(c) crown copyright
Catalogue Reference:CAB/128/56/13
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IfHlS
D O C U M E N T IS T H E P R O P E R T Y
OF H E R BRITANNIC M A J E S T Y ' S
C(75) 13th
Conclusions
GOVERNMENT
COPY NO
C
0 o
CABINET
C O N C L U S I O N S of a M e e t i n g of the C a b i n e t
h e l d at 10 D o w n i n g S t r e e t on
M O N D A Y 17 M A R C H 1975
at 10. 30 a m
P R E S E N T
The Rt Hen Harold Wilson
Prime
The Rt Hon E d w a r d S h o r t
MP
Minister
The R t Hon J a m e s Callaghan
MP
Lord P r e s i d e n t of t h e C o u n c i l
Commonwealth
Affairs
The R t Hon R o y Jenkins
The Rt H o n L o r d E l v / y n - J o n e s
Lord C h a n c e l l o r
The Rt H o n 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
MP
S e c r e t a r y of S t a t e f o r t h e H o m e
MP
Department
The R t Hon Anthony C r o s l a n d M P
S e c r e t a r y of S t a t e f o r t h e E n v i r o n m e n t
Chancellor of t h e E x c h e q u e r
The R t H o n M i c h a e l F o o t M P
Secretary o f S t a t e f o r E m p l o y m e n t
The R t Hon E r i c V a r l e y
The R t H o n S h i r l e y W i l l i a m s M P
Secretary o f S t a t e f o r P r i c e s and
Consumer P r o t e c t i o n
The R t Hon B a r b a r a 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
The Rt H o n A n t h o n y W e d g w o o d B e n n
S e c r e t a r y of State f o r
MP
Secretary o f S t a t e f o r I n d u s t r y
I The R t H o n R o y M a s o n
I Secretary o f S t a t e f o r
MP
Defence
I The R t H o n W i l l i a m R o s s
Secretary o f S t a t e f o r
MP
Scotland
The R t H o n M e r l y n R e e s
MP
Secretary o f S t a t e f o r N o r t h e r n I r e l a n d
Energy
The Rt Hon P e t e r Shore
S e c r e t a r y of State f o r
MP
MP
Trade
The Rt Hon Reginald Prentice
MP
S e c r e t a r y o f S t a t e f o r E d u c a t i o n and S c i e n c e
T h e R t Hon John M o r r i s Q C M P
S e c r e t a r y of State f o r W a l e s
The R t H o n H a r o l d L e v e r M P
Chancellor o f the D u c h y o f L a n c a s t e r
The R t Hon L o r d
The Rt H o n R o b e r t M e l l i s h M P
parliamentary S e c r e t a r y , T r e a s u r y
The R t Hon John Silkin
(Item 1)
Government
Lord Privy
Shepherd
Seal
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
SECRETARIAT
Sir
Mr
Mr
Mr
J o h n Hunt
P D Nairne
B C Cubbon
E J G Smith
( I t e m s 1 and 2 )
( I t e m s 1 and 2 )
( I t e m s 1 and 2 )
C O N T E N T S
j
Item
1
Subject
EEC
Page
RENEGOTIATION
Stocktaking
1
General
1
Common Agricultural
Community
Policy
2
Budget
4
E c o n o m i c and M o n e t a r y U n i o n
5
Regional
6
Policy
Industrial
Policy
7
Steel
Fiscal
7
Policies
Value-Added
Capital
8
Tax
8
Movements
9
C o m m o n w e a l t h and D e v e l o p i n g C o u n t r i e s :
N A T I O N A L I S A T I O N OF T H E A I R C R A F T A N D
INDUSTRIES
T r a d e and A i d
9
SHIPBUILDING
11
IEC
R E N E G O T I A T I O N
1.
T h e C a b i n e t h a d b e f o r e t h e m a m e m o r a n d u m b y 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 ( C ( 7 5 ) 3 3 ) on t h e r e s u l t s o f t h e
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 a c c e s s i o n t o the E u r o p e a n
Itocktaking
Economic Community
Previous
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 i s m e e t i n g o f the C a b i n e t w a s
d e s i g n e d to e l u c i d a t e the t e r m s which had b e e n r e n e g o t i a t e d b y the
G o v e r n m e n t , considering them under the objectives for
r e n e g o t i a t i o n s e t out i n the L a b o u r P a r t y s M a n i f e s t o f o r t h e
G e n e r a l E l e c t i o n i n F e b r u a r y 1974,
L a t e r i n the d a y h e w o u l d
d i s c u s s t h e r e n e g o t i a t e d t e r m s w i t h m e m b e r s o f the G o v e r n m e n t
n o t i n t h e C a b i n e t and w i t h t h e P a r l i a m e n t a r y L e b o u r P a r t y ,
The
C a b i n e t w o u l d r e s u m e i t s d i s c u s s i o n on t h e f o l l o w i n g d a y w h e n i t
should t r y to d e c i d e w h e t h e r or not to r e c o m m e n d continuing
membership.
T h e y would then h a v e to f o r m a judgment, not only
o n t h e r e v i s e d t e r m s t h a t h a d b e e n n e g o t i a t e d , but a l s o on t h e p r e s e n t
c h a r a c t e r of t h e C o m m u n i t y ,
T h e r e w a s an i m p o r t a n t d i s t i n c t i o n
b e t w e e n i t s p r a c t i c a l w o r k i n g , w h i c h w a s n o w m o r e p o l i t i c a l in
a p p r o a c h , and i t s t h e o r e t i c a l and l e g a l b a s i s .
If any M i n i s t e r
could not s u p p o r t the G o v e r n m e n t r e c o m m e n d a t i o n , he w o u l d be
f r e e t o s a y s o : and i n t h i s c o n t e x t g u i d e l i n e s f o r the " a g r e e m e n t
to d i f f e r " would be c i r c u l a t e d which would have r e g a r d to the n e e d
t o p r e s e r v e a u n i t e d C a b i n e t on a l l o t h e r i s s u e s .
In p a r t i c u l a r
p e r s o n a l a t t a c k s on o r r e p l i e s t o c o l l e a g u e s m u s t b e a v o i d e d ,
although the m e d i a m i g h t t r y to p r o m o t e t h e i r a p p e a r a n c e .
Reference:
fC(75) 12th
Conclusions,
llinute 1
jeneral
(EEC),
1
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 r e c a l l e d that
r e n e g o t i a t i o n could n o t g e t s e r i o u s l y u n d e r w a y until the G o v e r n m e n t
h a d b e e n r e t u r n e d w i t h a m a j o r i t y i n O c t o b e r 1974, b y w h i c h t i m e
t h e r e w e r e n e w H e a d s o f G o v e r n m e n t i n W e s t G e r m a n y and i n
France,
In v i e w o f t h e r e f e r e n d u m c o m m i t m e n t t h e G o v e r n m e n t
had n e v e r t h e l e s s d e c i d e d that i t should plan to conclude r e n e g o t i a t i o n
b y t h e e a r l y s p r i n g o f 1975.
T h i s h a d l i m i t e d the p e r i o d o f e f f e c t i v e
r e n e g o t i a t i o n to about four m o n t h s : and i t had c l e a r l y not b e e n
p o s s i b l e t o a c h i e v e a l l the G o v e r n m e n t s o b j e c t i v e s within that
period.
S o m e v/ould h a v e t o b e p u r s u e d i n c o n t i n u i n g E E C b u s i n e s s .
H e would h o w e v e r like to m a k e s o m e g e n e r a l observations as a
r e s u l t of t w e l v e m o n t h s ' e x p e r i e n c e of the E E C ,
F i r s t , it was
changing f a s t , u n d e r the p r e s s u r e of w o r l d e v e n t s as w e l l a s of
British influence.
T h e w o r l d food situation was r a d i c a l l y different
f r o m that e n v i s a g e d when w e w e r e c o n s i d e r i n g applying f o r
membership.
In p a r t i c u l a r t h e b a l a n c e b e t w e e n p r i m a r y p r o d u c e r s
and i n d u s t r i a l i s e d c o u n t r i e s h a d m o v e d m o r e in f a v o u r o f t h e f o r m e r ,
a d e v e l o p m e n t w h i c h a L a b o u r G o v e r n m e n t c o u l d n o t o p p o s e ; and t h i s
w o u l d h a v e t o b e t a k e n i n t o a c c o u n t i n d e t e r m i n i n g B r i t i s h f o o d and
a g r i c u l t u r a l p o l i c y w h e t h e r w e w e r e m e m b e r s of t h e E E C o r n o t .
T h e p r e v i o u s p l a n s f o r p r o g r e s s t o w a r d s e c o n o m i c and m o n e t a r y
union
had b e e n set aside, as had f e d e r a l i s t c o n c e p t s .
The
E E C w a s n o w s h o w i n g a m u c h m o r e open attitude to the r e s t of the
world.
Secondly, t h e r e w e r e l i m i t s to the C o m m i s s i o n s p o w e r :
the r e a l p o w e r r e s i d e d in the C o u n c i l of M i n i s t e r s ,
Regular
m e e t i n g s of the C o u n c i l , e s p e c i a l l y the n e w l y i n t r o d u c e d s y s t e m
of r e g u l a r m e e t i n g s of C o m m u n i t y H e a d s of G o v e r n m e n t , w e r e
g i v i n g c o - o r d i n a t e d p o l i t i c a l l e a d e r s h i p t o the C o m m u n i t y ,
The
C o m m i s s i o n r e m a i n e d t h e g u a r d i a n o f t h e t r e a t i e s , and a s such
tended to be s u p p o r t e d b y the s m a l l e r m e m b e r s oi the C o m m u n i t y
to p r o t e c t t h e m s e l v e s a g a i n s t undue d o m i n a n c e b y W e s t G e r m a n y ,
F r a n c e and the U n i t e d K i n g d o m .
T h i r d l y , the C o m m u n i t y w a s
m u c h m o r e s e n s i t i v e t o , and r e a d i e r to m e e t , n a t i o n a l i n t e r e s t s o f
m e m b e r s t a t e s than m i g h t h a v e a p p e a r e d .
In a s h o r t g e n e r a l d i s c u s s i o n i t w a s e m p h a s i s e d t h a t a n y c r i t i c i s m
o f the r e n e g o t i a t e d t e r m s w a s n o t i n t e n d e d as a r e f l e c t i o n on t h e
s k i l l and v i g o u r o f 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 o r o f
o t h e r M i n i s t e r s i n v o l v e d in r e n e g o t i a t i o n , w h o h a d p r o m o t e d B r i t i s h
i n t e r e s t s with a b i l i t y .
T h e Cabinet then c o n s i d e r e d the v a r i o u s
t o p i c s c o v e r e d i n 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 ' s
memorandum.
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
F e b r u a r y M a n i f e s t o had c a l l e d f o r " m a j o r c h a n g e s i n t h e C o m m o n
A g r i c u l t u r a l P o l i c y ( C A P ) , so that it c e a s e s to be a t h r e a t to w o r l d
t r a d e i n f o o d p r o d u c t s , and s o t h a t l o w - c o s t p r o d u c e r s o u t s i d e
E u r o p e can contimie to h a v e a c c e s s t o the B r i t i s h f o o d m a r k e t " .
W e had n o t c h a l l e n g e d the b a s i c p r i n c i p l e s of the p o l i c y - the
o b j e c t i v e s o f w h i c h w e r e s i m i l a r t o t h o s e o f the B r i t i s h a g r i c u l t u r a l
p o l i c y , f r o m t h e A g r i c u l t u r e A c t 1947 o n w a r d s - b u t w e h a d s o u g h t
to change it f r o m within
M o r e o v e r , i n v i e w of the c h a n g e d w o r l d
s
s i t u a t i o n , an a s s u r e d s u p p l y at r e l a t i v e l y s t a b l e p r i c e s ( w h i c h w e r e
f a l l i n g in r e a l t e r m s ) , as p r o v i d e d b y the C A P , w o u l d be in o u r
national interest.
T h e a r r a n g e m e n t s m a d e f o r the i m p o r t o f s u g a r
w e r e a d v a n t a g e o u s ; and t h e p r i n c i p l e s a d o p t e d f o r c o n t i n u i n g
i m p o r t of N e w Z e a l a n d d a i r y p r o d u c t s w e r e a l s o helpful.
The
C o m m i s s i o n ^ r e v i e w on w h i c h t h e s t o c k t a k i n g o f t h e C A P w o u l d
b e conducted w a s on b a l a n c e f a v o u r a b l e to our p o l i c y a p p r o a c h .
I n v i e w o f the c h a n g e s w h i c h h a d a l r e a d y o c c u r r e d , and t h o s e w h i c h
w o u l d b e m a d e - i f w e w e r e i n a p o s i t i o n t o k e e p up p r e s s u r e f o r
r e f o r m f r o m w i t h i n - h e c o n s i d e r e d t h e p o s i t i o n r e a c h e d on t h e
C A P to be acceptable.
In d i s c u s s i o n i t w a s a r g u e d that t h e r e had b e e n no change in the
f u n d a m e n t a l s t r u c t u r e of the C A P - C o m m u n i t y p r e f e r e n c e , v a r i a b l e
l e v i e s on i m p o r t s , and s u p p o r t b u y i n g .
T h e stocktaking would take
p l a c e o u t s i d e t h e r e n e g o t i a t i o n t i m e t a b l e ; and, s i n c e t h e C o m m i s s i o n
and s e v e r a l of t h e o t h e r m e m b e r s t a t e s w o u l d d e f e n d t h e p r e s e n t
a r r a n g e m e n t s strongly, w e could not say how much s u c c e s s would be
2
achieved,,
E v e n if
c o u l d n o t a l t e r t h e p r i n c i p l e s of t h e C A P
f o r the w h o l e C o m m u n i t y , w e s h o u l d h a v e o b t a i n e d a d e r o g a t i o n
f r o m t h e m f o r t h e U n i t e d K i n g d o m ; and t h i s h a d n o t b e e n a c h i e v e d .
The a r r a n g e m e n t w h e r e b y w e could operate deficiency payments for
b e e f h a d b e e n a g r e e d f o r o n e y e a r o n l y and M r L a r d i n o i s , t h e
C o m m i s s i o n e r concerned, had m a d e plain his dislike of national
aids.
I m p r o v e d a c c e s s for third country foodstuffs, apart f r o m
s u g a r and N e w Z e a l a n d d a i r y p r o d u c t s , h a d b e e n l e f t u n t i l t h e
m u l t i l a t e r a l t r a d e n e g o t i a t i o n s , w h i c h w o u l d t a k e p l a c e o u t s i d e the
renegotiation p e r i o d , w h e r e too it w a s uncertain what would be
achieved.
It w a s doubtful w h e t h e r t h e r e had b e e n a fundamental
change i n w o r l d f o o d f a c t o r s : e v e n t s of the l a s t t w o y e a r s m i g h t
constitute only a t e m p o r a r y change.
N o r t h A m e r i c a had ample
r e s o u r c e s for increased food production.
Already grain prices
had f a l l e n s u f f i c i e n t l y f a r f o r the E E C to r e i n t r o d u c e l e v i e s on
imports.
T h e E E C b u t t e r p r i c e w a s v e r y h i g h c o m p a r e d w i t h the
w o r l d p r i c e , a n d t h e r e w a s s t i l l a g e n e r a l b a n on i m p o r t s o f b e e f .
It c o u l d thus b e a r g u e d t h a t t h e C A P r e m a i n e d a t h r e a t t o w o r l d
f o o d t r a d e and c o n s t i t u t e d a s y s t e m o f t a x e s on f o o d .
w
e
On t h e o t h e r h a n d , i t w a s p o i n t e d o u t t h a t C A P p r i c e s w e r e n o w
being d e t e r m i n e d in a c c o r d a n c e with c r i t e r i a which e c o n o m i c a l l y
w e r e m o r e soundly b a s e d .
A s a result they w e r e being brought
d o w n in r e a l t e r m s f r o m t h e i r p r e v i o u s e x c e s s i v e l e v e l s , w h i l e
w o r l d p r i c e s had r i s e n .
M e m b e r s h i p of the E E C n o l o n g e r c a u s e d
the h e a v y i n c r e a s e in f o o d p r i c e s that had b e e n e x p e c t e d b e f o r e our
entry.
On b a l a n c e t h e e x t r a c o s t s w e r e a p p r o x i m a t e l y b a l a n c e d
b y t h e b e n e f i t s of t h e C A P , l e a v i n g o u r t o t a l f o o d b i l l a t a b o u t t h e
s a m e l e v e l as it would have been if we w e r e outside the C o m m u n i t y .
A l t h o u g h l e v i e s w e r e n o w p a y a b l e on c e r e a l i m p o r t s , t h e y w e r e
m o r e than o f f s e t b y the E E C s y s t e m s of c o m p e n s a t o r y a m o u n t s ,
and w e w e r e t h e r e f o r e s t i l l o b t a i n i n g c e r e a l s m o r e c h e a p l y than i f w e
w e r e o u t s i d e t h e E E C ; and w o r l d c e r e a l p r i c e s w e r e n o w r i s i n g
again.
D a i r y p r o d u c t s r e m a i n e d the a r e a w h e r e E E C p r i c e s w e r e
r e l a t i v e l y h i g h ; but the o n l y o t h e r m a j o r s u p p l i e r w a s N e w Z e a l a n d ,
which had not b e e n able t o supply the quantities p r o v i d e d f o r o v e r the
p a s t t w o y e a r s and c o u l d n o t g i v e an a s s u r a n c e that s h e w o u l d d o s o
in the c o m i n g y e a r s .
In a n y c a s e t h e N e w Z e a l a n d G o v e r n m e n t ,
w h o h a d w e l c o m e d t h e a g r e e m e n t r e a c h e d i n t h e E E C H e a d s of
G o v e r n m e n t m e e t i n g i n D u b l i n on 10/11 M a r c h o n t h e p r i n c i p l e s t o
g o v e r n continued a c c e s s f o r N e w Z e a l a n d d a i r y products, had m a d e
i t plain that they w o u l d s e e k a p p r e c i a b l y h i g h e r p r i c e s f o r t h e i r
exports.
A l t h o u g h f u t u r e w o r l d f o o d s u p p l i e s and p r i c e s c o u l d n o t
b e f o r e c a s t , w e c o u l d n o t b a s e o u r p o l i c y on t h e e x p e c t a t i o n o f a
r e t u r n to cheap f o o d .
S p e c i f i c a p p r o a c h e s on t h i s h a d b e e n m a d e
during renegotiation to our traditional C o m m o n w e a l t h suppliers,
w h o had m a d e it p l a i n that t h e y d i d not w i s h to r e t u r n to that s y s t e m .
I f t h e r e w e r e a r e t u r n t o h e a v y s u r p l u s e s , w e w o u l d i n any c a s e
3
w i s h t o t a k e a c t i o n , f o r b r o a d p o l i t i c a l r e a s o n s , t o s a f e g u a r d the
i n t e r e s t s of p r i m a r y p r o d u c e r s .
It w a s m o r e p r o b a b l e , h o w e v e r ,
that d e m a n d f o r food f r o m d e v e l o p i n g c o u n t r i e s would k e e p w o r l d
supplies tight.
W e w e r e l i k e l y to wish to expand our own
a g r i c u l t u r e f o r i m p o r t - s a v i n g r e a s o n s , and t h e C A P c o u l d a s s i s t
that,
T h e s t o c k t a k i n g o f t h e C A P w o u l d b e an i m p o r t a n t f o r u m in
w h i c h t o p u r s u e o u r o b j e c t i v e s ; and i t w a s u n r e a l i s t i c t o e x p e c t u s
t o h a v e o b t a i n e d a p e r m a n e n t c h a n g e in t h e b e e f r e g i m e i n a d v a n c e
of this.
W e should a l s o p u r s u e f u r t h e r i m p r o v e m e n t s in a c c e s s
f o r t h i r d c o u n t r y f o o d s t u f f s of c o n c e r n t o u s , such a s h a r d w h e a t ;
b u t w e h a d h a d s u c c e s s i n r e d u c i n g t a r i f f s on a w i d e r a n g e o f
f o o d s t u f f s i n a n u m b e r o f t r a d e n e g o t i a t i o n s , and t h e o v e r a l l i m p a c t
o f t a r i f f s on f o o d s t u f f s w a s n o w s m a l l .
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
F e b r u a r y M a n i f e s t o h a d c a l l e d f o r " n e w and f a i r e r m e t h o d s o f
financing the C o m m u n i t y b u d g e t .
N e i t h e r t h e t a x e s t h a t f o r m e d the
s o - c a l l e d ' o w n r e s o u r c e s ' s y s t e m of the C o m m u n i t i e s , n o r the
p u r p o s e s , m a i n l y a g r i c u l t u r a l s u p p o r t , on w h i c h t h e f u n d s a r e m a i n l y
to be spent, a r e a c c e p t a b l e to u s .
W e would be ready to contribute
t o C o m m u n i t y f i n a n c e s o n l y such s u m s a s w e r e f a i r i n r e l a t i o n to
w h a t i s p a i d and w h a t i s r e c e i v e d b y o t h e r c o u n t r i e s " .
The
G o v e r n m e n t h a d d e c i d e d n o t t o s e e k t o o v e r t u r n t h e "own r e s o u r c e s '
s y s t e m as such, but to c o r r e c t i t s unfair i m p a c t .
A g a i n s t strong
opposition w e had achieved considerable s u c c e s s .
W e had obtained
a c o r r e c t i n g m e c h a n i s m which would bring our g r o s s contribution
m o r e c l o s e l y i n t o l i n e w i t h our s h a r e of the C o m m u n i t y ' s g r o s s
national product ( G N P ) .
T h i s m e c h a n i s m w a s subject to a number
o f q u a l i f y i n g c o n d i t i o n s , o n l y o n e o f w h i c h w a s l i k e l y t o b i t e ; and
t h e r e w o u l d b e a c e i l i n g on t h e p o t e n t i a l r e f u n d a v a i l a b l e .
But the
end r e s u l t w o u l d be a w o r t h w h i l e r e d u c t i o n in o u r c o n t r i b u t i o n to
the C o m m u n i t y b u d g e t .
W e m u s t e x p e c t to continue t o be net
c o n t r i b u t o r s s i n c e , a m o n g o t h e r r e a s o n s , s o m e of the i t e m s of
Community expenditure - eg aid for developing countries - w e r e
those w e wished to see extended.
T h e a i m i n t h e f o r m s e t out in
the M a n i f e s t o h a d n e t b e e n m e t , but r e n e g o t i a t i o n h a d r e s u l t e d in a
new Community arrangement which would bring a considerable
f i n a n c i a l i m p r o v e m e n t t o u s ; and h e r e c o m m e n d e d t h e C a b i n e t t o
accept it.
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
i.
­
T h e fact that in r e n e g o t i a t i o n w e had not d i r e c t l y
a t t a c k e d the 'own r e s o u r c e s
accepted it.
1
s y s t e m d i d not m e a n that we
In t h i s c o n t e x t i t w a s r e l e v a n t t h a t s i n c e t w o
o f t h e t h r e e e l e m e n t s i n "own r e s o u r c e s ' w e r e
agricultural
l e v i e s and i m p o r t d u t i e s , t h e U n i t e d K i n g d o m ,
as the m a j o r
w o r l d t r a d e r in the C o m m u n i t y ,
4
could not avoid being a heavy
contributor;
and,
since a high p r o p o r t i o n of e x p e n d i t u r e
w e n t on a g r i c u l t u r a l s u p p o r t ,
relatively
inevitably our r e c e i p t s
were
low,
ii.
T h e l i m i t a t i o n s in t h e c o r r e c t i n g m e c h a n i s m m e a n t
that, in net t e r m s , only about one-third of the gap b e t w e e n
o u r c o n t r i b u t o r y s h a r e o f t h e b u d g e t and o f the C o m m u n i t y ' s
G N P would be c o v e r e d .
W e should s e e k to i m p r o v e our
p o s i t i o n b y , in a c c o r d a n c e with g e n e r a l G o v e r n m e n t p o l i c y ,
p u r s u i n g p o l i c i e s d e s i g n e d t o i n c r e a s e o u r G N P , and a l s o
by a i m i n g to i n c r e a s e our r e c e i p t s f r o m the C o m m u n i t y
budget,
.
iii.
F o r e c a s t s o f n e t c o n t r i b u t i o n s in t h e f u t u r e w e r e
v e r y u n c e r t a i n , as the c o n s i d e r a b l e d i f f e r e n c e s b e t w e e n
f o r e c a s t s and m u c h l o w e r o u t - t u r n f o r t h e p a s t t w o y e a r s
demonstrated,
iv.
If w e b e n e f i t t e d f r o m the c o r r e c t i n g m e c h a n i s m f o r
t h r e e y e a r s i n s u c c e s s i o n t h e C o m m u n i t y w o u l d r e v i e w the
p o s i t i o n with us in o r d e r to c o n s i d e r what f u r t h e r action
was required.
If w e w e r e l a g g i n g behind the c o n v e r g i n g
e c o n o m i e s of the o t h e r m e m b e r s , t h i s f u r t h e r a c t i o n c o u l d
be beneficial.
T h e C o m m u n i t y m i g h t say that our p o o r
e c o n o m i c p e r f o r m a n c e i n t h e s e c i r c u m s t a n c e s w a s due t o
our following the w r o n g p o l i c i e s , just as other international
o r g a n i s a t i o n s in t h i s f i e l d c o u l d and d i d ; b u t c o n d i t i o n s
could not be i m p o s e d upon u s w h i c h w o u l d a f f e c t our
b e n e f i t s f r o m the c o r r e c t i n g m e c h a n i s m if w e continued to
qualify f o r a refund.
Economic and
Monetary U n i o n
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 s a i d that the
M a n i f e s t o c o m m i t m e n t r e a d : " W e w o u l d r e j e c t any k i n d o f
international a g r e e m e n t which c o m p e l l e d us to accepted i n c r e a s e d
u n e m p l o y m e n t f o r the sake of m a i n t a i n i n g a f i x e d p a r i t y . . . . W e
b e l i e v e t h a t t h e m o n e t a r y p r o b l e m s o f t h e E u r o p e a n c o u n t r i e s can
be r e s o l v e d only within a w o r l d - w i d e f r a m e w o r k " .
T h e r e had
h o w e v e r b e e n a m a j o r c h a n g e in the attitude of o t h e r M e m b e r
G o v e r n m e n t s t o t h e p r a c t i c a b i l i t y o f a c h i e v i n g e c o n o m i c and
m o n e t a r y u n i o n ( E M U ) b y 1980.
T h e p r o g r a m m e f o r advancing to
E M U by stages had been tacitly abandoned.
EMU remained a
l o n g - t e r m C o m m u n i t y g o a l , but w e should be able to e n s u r e that
o u r i n t e r e s t s w e r e f u l l y p r o t e c t e d b y t h e v e t o i f and w h e n a n y
p r o p o s a l s w e r e m a d e in that d i r e c t i o n .
T h e r e w a s no p r o s p e c t of
o u r c o m i n g u n d e r p r e s s u r e t o a g r e e t o an a r r a n g e m e n t w h i c h w o u l d
t h r e a t e n t h e l e v e l o f u n e m p l o y m e n t in t h i s c o u n t r y .
The "world­
w i d e f r a m e w o r k " r e f e r r e d t o in the M a n i f e s t o h a d b e e n u s e d b y the
C o m m u n i t y i n r e c e n t m o n t h s , at t h e i n s t i g a t i o n o f t h e C h a n c e l l o r o f
the E x c h e q u e r , t o c o n s i d e r m o n e t a r y p r o b l e m s .
5
In d i s c u s s i o n i t w a s a r g u e d that the c o m m u n i q u e of the
Paris
S u m m i t i n D e c e m b e r 1974 h a d a f f i r m e d t h a t t h e C o m m u n i t y s w i l l
1
t o m a k e p r o g r e s s t o w a r d s E M U h a d n o t w e a k e n e d and t h a t t h i s
c o m m u n i q u e c o u l d b e u s e d i n t h e f u t u r e t o p u s h u s i n an u n a c c e p t a b l e
direction.
On t h e o t h e r h a n d i t w a s p o i n t e d out t h a t E M U w a s a
l o n g - t e r m g o a l o f the s a m e c h a r a c t e r a s g e n e r a l and c o m p l e t e
disarmament;
d e s i r a b l e i n p r i n c i p l e but u n a t t a i n a b l e i n p r a c t i c e .
T h e r e a l i t y w a s d i f f e r e n t f r o m the v i s i o n a r y concept of
communiques.
T h e r e w a s i n c r e a s i n g e m p h a s i s on c o - o p e r a t i o n
b e t w e e n M e m b e r G o v e r n m e n t s of a k i n d w h i c h w o u l d m a k e i t l e s s
i m p o r t a n t t o a c h i e v e the l i n k e d e x c h a n g e r a t e s w h i c h h a d b e e n
p r o m i n e n t in p r e v i o u s t h i n k i n g .
in our i n t e r e s t s .
P r o g r e s s along these lines w a s
T h e G o v e r n m e n t s W h i t e P a p e r on t h e o u t c o m e
o f r e n e g o t i a t i o n m i g h t m a k e c l e a r t h a t t h e s t a g e s , a d o p t e d i n 1971
a n d 1972 f o r p r o g r e s s t o w a r d s E M U ,
w e r e t a c i t l y d i s c a r d e d in the
P a r i s C o m m u n i q u e o f D e c e m b e r 1974.
THE FOREIGN AND COMMONWEALTH SECRETARY
said that the
M a n i f e s t o o b j e c t i v e w a s "the retention by P a r l i a m e n t of those 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
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 regional aspect had been
c o n s i d e r e d b y t h e C a b i n e t o n 27 F e b r u a r y ,
that,
regional,
when a m a j o r i t y
s u b j e c t t o t h e o v e r a l l j u d g m e n t on t h e o u t c o m e o f
concluded
renegotiation,
the C o m m u n i c a t i o n f r o m the C o m m i s s i o n m e t our r e q u i r e m e n t s .
That C o m m u n i c a t i o n established a h i e r a r c h y of a s s i s t e d a r e a s which
c o n f o r m e d with our own.
in p r i n c i p l e ,
N o f o r m s of n a t i o n a l aids w e r e r u l e d out
and t h e r e w a s no i n t e r f e r e n c e w i t h our e x i s t i n g
regional aids.
T h e C o m m i s s i o n had acknowledged that national
G o v e r n m e n t s w e r e the b e s t j u d g e s of what w a s r e q u i r e d in t h e i r own
c o u n t r y and t h a t u r g e n t a c t i o n b y G o v e r n m e n t s s h o u l d n o t b e h e l d u p
by Treaty procedures.
A d e r o g a t i o n w a s b e i n g obtained f o r the
a s s i s t a n c e g i v e n 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
P a r l i a m e n t r e t a i n e d the p o w e r to v o t e m o n e y f o r r e g i o n a l
Board.
assistance
and t o a l l o c a t e t h i s m o n e y i n a w a y w h i c h w a s r e q u i r e d t o p r o m o t e
effective regional policies.
The C o m m i s s i o n s powers w e r e
d e r i v e d f r o m the E E C T r e a t y ,
w h i c h l a i d e m p h a s i s on the n e e d to
a v o i d a s s i s t a n c e which g a v e u n f a i r advantage to one M e m b e r
o v e r a n o t h e r and h e w o u l d c i r c u l a t e s o m e r e a s s u r i n g
State
supplementary
c o r r e s p o n d e n c e w i t h t h e C o m m i s s i o n on t h e m a t t e r .
In d i s c u s s i o n it w a s a r g u e d that the M a n i f e s t o c o m m i t m e n t had not
b e e n m e t s i n c e the l e g a l p o w e r t o g r a n t r e g i o n a l a s s i s t a n c e i n t h i s
c o u n t r y r e m a i n e d f e t t e r e d b y t h e T r e a t y and t h e p o w e r s o f t h e
Commission,
T h e C o m m i s s i o n s C o m m u n i c a t i o n l a i d down
p r i n c i p l e s w h i c h w e r e v a l i d f o r o n l y t h r e e y e a r s and p r o v i d e d n o
s a f e g u a r d s f o r future changes in o u r a i d s .
I t w a s a r g u e d , on t h e
o t h e r h a n d , t h a t t h e C o m m u n i c a t i o n , and o u r e x p e r i e n c e o f t h e
o p e r a t i o n of the T r e a t y S p r o v i s i o n s , d e m o n s t r a t e d that w e should
e n c o u n t e r d i f f i c u l t y in the C o m m u n i t y only if w e u s e d a r e g i o n a l
a i d t o g i v e an u n f a i r c o m p e t i t i v e a d v a n t a g e t o o u r i n d u s t r y o v e r t h a t
of another m e m b e r state, o r to outbid another m e m b e r state by
m a k i n g s p e c i a l r e g i o n a l g r a n t s t o s e c u r e an i n v e s t m e n t
w h i c h w o u l d h a v e o t h e r w i s e g o n e e l s e w h e r e in the
project
Community.
T h e a s s i s t e d a r e a s in the United K i n g d o m could be a s s u r e d that
t h e i r position had b e e n c o m p l e t e l y safeguarded.
f r o m the C o m m u n i t y ,
If w e w i t h d r e w
any f r e e t r a d e a r r a n g e m e n t w e w e r e able to
n e g o t i a t e w o u l d be bound to include c o m p e t i t i o n p r o v i s i o n s
t o t h e r u l e s in t h e E E C T r e a t y .
similar
W e should also s t i l l b e bound by
other international a g r e e m e n t s of this kind.
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 w e
h a d n o t m e t w i t h any s e r i o u s d i f f i c u l t i e s f r o m t h e E E C i n t h e
c o n d u c t o f i n d u s t r i a l p o l i c y d u r i n g t h e p a s t y e a r , and i t w a s
i n c o r r e c t t o s u g g e s t t h a t t h e T r e a t i e s and t h e C o m m i s s i o n s t o o d
in the w a y of the p o l i c i e s t o w h i c h the G o v e r n m e n t w e r e c o m m i t t e d .
If w e w i t h d r e w f r o m the C o m m u n i t y , the c o m p e t i t i o n r u l e s attached
to any f r e e t r a d e a g r e e m e n t w o u l d e x t e n d t o i n d u s t r i a l
a r r a n g e m e n t s , as w e l l as to r e g i o n a l a s s i s t a n c e .
The proposals
i n t h e I n d u s t r y B i l l f o r t h e N a t i o n a l E n t e r p r i s e B o a r d and f o r
planning a g r e e m e n t s w e r e in n o w a y i n c o m p a t i b l e w i t h the E E C
T r e a t y , p r o v i d e d that p o w e r s w e r e not e x e r c i s e d in a w a y which
d a m a g e d the i n t e r e s t s of other m e m b e r s t a t e s .
The E E C Treaty
specifically permitted nationalisation.
T h e p r o v i s i o n in the
I n d u s t r y B i l l f o r stopping f o r e i g n t a k e o v e r s w o u l d of c o u r s e h a v e
t o b e e x e r c i s e d in a w a y which did not d i s c r i m i n a t e a g a i n s t E E C
f i r m s : but that l i m i t a t i o n w o u l d h a v e to b e w e i g h e d in the o v e r a l l
a s s e s s m e n t of t h e o u t c o m e o f r e n e g o t i a t i o n .
In d i s c u s s i o n i t w a s a r g u e d that the e x p e r i e n c e of the p a s t y e a r w a s ,
in the s p e c i a l c i r cum stance s
future,
r
an i n a d e q u a t e s a f e g u a r d f o r t h e
s i n c e p o w e r s t i l l r e s i d e d with the C o m m u n i t y institutions,
r a t h e r than with P a r l i a m e n t .
t h e r e f o r e been m e t .
T h e Manifesto c o m m i t m e n t had not
On the o t h e r hand, our own s y s t e m of
planning a g r e e m e n t s w a s p a r t l y b a s e d on the p r a c t i c e in F r a n c e
and o t h e r E E C c o u n t r i e s w h e r e i t h a d n o t r u n i n t o d i f f i c u l t i e s
the T r e a t y o r the C o m m i s s i o n .
T h i s i l l u s t r a t e d how the
Cabinets
o v e r a l l j u d g m e n t w o u l d n e e d t o b e b a s e d on h o w f a r the E E C ,
and i n t h e f u t u r e ,
with
now
would operate in the p r a g m a t i c way which our
e x p e r i e n c e had shown w a s to be e x p e c t e d ,
instead of j u r i d i c a l l y
and w i t h an o v e r - s t r i c t r e g a r d f o r t h e l e t t e r o f t h e T r e a t i e s .
T H E P R I M E M I N I S T E R said that he had h i m s e l f r a i s e d the question
o f s t e e l w i t h t h e o t h e r H e a d s o f C o m m u n i t y G o v e r n m e n t s at t h e i r
r e c e n t m e e t i n g in D u b l i n .
H e h a d r e m i n d e d t h e m that n e i t h e r the
T r e a t y e s t a b l i s h i n g t h e E u r o p e a n C o a l a n d S t e e l C o m m u n i t y , n o r any ­
r u l e s a n d p r a c t i c e s d e v e l o p e d u n d e r t h e T r e a t y , d e r o g a t e d i n any
7
w a y f r o m t h e r i g h t o f B r i t a i n o r o f any o t h e r m e m b e r c o u n t r y t o
e x t e n d the b o u n d a r i e s of p u b l i c o w n e r s h i p o r t o take the w h o l e s t e e l
industry into public o w n e r s h i p .
When B r i t a i n j o i n e d the E E C the
C o n s e r v a t i v e G o v e r n m e n t h a d r e p e a l e d t h e statutog?y p o w e r s w h i c h
g a v e the G o v e r n m e n t c e r t a i n c o n t r o l s o v e r p r i v a t e i n v e s t m e n t .
T h i s had m e a n t that the G o v e r n m e n t could n o t d e a l a d e q u a t e l y w i t h
the p r o b l e m of the m i n i - m i l l s .
T h i s p o s i t i o n h a d t o b e put r i g h t ,
i f n e c e s s a r y by a m e n d m e n t to the T r e a t y .
H e had h o w e v e r t o l d the
o t h e r H e a d s of G o v e r n m e n t that he w o u l d be g l a d t o l e a r n f r o m t h e i r
e x p e r i e n c e in solving s i m i l a r p r o b l e m s , to see whether ours could
b e r e s o l v e d in a w a y c o m p a t i b l e with the T r e a t y ,
He had assured
t h e m that w e should m u c h p r e f e r to a v o i d a T r e a t y a m e n d m e n t , but
that it w a s of v i t a l i m p o r t a n c e t o us that the p r o b l e m should be
solved.
It w a s not p r a c t i c a b l e to m a k e p r o g r e s s on it b e f o r e the
e n d o f r e n e g o t i a t i o n and i t w o u l d f a l l t o b e d e a l t w i t h i n t h e f u t u r e
w o r k of the C o m m u n i t y if w e r e m a i n e d m e m b e r s a f t e r the r e f e r e n d u m .
In d i s c u s s i o n i t w a s p o i n t e d o u t t h a t d i f f i c u l t i e s h a d a l s o a r i s e n i n
r e l a t i o n to the acquisition of a p r i v a t e steel f i r m .
There were
g r o u n d s f o r s u p p o s i n g , h o w e v e r , t h a t the C o m m i s s i o n ^ r e a c t i o n t o
t h e o r i g i n a l p r o p o s a l m a y h a v e b e e n due t o a f a i l u r e t o u n d e r s t a n d
c l e a r l y what the G o v e r n m e n t s intentions w e r e .
THE FOREIGN AND COMMONWEALTH SECRETARY
p r o b l e m s had a r i s e n in r e l a t i o n to f i s c a l p o l i c i e s .
s a i d that no
Certain
m e a s u r e s had b e e n p r o p o s e d to h a r m o n i s e the s t r u c t u r e of
indirect taxes.
some
W e s h o u l d b e a b l e t o b l o c k any p r o p o s a l s w h i c h w e
considered unacceptable.
THE FOREIGN AND COMMONWEALTH
SECRETARY
s a i d that the
M a n i f e s t o c o m m i t m e n t w a s to p r e v e n t " h a r m o n i s a t i o n of
tax ( V A T ) which would r e q u i r e us to tax n e c e s s i t i e s " .
p r o p o s a l s n o w b e i n g d i s c u s s e d in the C o m m u n i t y w e r e
with agreeing a uniform assessment base for V A T .
f o r our s y s t e m of z e r o r a t i n g ,
value-added
The
concerned
They provided
W e should b e r e a d y to r e s i s t any
p r o p o s a l s in this field which w e r e unacceptable to u s .
In d i s c u s s i o n i t w a s p o i n t e d out that the n e e d f o r a u n i f o r m
a s s e s s m e n t b a s e f o r V A T a r o s e because the budgetary r e s o u r c e s
of the C o m m u n i t y u n d e r the "own r e s o u r c e s s y s t e m w o u l d include
s u m s c o r r e s p o n d i n g t o t h e y i e l d of V A T c h a r g e d at a r a t e of up t o
1 p e r c e n t on a u n i f o r m b a s e .
Our s y s t e m of z e r o rating w a s
p r o v i d e d f o r in the u n i f o r m b a s e w h i c h had b e e n p r o p o s e d .
All
m e m b e r s t a t e s w o u l d f i n d i t d i f f i c u l t t o a g r e e on h a r m o n i s a t i o n o f
t h e a c t u a l r a t e s of V A T .
5
THE FOREIGN AND COMMONWEALTH SECRETARY
February Manifesto read:
s a i d that the
" W e n e e d an a g r e e m e n t on c a p i t a l
m o v e m e n t s w h i c h p r o t e c t s o u r b a l a n c e o f p a y m e n t s and f u l l
employment policies".
L a s t y e a r the G o v e r n m e n t had b e e n a b l e ,
b y u s i n g p r o v i s i o n s i n t h e E E C T r e a t y about m e m b e r s t a t e s i n
b a l a n c e of p a y m e n t s d i f f i c u l t i e s ,
to r e v e r t t o what w a s b r o a d l y the
s a m e exchange control r e g i m e as applied b e f o r e a c c e s s i o n .
Action
could continue to be taken under these p r o v i s i o n s to p r o t e c t our
balance of p a y m e n t s .
In d i s c u s s i o n i t w a s s u g g e s t e d t h a t t h e C a b i n e t s h o u l d h a v e f u r t h e r
i n f o r m a t i o n about the t e r m s of the d e r o g a t i o n s w e had b e e n g r a n t e d
i n r e s p e c t of c a p i t a l m o v e m e n t s ; t h e s e w o u l d b e p r o v i d e d b y t h e
C h a n c e l l o r of t h e E x c h e q u e r .
The T r e a t y p r o v i s i o n s under which
w e h a d a c t e d p r o v i d e d f o r an i n v e s t i g a t i o n b y t h e C o m m i s s i o n o f the
p o s i t i o n of the m e m b e r state w h i c h i n v o k e d t h e m , but the
C o m m i s s i o n ^ c o n s e q u e n t i a l r e c o m m e n d a t i o n s w o u l d n e e d to g o
b e f o r e t h e C o u n c i l of M i n i s t e r s , w h e r e w e s h o u l d n o t a g r e e t o
m e a s u r e s which w e r e unacceptable to u s ,
The International
M o n e t a r y F u n d r e g u l a t i o n s c o n t a i n e d s i m i l a r p r o v i s i o n f o r an
i n v e s t i g a t i o n in a p p r o p r i a t e c i r c u m s t a n c e s ,
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 s a i d that the
F e b r u a r y M a n i f e s t o r e a d : " T h e e c o n o m i c i n t e r e s t s of t h e
C o m m o n w e a l t h and t h e d e v e l o p i n g c o u n t r i e s m u s t b e s a f e g u a r d e d .
T h i s i n v o l v e s s e c u r i n g continued a c c e s s t o the B r i t i s h m a r k e t and,
m o r e g e n e r a l l y , the a d o p t i o n b y an e n l a r g e d C o m m u n i t y o f t r a d e
and a i d p o l i c i e s d e s i g n e d t o b e n e f i t n o t j u s t A s s o c i a t e d o v e r s e a s
t e r r i t o r i e s ' in A f r i c a but d e v e l o p i n g c o u n t r i e s t h r o u g h o u t the w o r l d " .
O u r m e m b e r s h i p of t h e E E C had b r o u g h t c o n s i d e r a b l e b e n e f i t s t o
t h e C o m m o n w e a l t h b o t h in o p e n i n g up t h e C o m m u n i t y m a r k e t t o t h e m
and in a i d .
H e had h a d c o n v e r s a t i o n s in the p a s t f e w m o n t h s w i t h
r e p r e s e n t a t i v e s of m a n y d e v e l o p e d and d e v e l o p i n g m e m b e r s o f t h e
Commonwealth.
In a l l c a s e s t h e y h a d t h o u g h t t h a t t h e i r i n t e r e s t s
w e r e b e t t e r s a f e g u a r d e d by o u r b e i n g i n s i d e t h e E E C r a t h e r than o u t .
In a d d i t i o n t o w h a t h a d b e e n a c h i e v e d i n r e s p e c t of s u g a r and
N e w Z e a l a n d d a i r y p r o d u c t s , t h e r e had b e e n the i m p o r t a n t
a c h i e v e m e n t o f the L o m e C o n v e n t i o n b e t w e e n t h e E E C and
46 d e v e l o p i n g c o u n t r i e s , 22 o f t h e m i n t h e C o m m o n w e a l t h , f r o m
A f r i c a , t h e C a r i b b e a n and t h e P a c i f i c ,
T h i s convention had b e e n
h a i l e d i n t e r n a t i o n a l l y a s a m a j o r n e w d e v e l o p m e n t , and a s
e s t a b l i s h i n g a s a t i s f a c t o r y b a s i s f o r r e l a t i o n s b e t w e e n the d e v e l o p e d
and t h e d e v e l o p i n g w o r l d .
T h e s c h e m e f o r the s t a b i l i s a t i o n of
e x p o r t e a r n i n g s f r o m c o m m o d i t i e s w a s a n e w s t e p of e s p e c i a l v a l u e .
T h e C o m m u n i t y ' s G e n e r a l i s e d S c h e m e of P r e f e r e n c e s h a d b e e n
g r e a t l y i m p r o v e d and e x t e n d e d t o b e y o n d 1980,
A i d to d e v e l o p i n g
c o u n t r i e s o u t s i d e t h e L o m e C o n v e n t i o n h a d b e e n a g r e e d in p r i n c i p l e ,
but no m o n e y had y e t b e e n f o r t h c o m i n g .
T h i s w a s an i s s u e w h i c h
9
the G e r m a n s l o o k e d upon as affecting their national financial
interest,
and t h e y w e r e p r o v i n g d i f f i c u l t a b o u t i t .
On t r a d e ,
a
w i d e r a n g e of i m p r o v e m e n t s h a d b e e n m a d e i n a n u m b e r o f t r a d e
n e g o t i a t i o n s which w o u l d b e of a s s i s t a n c e t o C o m m o n w e a l t h
developing countries.
In h i s v i e w t h e r e f o r e t h e
and
Manifesto
o b j e c t i v e had been m e t .
In d i s c u s s i o n it w a s a r g u e d that the situation on aid t o Southern
A s i a r e q u i r e d f u r t h e r c o n s i d e r a t i o n , and t h a t t h e M i n i s t e r o f
O v e r s e a s D e v e l o p m e n t h a d e x p r e s s e d h e r d i s s a t i s f a c t i o n on t h i s
point.
A l t h o u g h the c o u n t r i e s c o n c e r n e d w o u l d b e n e f i t under the
G e n e r a l i s e d S c h e m e o f P r e f e r e n c e s and f r o m b i l a t e r a l a i d , w e
s h o u l d k e e p up o u r p r e s s u r e on t h e C o m m u n i t y t o i m p l e m e n t t h e
p r i n c i p l e s for w o r l d - w i d e aid which it had a c c e p t e d .
It should be
r e c o g n i s e d that our w i t h d r a w a l f r o m the C o m m u n i t y w o u l d r e d u c e
r a t h e r than i n c r e a s e the p r e s s u r e f o r b e t t e r t r e a t m e n t f o r
S o u t h e r n A s i a ; and t h e c o u n t r i e s c o n c e r n e d u n d e r s t o o d t h i s ,
THE PRIME MINISTER,
s u m m i n g up t h e d i s c u s s i o n ,
said that the
Cabinet would r e s u m e their d i s c u s s i o n the following day,
starting
w i t h t h e g e n e r a l i s s u e o f P a r l i a m e n t a r y s o v e r e i g n t y and m o v i n g on
t o an a s s e s s m e n t o f t h e o v e r a l l p a c k a g e .
The Cabinet
-
A g r e e d t o r e s u m e on t h e f o l l o w i n g d a y t h e i r
c o n s i d e r a t i o n o f t h e o u t c o m e of r e n e g o t i a t i o n .
10
:: '
LTIONALISATION
IF THE
I r c r a f t
AND
felPBUILDlNG
IDUSTRIES
2.
:...rv
T H E P R I M E M I N I S T E R i n f o r m e d the C a b i n e t that the
v S e c r e t a r y of State f o r I n d u s t r y w o u l d b e a n n o u n c i n g l a t e r i n t h e
d a y t h e t e r m s of c o m p e n s a t i o n f o r n a t i o n a l i s i n g t h e a i r c r a f t and
shipbuilding industries,.
In a c c o r d a n c e w i t h p r e c e d e n t t h e s e h a d
b e e n c o n s i d e r e d b y a v e r y s m a l l g r o u p of M i n i s t e r s u n d e r h i s o w n
c h a i r m a n s h i p : and i t r e m a i n e d of t h e u t m o s t i m p o r t a n c e t o a v o i d
any l e a k a g e o f i n f o r m a t i o n i n a d v a n c e of t h e S e c r e t a r y o f S t a t e s
statement.
N e v e r t h e l e s s he thought m e m b e r s of the C a b i n e t
s h o u l d s e e t h e s t a t e m e n t i n a d v a n c e of i t b e i n g m a d e , and c o p i e s
w e r e being m a d e a v a i l a b l e to t h e m a c c o r d i n g l y .
T h e e s s e n c e of
t h e G o v e r n m e n t s p r o p o s a l s w a s t h a t t h e p r e c e d e n t of t h e I r o n and
S t e e l A c t 196? s h o u l d b e f o l l o w e d and t h a t the G o v e r n m e n t s h o u l d
buy s h a r e s r a t h e r than a s s e t s , m a i n l y b e c a u s e a s s e t s a r e v a r i o u s l y
v a l u e d i n c o m p a n y b o o k s , o f t e n at p r i c e s i n f l a t e d w e l l b e y o n d t h e i r
earning capacity.
S o m e s h a r e h o l d e r s w o u l d no doubt c o n s i d e r it
h a r s h to b a s e c o m p e n s a t i o n on s h a r e s d e s p i t e the r e c e n t r e c o v e r y
on t h e S t o c k E x c h a n g e , but s u c h c r i t i c i s m h a d b e e n a n t i c i p a t e d b y
c h o o s i n g a c o m p a r a t i v e l y g e n e r o u s r e f e r e n c e period^, n a m e l y t h e
s i x m o n t h s p r i o r t o t h e E l e c t i o n i n F e b r u a r y 1974, w h e n t h e
g e n e r a l l e v e l o f s h a r e p r i c e s w a s s i g n i f i c a n t l y h i g h e r than i t w a s
now.
N o deduction would be m a d e f r o m compensation in r e s p e c t
o f p a s t a i d g i v e n on s e t t l e d t e r m s , s i n c e i t w o u l d b e a g a i n s t a l l
p r e c e d e n t to a l t e r such t e r m s r e t r o s p e c t i v e l y but, e q u a l l y ^ no
c r e d i t w o u l d be a l l o w e d f o r e x p e c t a t i o n s of future a i d
Provision
w o u l d b e m a d e as u s u a l f o r p r i c e s t o b e d e c i d e d b y a r b i t r a t i o n i f
the S e c r e t a r y of State f o r I n d u s t r y could not a g r e e t h e m with the
stockholders' representative.
5
0
The Cabinet
-
T o o k note, with approval,
b y the P r i m e
Cabinet
Minister.
Office
17 M a r c h 1975
11
of t h e
statement