House of Commons Hansard Debates for 18 Jan 1993

Mr. Shore : I am glad that the Minister of State nods. I hope that my hon. Friends on the Opposition Front Bench will take this in. There is nothing in the article except that which the Minister of State went out of his way to emphasise, which is contained in the final sentence. It reads :

"This Title shall not provide a basis for the introduction by the Community of any measure which could lead to a distortion of competition."

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Even the generalities--they add nothing to powers that already exist--are subjective. They do not infringe on or distort competition. In other words, the principle has been established that industrial policy, to which my right hon. and hon. Friends attach such importance, is wholly subject to competition policy. There can be no effective industrial policy for as long as competition policy is allowed to reign supreme.

I do not understand why my right hon. and hon. Friends have chosen to make No. 1 their lead amendment. It has, of course, opened up a major and interesting subject for debate, but if anyone thought that he should identify article 129 as the sunny face of the treaty from the point of view of those who wish to have an effective industrial policy, he would be wrong and disappointed. It is not there. We would wish it to be there, but it is not.

Even if the Community developed an industrial policy--it would not get very far--at a later stage and it helped European industry, would it necessarily help British industry? What are the principles of distribution among member states and the different industries of the European Community? I put that unanswered question to the Committee. Anyone who believes that Britain would benefit automatically from a European industrial policy has much explaining to do. He would have to search for any evidence that that would follow.

My hon. Friend the Member for Newport, East (Mr. Hughes) drew attention to another important feature of the so-called industrial policy. He talked about accelerating structural change in the context of article 129.

Mr. Rowlands : It is article 130.

Mr. Shore : I am grateful to my hon. Friend for that correction. I have been referring to article 130 throughout. I do not know why I identified it as article 129.

It is right that the article emphasises an acceleration of structural change. Those are pleasing words which disguise what we know is the reality --mergers and the elimination of firms as they go to the wall. Those are not pleasing prospects. The motor car industry is an example which we must all have in mind. When we look across the Atlantic, see where the American single market has left its motor car industry and consider how many separate units remain, it is surely not fanciful to talk about takeovers and mergers between the eight or more major motor car companies that are in Europe. Those problems will arise.

To anyone who looks a little further ahead, I say that that is not a pleasing prospect. There could be a takeover bid for one of the remaining British car companies, such as Rolls-Royce. If the scale were big enough-- for example, if ICI were the subject of a takeover bid by I.G. Farben--it would be no use arguing that that would not be in Britain's national interest.

Under the Single European Act, we have already abandoned the power to decide whether a merger or takeover should take place ; we have given that power to the European Commissioner. That is no longer Sir Leon Brittan-- although, quite frankly, I would not have any greater confidence if it were, as he is a great believer in competition policy. In appropriate conditions, he is in favour of mergers, amalgamations and takeovers where they do not disturb the objective of competition.

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That is the reality of competition policy. There is nothing in the treaty that helps, safeguards or strengthens British industry. Instead, it is possible that there will be an open season on British firms. There is nothing to protect them other than their own strengths and competitiveness. Whatever their temporary difficulties may be, they could easily be brought down.

My hon. Friend the Member for Great Grimsby (Mr. Mitchell) rightly pointed out that we have the considerable difficulty that our capital market is so open. Our firms are vulnerable to takeover bids because there is no protective institution in the United Kingdom. They may run into short-term difficulties and their stock market values may tumble. Then, regardless of their long-term potential, they become very vulnerable. That is not true of Germany. As my hon. Friend explained, many German shares are held by German banks for a long period. They will not give them up, so there are not the same pressures.

Those are real dangers for British industry. If nothing else, we have drawn attention to that by putting article 130 under the spotlight.

Mr. Wells : Is it not true that, as the right hon. Gentleman said at the beginning of his remarks, article 130 is the product of the treaty of Rome as amended by the Single European Act, and that the Maastricht treaty makes no change? Although we respect the right hon. Gentleman's objections to the whole concept of Europe and a European industrial policy, in fact the Maastricht treaty, and therefore the Bill, do not affect what is already in existence and will remain so even if we reject the Bill.

Mr. Shore : I agree that the Bill repeats and reaffirms what is already in the Single European Act. Perhaps those of us who fought that Act tooth and nail may be accorded some understanding of why we opposed it when it was pushed through this Parliament on a three-line Whip.

Mr. Marlow : The right hon. Gentleman said that European mergers and takeovers will be all one way because of institutional problems in other European countries. Is it not worse than that? If any of our television companies wanted to take over a European television company it would be unable to do so, whereas potentially in a few months' time European television companies will be able to take over our television companies.

If our steel industry, which is the most efficient in Europe, wanted to take over some of the rotten remnants of European steel, it would be unable to do so, because other European Governments would get in the way. In every area of endeavour, by and large, the dice are loaded against us.

Mr. Shore : Yes, and with some European countries more than others. The French and Germans in particular protect their industries--not completely, but they provide their industries with defences against predatory raiders and takeover bidders.

Mr. Rowlands : Since the Minister stated that article 130 does not change the treaty of Rome or the Single European Act, I researched the matter as best I could in the Library. I can find nothing as explicit as the reference in article 130 to

"speeding up the adjustment of industry to structural changes".

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Perhaps my right hon. Friend will press the Minister to say, when he winds up, whether that phrase comes from the treaty of Rome or the Single European Act, or whether it is a new provision --and therefore potentially rather more dangerous.

Mr. Shore : I thank my hon. Friend for that valuable intervention. I ask the Minister to address himself to precisely that part of article 130 that refers to

"speeding up the adjustment of industry to structural changes". Is that a new form of words, and does it carry the general implication that I have placed upon it?

Mr. Calum Macdonald (Western Isles) : I agree with my right hon. Friend that this issue is important, but is it not one that already confronts us in the United Kingdom? I refer, for example, to the threatened takeover of Pilkington plc, with the potential loss of regional and centralised jobs. More tellingly, did not that issue arise when Distillers was taken over by Guinness? It is nothing new--it is just that we have to face it on a European rather than a British stage. Presumably my right hon. Friend's solution to the Guinness-Distillers case is not to argue for independence for Scotland, to be able to defend its own industries. We must work out an investment strategy on a British stage, then on a European stage.

Mr. Shore : My hon. Friend misses the whole point. Of course some United Kingdom takeover bids were very unwelcome. If Hanson had pursued its quest for ICI, an issue of major importance would have been raised--with most right hon. and hon. Members, I believe, wanting ICI to remain independent. Until the Single European Act, the arbiter of whether such a takeover bid should, in the national interest, proceed was the Secretary of State for Trade and Industry--a British citizen whose primary concern was the welfare of his own country, not of some generalised European future nation state.

Mr. Macdonald rose --

Mr. Shore : No, I will not give way again to my hon. Friend on that point.

Mr. Spearing : I am not sure that my hon. Friend the Member for Western Isles (Mr. Macdonald) understands the purport of that important phrase,

"speeding up the adjustment of industry to structural changes". My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) referred to structural change in the financial sense of markets, takeovers, the ownership of firms, and so on. He cited the chemical industry as an important example. However, as we know only too well, structural change in this context means not just takeovers but market changes. Does not article 130 attempt to enjoin nation states, in so far as they have any powers left, and the Community to speed up the process of change irrespective of the social effects?

Mr. Shore : There is no suggestion in the section on industrial change that any regard or consideration will be given to such matters as employment.

Mr. Macdonald : Surely the aim is to secure an industrial policy in Europe of which we, as socialists, would approve. The controversy over the Secretary of State who decided the question of the Guinness takeover bid, the Hanson attempt on ICI or the Pilkington issue

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concerned not whether it was a British Secretary of State, but whether it was a socialist Labour Secretary of State or a market-oriented Conservative Secretary of State. The solution to the Guinness takover was to involve not a Scottish but a socialist, Labour, Secretary of State.

Mr. Shore : Clearly, there are differences between Conservative and Labour Governments and Presidents of the Board of Trade. There is, however, a fundamental interest that unites us all ; I am amazed--indeed, shocked-- that my hon. Friend does not seem to share it. I refer to the British interest. Britain as a whole is a nation and a people : we have our own interests, and those interests--while not necessarily hostile to those of our European neighbours--cannot be assumed to be identical to them. To transfer these powers from our people, our Parliament and our Government to our European neighbours is, in my view, a great mistake.

Article 130 deals with research and technological development. Its proposals are quite ambitious. What does the Minister understand by, for instance, the following passage in article 130h :

"The Community and the Member States shall co-ordinate their research and technological development activities so as to ensure that national policies and Community policy are mutually consistent" ?

What is the "mutual consistency" of such research and development programmes likely to entail?

According to article 130i,

"A multiannual framework programme, setting out all the activities of the Community, shall be adopted by the Council, acting in accordance with the procedure referred to in article 189b." The purpose of all that is as follows :

"The framework programme shall establish the scientific and technological objectives to be achieved indicate the broad lines of such activities fix the maximum overall amount and the detailed rules for Community financial participation".

Do we really envisage the taking over of research and development, on a massive European scale, by the European Commission? Are those policies backed up by any budgeting arrangements, and any allocation of funds? I think that we should know the real meaning of title XV. People may wonder about this at times, but agriculture is an industry--an important industry, with separate and special characteristics. One of the great puzzles of the Maastricht treaty is the fact that, although so much was examined--the treaty of Rome and the Single European Act were rephrased, added to and, sometimes, subtracted from--the agricultural matters in articles 38 and 47 of the treaty of Rome were not subjected to a single amendment. The only reference to agriculture is dealt with in amendment No. 184 : it comes into the list of common policies, and is dealt with in just two lines. Not a single amendment was proposed. That is extraordinary. The CAP is one of the least efficient, highly protected and most expensive policies for consumers, farmers and the nation that have ever been devised. It was a constant worry during the simultaneous GATT negotiations and nearly brought that round to a dead stop. Another extraordinary feature of the CAP is the great cost that it still imposes upon the whole Community and upon Britain as part of the Community. We heard earlier about the substantial reduction in farmers' incomes over the last few years. That reduction in farm incomes and the continued rise in food prices has to be set against the continuing increase in agricultural expenditure. The guarantee and

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guidance sections of the CAP accounted during the past year for 60 per cent. of the total budget of the European Community.

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I notice in today's press that one of our colleagues in the European Parliament has stated that up to £5 billion a year is defrauded from the European Community's agricultural budget by means of simple administrative procedures. I refer to Mr. John Tomlinson, who was formerly a Member of this House. He said that the Community's export refund regime is the biggest incentive to crime in Europe today and that it is extremely wasteful and costly.

Why is the CAP so costly? It provides guaranteed prices for almost unlimited quantities of production, although it tries to claw them back and to limit them where there are obvious excesses. It operates a system of levies that leads to any third-country producer, however efficient he may be, being cut off. His produce may be pounds per tonne cheaper than the European Community guaranteed price, but he will never be able to sell his produce within the European common market. However big the difference is, the levies will impose themselves and make up that difference.

One of the most extraordinary features of any protective system that I have ever heard of is the system of export

restitutions--selling the surpluses produced, at dumped prices, in third world markets, thus affecting both developing countries and developed countries such as our old temperate food suppliers : New Zealand, Australia, Canada--and Argentina, for that matter. The CAP structure consists of export restitutions, guaranteed prices and import levies.

Despite the fact that the GATT negotiations were taking place at the same time, not a single amendment was tabled to change the CAP. I find that extraordinary. I am sure that the Committee does so, too. There is a strong common-sense case for dismantling a large part of the CAP. If we are serious about subsidiarity, surely we ought to be repatriating many of the powers that were handed over when the CAP was devised 20 years ago.

Can the Minister of State tell the Committee whether that question was even raised with the Commission or the Council of Ministers during the protracted discussions before Edinburgh, and ending in Edinburgh, about subsidiarity? Is it on the agenda, and if not, why not? It is the costliest and most foolish policy that the Community has devised. If we are serious about subsidiarity and repatriating powers that we should never have let go, it must be the prime target for examination and change.

I do not intend to pursue that issue further, because I am looking forward to hearing the Minister's reply. However, if we are to be competitive in Europe we must, first, keep our exchange rate policies under control and, secondly, find ways not of trying to invent European industrial policies but of assisting our own industry, which is so grievously out-classed by Germany's.

Mr. Garel-Jones : I am able to oblige the right hon. Member for Bethnal Green and Stepney (Mr. Shore) by seeking to intervene at this stage and deal with at least some of the points that have been made. I shall start with what the hon. Member for Great Grimsby (Mr. Mitchell) said about the common fisheries

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policy. A number of his points were dealt with by my hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food, who was present at the time.

The hon. Member for Newham, South (Mr. Spearing) expressed delight at being instructed for the first time in a matter concerning the treaty of Rome. I must disappoint the hon. Gentleman : the hon. Member for Great Grimsby has not opened a new window. The first important fisheries decision, equal access to stocks, was adopted by the Six just before we joined the Community in 1972. As the hon. Member for Great Grimsby will recall, Lord Wilson did not challenge that--

Mr. Lord : On a point of order, Mr. Lofthouse. I have sat throughout the debate hoping to speak on behalf of my farming constituents. I am not anxious to conclude the debate, but experience has shown that, when the Minister speaks at this point of the evening, he is making his wind-up speech and a closure motion will follow shortly. Are we to assume that that is so this evening?

The First Deputy Chairman : I do not think that we can assume anything. We shall have to wait and see.

Mr. Garel-Jones : The hon. Member for Great Grimsby will be aware that that position was not challenged by the Labour Government in 1974, when we sought what was euphemistically called renegotiation. The European Community has always used article 43 as the treaty base for fisheries. As far as I am aware, that has not been challenged before the European Court of Justice, so it is clear that no one shares the hon. Gentleman's rather idiosyncratic view.

Another point was made about fishing by my hon. Friend the Member for Stafford (Mr. Cash), who is not in his place at the moment. I do not say that in a critical sense ; he has spent a considerable amount of time with us in the Committee. He mentioned United Kingdom quotas in one fishing area. Traditionally, as I am sure the hon. Member for Great Grimsby will confirm, we have never been big takers of monkfish from the area to which my hon. Friend referred. Our interests are in the North sea off Scotland, where our share of the take is high. For example, we take about 80 per cent. of the haddock caught in those waters.

The right hon. Member for Bethnal Green and Stepney is, of course, correct to say that there are no reforms per se in the treaty of the articles which refer to the common agricultural policy. However, there is probably unanimity in the House that the CAP should be the subject of continuing pressure for reform. The right hon. Gentleman will know that the CAP has been reformed this year, as a result of which price support has been reduced for cereals by almost 50 per cent.--or will be reduced by 50 per cent. in time.

The amount of resources which the Community devotes to the CAP is already down--not least thanks to pressure from the Government--to 60 per cent. of the budget, having been almost 80 per cent. at one time.

Mrs. Dunwoody rose --

Mr. Garel-Jones : I shall finish this point and then I shall of course give way to the hon. Lady.

The Edinburgh future financial deal reinforced discipline in that respect and maintained the guidelines

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restricting budget growth. We expect that the CAP share of the EC budget will be less than 50 per cent. by the end of this financial perspective, by 1999.

Mrs. Dunwoody : Is it not clear from the pattern of past years that the CAP budget is agreed at an early stage but, because of the number of supplementary budgets agreed throughout the year, it is only well into the financial year that the true total, as opposed to the budgetary total, becomes clear? Inevitably, it is obvious that the budget rises well above 60 per cent. and has in many instances reached 80 per cent.

Mr. Garel-Jones : The hon. Lady is not correct. One of the things that gave us a fair amount of leverage in arguing the financial perspective for the next seven years was that there had been a considerable underspend by the Community, not least in agriculture. The right hon. Member for Bethnal Green and Stepney and other hon. Members referred to article 130.

Mr. Marlow rose --

Mr. Garel-Jones : I should like to make my point, and then I shall give way.

Hon. Members have been broadly correct to say that there have been no what I would call "changes of substance" in article 130 as opposed to the text under the treaty of Rome as amended by the Single European Act. As I said earlier, the key change for which Britain pressed was the sentence that I quoted on the need to preserve "open and competitive markets". Hon. Members have expressed concern about how the British interests will be defended by the Government. The quick and not so simple answer--the quick and easy answer--is that unanimity will be required, which seems to give the Government every opportunity to defend Britain's interests.

Mr. Marlow : Will my right hon. Friend give way?

Mr. Garel-Jones : In a moment. I want to respond to as many of the right hon. Gentleman's points as possible.

He also mentioned the Community's research and development programme. It is well known that the United Kingdom has been very successful in gaining funds under the Community's research programmes. For example, it has more participants than any other member state and we certainly receive substantially more than we contribute to the EC's research budget. A recent report by the university of Manchester showed that the impact of the European research programmes is far greater than the research funding itself. It has become a vehicle for links with Europe and for obtaining the two-way flow between researchers which is so important in the area. I am sure that the House and hon. Members who have universities and seats of learning in their constituencies will be aware that researchers from industry and in academia are extremely enthusiastic about their participation in the EC programmes.

We in the United Kingdom are very anxious to press the point--there is a danger here from other pressures within the Community--that EC research should be focused on generic issues and underpinning technology rather than seeking a back-door subsidy for particular industries within the Community

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Mr. Marlow : My right hon. Friend has said that article 130 under title XIII with the heading "Industry" in the Maastricht treaty is substantially in the treaty of Rome. Is it under one heading in the treaty of Rome or is it spread about within it? If it is spread about within that treaty, in what parts of the treaty can one find it? Article 130 contains the words :

"speeding up the adjustment of industry to structural changes". Does that mean picking winners? If it means picking winners, where did the policy first appear in European legislation?

Mr. Garel-Jones : The best answer I can give my hon. Friend at this stage--if I am inaccurate in what I am saying, I shall write to him--is that under the treaty of Rome as amended by the Single European Act there was an industrial policy. The Government have sought--this is the only substantial change in the text--to preserve unanimity so that we have a veto over any moves made in the area and, above all, to insert wording--I accept the point made by an Opposition Member that these are only words--in the chapter that ensures that nothing shall be done to undermine competitiveness within the Community.

Sir Russell Johnston : The Minister may remember that I intervened to commend to him the virtues of majority voting, which produced from him a paean of praise on the virtues of majority voting and how important it had been in the completion of the single market. Now he is telling us how important unanimity and the capacity to introduce a veto are. He does not seem to be very consistent.

Mr. Garel-Jones : What member states must do, and what the United Kingdom seeks to do, as my hon. Friend the Member for Northampton, North (Mr. Marlow) said in an intervention, is make judgments about what is in the interests of the United Kingdom. My right hon. Friend Baroness Thatcher when she was Prime Minister judged rightly--this is the example I gave-- that, if we were to achieve the single market, the only way in which we would achieve it would be qualified majority voting, because of the vested interests involved.

We have judged that there is a danger that research and development resources could be used to underpin uncompetitive industries in Europe. We want to be certain that the decisions taken about research and development should be taken by unanimity, so that we can ensure the pure, generic research of general application, which we think is the right way in which the Community should spend money. That is why we judged, in this instance, that it was right to preserve unanimity. We should not seek to elevate qualified majority voting or unanimity into a religious principle. One should seek to make judgments in each instance about what is in the best interests of the United Kingdom.

Mr. Fatchett : Will the Minister define in greater detail what he means by competitiveness in this context? There is an argument about whether competitiveness should be justified in the European context, or whether it should be defined as Europe versus Japan or the United States. Do the British Government differentiate in terms of competitiveness, or do they accept that there is an argument for European competitiveness in certain

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industries against Japanese and American interests? Or are the Government taking a view of competitiveness that relates to the European Community?

Mr. Garel-Jones : I reassure the hon. Gentleman that we are doing both. On the one hand, we want to ensure that anti-competitive practices shall not flourish within the Community, and that Community funds should not be used to support and sustain uncompetitive industries, particularly in matters of research and development. In doing that, we seek to make this country and the Community as a whole competitive in world markets.

Mr. Cash : My right hon. Friend the Minister of State has referred to the pre-existence of industrial policy under the treaty of Rome. To begin with, I presume that my right hon. Friend meant to refer to the treaty of Rome as amended by the Single European Act. Does my right hon. Friend agree that article 130 of the Single European Act, which deals with the European investment bank, and title 5, which relates to economic and social cohesion and research and technological development, do not deal with industrial policy in the terms in which he put it?

Furthermore, my right hon. Friend the Minister of State referred to Baroness Thatcher and her policies. The concept of economic policy under the critical title 2 was based exclusively, directly and deliberately on the notion of co-operation and not in terms of the proposals included in the Maastricht treaty that are intended to lead, and do lead, to a single currency and fixed exchange rates and have nothing to do with co-operation.

Mr. Garel-Jones : I do not know whether my hon. Friend was in the Chamber yesterday when my hon. Friend the Financial Secretary to the Treasury dealt with these points--

Mr. Cash : Rubbish.

Mr. Garel-Jones : I was about to deal with the points raised by my hon. Friend the Member for Coventry, North-West (Mr. Butcher). It is all very well for my hon. Friend the Member for Stafford (Mr. Cash) to make derogatory remarks from a sedentary position about the speech of my hon. Friend the Financial Secretary. I would limit myself to saying that my hon. Friend the Member for Lindsey, East (Sir P. Tapsell), who is no great lover of the treaty, described the intervention of my hon. Friend the Financial Secretary as brilliant, and his mental approach as first class.

Mr. Lord : Will my right hon. Friend give way?

Mr. Garel-Jones : I will give way when I have finished this point. My hon. Friend the Member for Lindsey, East said that my hon. Friend the Financial Secretary had a first-class mind. I thought that my hon. Friend the Financial Secretary, to the satisfaction of the Committee, made it perfectly clear that there was absolutely nothing in the treaty that obliges the United Kingdom to join the exchange rate mechanism at any particular date and absolutely nothing--and rather the contrary--

Mr. Cash : Will my right hon. Friend give way?

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Mr. Garel-Jones : I am not going to give way again to my hon. Friend the Member for Stafford on this point. My hon. Friend the Financial Secretary made it absolutely clear that nothing in the treaty forces Britain or the House to take a decision, if the circumstances arose when that might be possible, to move to stage 3.

Mr. Lord : May I remind my right hon. Friend of a point made by the hon. Member for Leeds, Central (Mr. Fatchett) about the funding of research and development and how the whole thing fits together? If we are talking about nation states or multinational companies and the kind of competition between Europe and America, is not the great contradiction and conundrum the fact that we are being asked, almost in the same breath, to support both co-operation and competition? Somehow, that does not seem to hang together.

Mr. Garel-Jones : My hon. Friend is making a perfectly intelligent point--I do not say that in a patronising way. That is why, in the discussions about research and development, we sought to ensure that the Community's money was put into generic research. Of course my hon. Friend is right : a number of vested interests in the Community will seek to divert the research and development funds into the support of uncompetitive or failing industries. That is not something that we would wish to seek.

Several Hon. Members rose --

Mr. Garel-Jones : I should like to make a little more progress, if I may. A number of my hon. Friends are still rising, and they might wish to catch your eye, Mr. Lofthouse.

Mr. Marlow : Will my right hon. Friend give way?

Mr. Garel-Jones : I promised to give way.

Mr. Marlow : I am sorry to be so tiresome about this matter. I am grateful to my right hon. Friend for his great courtesy. Under the Maastricht treaty, there is a distinct title--"Industry" ; article 130. My right hon. Friend has said that there is a minimal amendment since the treaty of Rome, as amended by other treaties. He is surrounded by Industry Ministers, and there are three people in the Box. I wonder whether my right hon. Friend would tell the Committee precisely where in the treaty of Rome, as amended by previous treaties, there is that industry policy which is virtually the same as article 130, except for the amendment with regard to competition. The Committee would be very pleased to know that. I do not doubt that it is there, but these matters are very complex and it would be very helpful for the Committee to know where it appears in the treaty of Rome.

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