
on w h i c h t h e C a b i n e t h a d a g r e e d .
W e m u s t a c c e p t t h a t the E E C
T r e a t y g a v e the C o m m i s s i o n c e r t a i n f o r m a l p o w e r s in r e s p e c t of
r e g i o n a l aid s y s t e m s ; but in t h e i r C o m m u n i c a t i o n the C o m m i s s i o n
d e c l a r e d that t h e r e w o u l d in p r a c t i c e be no i n t e r f e r e n c e w i t h the
r e g i o n a l p o l i c i e s t h e G o v e r n m e n t n e e d e d t o p u r s u e , and f o r t h e s e
the G o v e r n m e n t w o u l d r e m a i n w h o l l y a n s w e r a b l e t o P a r l i a m e n t .
T h e p o l i t i c a l r e a l i t y w a s that the m e m b e r S t a t e s in the C o u n c i l of
M i n i s t e r s could d e t e r m i n e the e f f e c t i v e substance of C o m m u n i t y
c o n t r o l o v e r r e g i o n a l a i d s and o t h e r q u e s t i o n s .
T h e m a j o r i t y of
E C S a c c o r d i n g l y t o o k the v i e w that the M a n i f e s t o a i m had b e e n m e t
i n r e l a t i o n t o r e g i o n a l p o l i c i e s , and t h a t t h e C o m m i s s i o n ^
C o m m u n i c a t i o n should a c c o r d i n g l y be a c c e p t e d in the C o u n c i l of
M i n i s t e r s , subject to the n e e d f o r p r i o r P a r l i a m e n t a r y d e b a t e s ,
w h i c h s h o u l d t a k e p l a c e on " t a k e n o t e " m o t i o n s .
T h e i s s u e of c o n t r o l o v e r s t e e l p r e s e n t e d s p e c i a l d i f f i c u l t y ,
because
t h e r e l e v a n t C o m m u n i t y r u l e s r e s t e d a l m o s t e n t i r e l y on t h e
p r o v i s i o n s o f t h e E u r o p e a n C o a l and S t e e l C o m m u n i t y
Treaty,
(ECSC)
which g a v e to the C o m m i s s i o n the r o l e of acting as the
c u s t o d i a n of the T r e a t y p r o v i s i o n s .
F r o m the p r a g m a t i c
angle
our e x p e r i e n c e of the E C S C T r e a t y had b e e n to s o m e e x t e n t
reassuring.
W e had b e e n able to influence the B r i t i s h
Corporation (BSC) over price increases.
Steel
W e had a l s o had
e x p e r i e n c e of s e v e r a l c a s e s i n v o l v i n g the C o m m i s s i o n ^
under the T r e a t y to m e r g e r
c a s e s in the s t e e l i n d u s t r y ,
consent
but j u d g m e n t
on t h e o p e r a t i o n o f t h e T r e a t y i n t h e m e r g e r s f i e l d m u s t b e
until the c u r r e n t c a s e of Johnson, F i r t h ,
5
B r o w n had b e e n
reserved
completed
satisfactorily.
T h e r e w a s no doubt that the C o m m u n i t y a c c e p t e d
the p r i n c i p l e of n a t i o n a l i s a t i o n as such.
Control over investment
in t h e p u b l i c s e c t o r p r e s e n t e d n o p r o b l e m , b u t i t a p p e a r e d t h a t the
T r e a t y w o u l d n o t p e r m i t us t o r e a s s u m e t h e p o w e r s w h i c h h a d b e e n
c o n t a i n e d i n s e c t i o n 15 o f t h e I r o n and S t e e l A c t 1967 to c o n t r o l
i n v e s t m e n t in t h e p r i v a t e s e c t o r .
T h e G o v e r n m e n t t h e r e f o r e did
n o t h a v e t h e p o w e r , and n o r h a d t h e C o m m i s s i o n , t o ban any p r i v a t e
steel project which might be judged undesirable.
A t the o u t s e t of
r e n e g o t i a t i o n the G o v e r n m e n t had m a d e c l e a r that they would f e e l
f r e e t o p r o p o s e T r e a t y a m e n d m e n t s if it e m e r g e d that t h e s e w e r e
necessary.
It w a s c l e a r that w e n e e d e d an o v e r h a u l of the E C S C
T r e a t y , going w i d e r than the i n v e s t m e n t p r o v i s i o n s .
W e could not
h o p e t o r e a c h a g r e e m e n t i n t h e C o m m u n i t y on r e v i s i o n of t h e T r e a t y
w i t h i n t h e r e n e g o t i a t i o n t i m e s c a l e , and t h e o t h e r m e m b e r
G o v e r n m e n t s w o u l d n o t be r e a d y t o c o m m i t t h e m s e l v e s t o t h i s
p r o c e s s until t h e y k n e w that the U n i t e d K i n g d o m w a s r e m a i n i n g in
the C o m m u n i t y .
T h e m a j o r i t y of E C S had t h e r e f o r e c o n c l u d e d that
w e s h o u l d g i v e n o t i c e n o w t o t h e o t h e r G o v e r n m e n t s t h a t if, a s a
r e s u l t of the r e f e r e n d u m , the U n i t e d K i n g d o m s t a y e d in the E E C ,
w e s h o u l d p r e s s f o r an o v e r h a u l o f t h e E C S C T r e a t y , p a r t i c u l a r l y
i n r e l a t i o n to t h e i s s u e a w h i c h h a d c o n c e r n e d u s .
In d i s c u s s i o n i t w a s m a i n t a i n e d t h a t t h e n e w r u l e s f o r m u l a t e d b y
t h e C o m m i s s i o n w o u l d l e a v e a l l e x i s t i n g f o r m s and l e v e l s o f a i d i n
the U n i t e d K i n g d o m untouched, w i t h the s i n g l e e x c e p t i o n of c e r t a i n
a i d s g r a n t e d i n S c o t l a n d b y t h e H i g h l a n d s and I s l a n d s D e v e l o p m e n t
B o a r d f o r w h i c h the C o m m i s s i o n h a d a l r e a d y u n d e r t a k e n t o g r a n t us
a derogation.
T h e p u r p o s e of the n e w r u l e s w a s not t o p r e v e n t the
United Kingdom or other G o v e r n m e n t s f r o m granting assistance
w h e r e r e q u i r e d t o t h e i r l e a s t f a v o u r e d r e g i o n s , but t o c o n t r o l the
l e v e l of s u b s i d i e s g r a n t e d in the m o r e f a v o u r e d a r e a s of the
C o m m u n i t y and t o p r e v e n t m u l t i n a t i o n a l c o m p a n i e s f r o m p l a y i n g o f f
one G o v e r n m e n t a g a i n s t another in o r d e r to obtain subsidies f o r
investment.
T h e e x p e r i e n c e of the o t h e r m e m b e r c o u n t r i e s of the
C o m m u n i t y o v e r t h e p a s t 17 y e a r s w a s t h a t t h e y h a d b e e n a b l e t o
c o n t i n u e t o f o l l o w t h e i r o w n c h o s e n r e g i o n a l p o l i c i e s , and t h e
L a b o u r P a r t y a s an i n t e r n a t i o n a l i s t P a r t y s h o u l d w e l c o m e a n y
a r r a n g e m e n t s w h i c h h e l p e d t h e e c o n o m i c d e v e l o p m e n t of a n y
d i s a d v a n t a g e d a r e a of the C o m m u n i t y , such as s o u t h e r n I t a l y .
If
the U n i t e d K i n g d o m l e f t the C o m m u n i t y , i t w a s p r o b a b l e that, in any
future t r a d i n g a g r e e m e n t w i t h the E E C , w e should be o b l i g e d to
a c c e p t r u l e s c o n c e r n i n g t h e l e v e l o f s t a t e a i d s , but that, s o f a r f r o m
b e i n g a b l e to i n f l u e n c e t h e s e r u l e s a s w e h a d b e e n a b l e t o d o a s a
C o m m u n i t y m e m b e r , t h e y w o u l d b e i m p o s e d on u s .
hi the
c i r c u m s t a n c e s of the w o r l d t o d a y n a t i o n a l s o v e r e i g n t y w a s no l o n g e r
a b s o l u t e : s o m e s u r r e n d e r o f s o v e r e i g n t y w a s i n e v i t a b l e w i t h i n the
C o m m u n i t y , and t h e r e w a s n o t h i n g o b j e c t i o n a b l e i n i t s e l f i n t h e
e n f o r c e a b i l i t y of c o m m o n r u l e s .
T h e d e c i s i v e test w a s not what
6
t h e t e x t o f t h e E E C T r e a t y m i g h t s a y about t h e p o w e r s o f t h e
Commission,
practice.
but t h e w a y i n w h i c h t h e C o m m u n i t y o p e r a t e d in
F r o m t h a t a s p e c t w e c o u l d b e c o n f i d e n t that
effective
p o w e r w o u l d c o n t i n u e t o r e s t t h r o u g h the C o u n c i l o f M i n i s t e r s w i t h
member Governments,
which would r e m a i n answerable to their
national P a r l i a m e n t s .
On t h e o t h e r h a n d , i t w a s a r g u e d t h a t i t c o u l d n o t b e m a i n t a i n e d
t h a t w e c o u l d d i s r e g a r d t h e t e x t o f t h e E E C T r e a t y on t h e g r o u n d s
t h a t i t s r u l e s and p r o v i s i o n s w e r e n o t i n f a c t o b s e r v e d .
This was
n o t t h e t r u e s i t u a t i o n , and t h e r e c o r d of a r e c e n t c o n v e r s a t i o n
b e t w e e n t h e M i n i s t e r o f S t a t e f o r F o r e i g n and C o m m o n w e a l t h A f f a i r s
and a G e r m a n M i n i s t e r c o n f i r m e d t h a t w e w e r e at t h e m e r c y o f t h e
C o m m i s s i o n whenever they chose to e x e r c i s e their p o w e r s .
Under
t h e T r e a t y , any p o w e r o f P a r l i a m e n t a r y c o n t r o l o v e r t h e
C o m m i s s i o n l a y n o t w i t h n a t i o n a l P a r l i a m e n t s but w i t h t h e
European A s s e m b l y .
T h e n e w r u l e s , w h i c h w e r e t e m p o r a r y in
c h a r a c t e r , did not conflict with our p r e s e n t r e g i o n a l aid p o l i c i e s ,
but t h e y d i d nothing t o r e s t o r e in t h i s a r e a t h e s o v e r e i g n t y of
P a r l i a m e n t , w h i c h the G o v e r n m e n t h a d p l e d g e d t h e m s e l v e s t o
r e g a i n in t h e i r F e b r u a r y 1974 M a n i f e s t o .
T h i s had s e r i o u s
i m p l i c a t i o n s f o r the continuation of d e m o c r a c y .
T h e i s s u e at
s t a k e w a s w h e t h e r G o v e r n m e n t s w e r e t o r e m a i n , not. t h e " b e s t
j u d g e s " , a s t h e C o m m i s s i o n ^ d o c u m e n t s u g g e s t e d but t h e s u p r e m e
j u d g e s of the p o l i c i e s they n e e d e d to i m p l e m e n t .
The new rules
could not be a c c e p t e d as s a t i s f a c t o r y u n l e s s it w a s e s t a b l i s h e d that
b o t h i n s u b s t a n c e and i n l a w t h e l a s t w o r d d i d n o t r e m a i n w i t h t h e
Commission.
In f u r t h e r d i s c u s s i o n i t w a s s u g g e s t e d that, w h i l e the n e w r u l e s f o r
t h e c o - o r d i n a t i o n o f r e g i o n a l a i d s r a i s e d q u e s t i o n s of m a j o r
i m p o r t a n c e in r e n e g o t i a t i o n , t h i s w a s not the o c c a s i o n f o r the
g e n e r a l d i s c u s s i o n of the i s s u e of s o v e r e i g n t y which the C a b i n e t
w o u l d b e h a v i n g i n due c o u r s e .
T h i s i s s u e w a s at p r e s e n t u n d e r
c o n s i d e r a t i o n b y the L e g i s l a t i o n C o m m i t t e e .
A t the s a m e t i m e
the C a b i n e t c o u l d not d e c i d e w h e t h e r the r e n e g o t i a t i o n i s s u e of
r e g i o n a l p o l i c y had b e e n s a t i s f a c t o r i l y s e t t l e d in a d v a n c e of the
g e n e r a l c o n s i d e r a t i o n of w h e t h e r r e n e g o t i a t i o n as a whole had been
s u c c e s s f u l ; and t h e P a r l i a m e n t a r y d e b a t e s on t h e n e w c o - o r d i n a t i o n
r u l e s should a l s o be d e f e r r e d .
T h e F o r e i g n and C o m m o n w e a l t h
S e c r e t a r y w o u l d b e e x p e c t e d t o t a k e up a p o s i t i o n i n t h e C o u n c i l o f
M i n i s t e r s , p a r t i c u l a r l y b e c a u s e of the connection w h i c h s o m e
c o u n t r i e s s a w b e t w e e n t h e c o - o r d i n a t i o n r u l e s and t h e p r o v i s i o n of
m o n e y f o r the R e g i o n a l D e v e l o p m e n t F u n d ,
But a f i n a l d e c i s i o n
w o u l d not be taken b y the C o u n c i l of M i n i s t e r s until t h e i r A p r i l
meeting.
T h e d i s c u s s i o n t h e n t u r n e d t o t h e i s s u e of s t e e l ,
It w a s s u g g e s t e d
that it w a s m o s t u n s a t i s f a c t o r y that t h i s q u e s t i o n had b e e n l e f t
u n r e s o l v e d u n t i l s o l a t e i n t h e p r o c e s s of r e n e g o t i a t i o n .
The
r e n e g o t i a t i o n of o u r t e r m s o f m e m b e r s h i p c o u l d n o t b e r e g a r d e d a s
c o m p l e t e u n t i l the p r o b l e m o f s t e e l h a d b e e n s o l v e d .
But it w a s
p o i n t e d out t h a t t h e i s s u e o f s t e e l h a d b e e n d r a w n s p e c i f i c a l l y t o
the attention of o t h e r E E C G o v e r n m e n t s as a r e n e g o t i a t i o n
o b j e c t i v e , f o r e x a m p l e b y t h e P r i m e M i n i s t e r at tne m e e t i n g o f
H e a d s o f G o v e r n m e n t in P a r i s i n D e c e m b e r 1974.
They were
t h e r e f o r e a l r e a d y on n o t i c e t h a t w e h a d r e q u i r e m e n t s .
The
g r e a t e s t difficulty c o n c e r n e d the p o w e r to c o n t r o l p r i v a t e s e c t o r
s t e e l i n v e s t m e n t j and o n e s o l u t i o n w o u l d b e f o r t h e G o v e r n m e n t t o
i n f o r m P a r l i a m e n t at an e a r l y d a t e t h a t t h e y p r o p o s e d t o r e - a s s u m e
t h r o u g h l e g i s l a t i o n p o w e r s e q u i v a l e n t t o t h o s e i n s e c t i o n 15 o f t h e
I r o n and S t e e l A c t 1967.
A n a l t e r n a t i v e c o u r s e m i g h t be for us to
put t h e o t h e r E E C G o v e r n m e n t s o n n o t i c e , n o t t h a t w e s h o u l d
n e c e s s a r i l y w i s h t o a m e n d t h e T r e a t y , but t h a t w e p r o p o s e d t o
r e - a s s u m e p o w e r s t o c o n t r o l i n v e s t m e n t in t h e p r i v a t e s e c t o r .
T h e y m i g h t a c k n o w l e d g e t h a t t h i s w o u l d r e q u i r e a m e n d m e n t of t h e
Treaty,
o r they m i g h t be r e a d y to find s o m e a l t e r n a t i v e m e t h o d
of m e e t i n g o u r w i s h e s w h i c h w o u l d not r e q u i r e T r e a t y a m e n d m e n t , .
Until this a p p r o a c h w a s m a d e it w a s i m p o s s i b l e to d e m o n s t r a t e that
an a t t e m p t h a d b e e n m a d e t o s e c u r e t h e M a n i f e s t o o b j e c t i v e .
Other
E E C G o v e r n m e n t s , for e x a m p l e , appeared to have been successful
in p r e v e n t i n g u n d e s i r a b l e i n v e s t m e n t d e s p i t e the T r e a t y .
C o n s i d e r a t i o n of the c h a n g e s w e m i g h t want in the T r e a t y should a l s o
e x t e n d t o t h e b a s i n g p o i n t s y s t e m f o r e s t a b l i s h i n g s t e e l p r i c e s ; at
s o m e t i m e i n the f u t u r e t h i s c o u l d t h r e a t e n t h e i n t e r e s t s o f t h o s e
p a r t s of the U n i t e d K i n g d o m d i s t a n t f r o m s t e e l m a n u f a c t u r i n g p l a n t s
in the e v e n t of s t e e l c l o s u r e s , f o r e x a m p l e in S c o t l a n d ,
T H E P R I M E M I N I S T E R , s u m m i n g up t h e d i s c u s s i o n , s a i d t h a t
t h e C o u n c i l o f M i n i s t e r s w o u l d n o t b e t a k i n g a f i n a l d e c i s i o n on
r e g i o n a l a i d s at t h e i r n e x t m e e t i n g .
T h e F o r e i g n and C o m m o n w e a l t h
S e c r e t a r y could i n d i c a t e that h e w a s content with the C o m m u n i c a t i o n
f r o m t h e C o m m i s s i o n a s an e l e m e n t i n the t o t a l r e n e g o t i a t i o n
p a c k a g e on w h i c h t h e G o v e r n m e n t s t i l l h a d t o t a k e a d e c i s i o n .
T h e s a m e l i n e w o u l d b e t a k e n at t h e m e e t i n g o f t h e E u r o p e a n C o u n c i l
at D u b l i n on 10-11 M a r c h .
F o l l o w i n g t h a t m e e t i n g , the C a b i n e t w o u l d
r e s u m e t h e i r c o n s i d e r a t i o n of r e g i o n a l aids in the context of a
g e n e r a l s t o c k t a k i n g o f r e n e g o t i a t i o n , t o g e t h e r w i t h the c o n c l u s i o n s
r e a c h e d b y t h e L e g i s l a t i o n C o m m i t t e e on t h e g e n e r a l i s s u e o f t h e
s o v e r e i g n t y of P a r l i a m e n t .
T h e c o - o r d i n a t i o n r u l e s should not be
debated until a f t e r this f u r t h e r C a b i n e t d i s c u s s i o n , although the
d e b a t e s w o u l d h a v e t o t a k e p l a c e b e f o r e the A p r i l m e e t i n g of the
C o u n c i l o f M i n i s t e r s at w h i c h G o v e r n m e n t s w o u l d b e e x p e c t e d t o
g i v e their a p p r o v a l to the r u l e s by a Council R e s o l u t i o n ,
On s t e e l ,
the C a b i n e t w e r e a g r e e d that a c t i o n w a s n e e d e d t o r e a s s u m e p o w e r s
8
t o c o n t r o l p r i v a t e s e c t o r s t e e l i n v e s t m e n t , and the F o r e i g n and
C o m m o n w e a l t h S e c r e t a r y should g i v e f u r t h e r c o n s i d e r a t i o n in the
l i g h t of t h e d i s c u s s i o n to t h e t e r m s in w h i c h o u r r e q u i r e m e n t s
s h o u l d b e put b e f o r e o t h e r E E C G o v e r n m e n t s .
T h e Cabinet should
a l s o r e t u r n t o t h i s s u b j e c t o n t h e b a s i s of a f u r t h e r r e p o r t b y t h e
F o r e i g n and C o m m o n w e a l t h S e c r e t a r y , w h e n t h e y r e v i e w e d t h e
o u t c o m e of r e n e g o t i a t i o n a f t e r the Dublin m e e t i n g .
The Cabinet
­
1.
T o o k note, with a p p r o v a l , of the P r i m e
M i n i s t e r s s u m m i n g up of t h e i r d i s c u s s i o n .
?
2
0
I n v i t e d t h e F o r e i g n and C o m m o n w e a l t h
S e c r e t a r y t o b e g u i d e d a c c o r d i n g l y at t h e C o u n c i l
of M i n i s t e r s on the q u e s t i o n of the
of r e g i o n a l a i d s .
co-ordination
[ATEMENT
I; THE
IFENCE
5,
T h e Cabinet c o n s i d e r e d a m e m o r a n d u m b y the S e c r e t a r y of
State f o r D e f e n c e ( C ( 7 5 ) 21) t o w h i c h w a s a t t a c h e d a d r a f t o f t h e
S t a t e m e n t on t h e D e f e n c e E s t i m a t e s 1975
a
IriivlATES 1975
T H E S E C R E T A R Y O F S T A T E F O R D E F E N C E said that the W h i t e
P a p e r w a s l o n g e r t h a n u s u a l b e c a u s e of t h e n e e d t o g i v e f u l l c o v e r a g e
t o t h e D e f e n c e R e v i e w i n t h e l i g h t o f t h e r e s u l t s of c o n s u l t a t i o n s
w i t h o u r a l l i e s and t o g i v e a d d i t i o n a l i n f o r m a t i o n a b o u t p o l i c y and
s t r a t e g i c m a t t e r s as had b e e n r e c o m m e n d e d b y the S e l e c t
C o m m i t t e e on E x p e n d i t u r e , ,
Subject to the a p p r o v a l of h i s
c o l l e a g u e s h e p r o p o s e d t o p u b l i s h the S t a t e m e n t on 19 M a r c h .
In d i s c u s s i o n i t w a s a r g u e d t h a t m a n y o f t h e G o v e r n m e n t ' s
s u p p o r t e r s w e r e d i s a p p o i n t e d that g r e a t e r s a v i n g s w e r e not being
m a d e in d e f e n c e e x p e n d i t u r e .
T h e y w o u l d b e c r i t i c a l of t h e
i m p l i c a t i o n i n t h e W h i t e P a p e r t h a t f i r m d e c i s i o n s h a d b e e n t a k e n on
t h e l e v e l o f d e f e n c e e x p e n d i t u r e f o r t h e n e x t 5 and e v e n 10 y e a r s .
T h e p o s s i b i l i t y of f u r t h e r r e d u c t i o n s in p u b l i c e x p e n d i t u r e c o u l d n o t
b e e x c l u d e d and t h e W h i t e P a p e r s h o u l d d e s c r i b e t h e D e f e n c e B u d g e t
f i g u r e s as i n t e r i m o r p r o v i s i o n a l .
On t h e o t h e r h a n d i t w a s s t r o n g l y
u r g e d t h a t the W h i t e P a p e r r e f l e c t e d d e c i s i o n s t a k e n b y t h e C a b i n e t
i n t h e c o n t e x t of t h e D e f e n c e ? . e v i e w and of t h e P u b l i c E x p e n d i t u r e
Survey.
A l l p u b l i c e x p e n d i t u r e p r o g r a m m e s w e r e , of c o u r s e ,
l i a b l e t o r e v i e w b u t i t w o u l d b e w r o n g t o s i n g l e out t h e d e f e n c e
p r o g r a m m e in t h i s c o n t e x t .
If the D e f e n c e R e v i e w d e c i s i o n s w e r e
d e s c r i b e d as p r o v i s i o n a l i t w o u l d b e w i d e l y a s s u m e d that a f u r t h e r
r e v i e w w a s i m p e n d i n g and t h i s w o u l d h a v e v e r y d a m a g i n g
c o n s e q u e n c e s f o r t h e c o n f i d e n c e of t h e S e r v i c e s , o f the d e f e n c e
i n d u s t r y , and o f o u r a l l i e s w h o c o n s i d e r e d t h a t o u r c u t s h a d a l r e a d y
gone too f a r .
THE PRIME MINISTER,
s u m m i n g up the d i s c u s s i o n ,
said that the
C a b i n e t h a d a p p r o v e d the D e f e n c e R e v i e w p r o p o s a l s s u b j e c t t o t h e
o u t c o m e of i n t e r n a t i o n a l consultation;
t h e n e e d f o r any c h a n g e .
this consultation had not shown
The R e v i e w was therefore
confirmed.
T h e C h a n c e l l o r of the E x c h e q u e r had h o w e v e r r e m i n d e d the C a b i n e t
t h a t i t m i g h t w e l l b e c o m e n e c e s s a r y at s o m e p o i n t t o r e q u i r e
substantial cuts in p u b l i c e x p e n d i t u r e ,
including defence
further
expenditure.
Continuing, the P r i m e M i n i s t e r s a i d that p r e p a r a t i o n f o r the
p u b l i c a t i o n o f t h e 1975 S t a t e m e n t on the D e f e n c e E s t i m a t e s s h o u l d
p r o c e e d a s p r o p o s e d b y t h e S e c r e t a r y o f S t a t e f o r D e f e n c e but b e f o r e
it w a s published f u r t h e r c o n s i d e r a t i o n should be g i v e n to the question
of h o w the d e f e n c e e x p e n d i t u r e f i g u r e s should b e e x p r e s s e d in the
l i g h t o f t h e f a c t t h a t t h e W h i t e P a p e r on P u b l i c E x p e n d i t u r e t o
1 9 7 8 - 7 9 ( C m n d 5 8 7 9 ) h a d n o t e d t h a t t h e f i g u r e s f o r 1 9 7 7 - 7 8 and
1978-79 w e r e p r o v i s i o n a l .
The Cabinet
-
T o o k note, with approval,
o f the P r i m e
s u m m i n g up o f t h e i r d i s c u s s i o n .
Cabinet
Office
2 7 F e b r u a r y 1975
II
,;
jyyyyyvYyfy,
Ministers