Mr. Speaker

I have selected the amendment in the name of the right hon. Gentleman the Leader of the Opposition.

3.47 pm
Mr. Denis Healey (Leeds, East)

I beg to move, at the end of the Question, to add: But humbly regret the unconditional commitment in the Gracious Speech to the deployment this year of Cruise missiles in Britain and to the continuation of the Trident programme, which jeopardise the possibility of any agreement on nuclear disarmament; regret that the failure of Her Majesty's Government to secure changes in the Common Agricultural Policy and the European Community Budget will injure the prospect of constructive relations with our European partners referred to in the Gracious Speech; and consider that he refusal of Her Majesty's Government to support adequate action for international economic recovery condemns the world to continuing mass unemployment, weakens co-operation with developing countries, and puts the world banking system at risk. I congratulate the right hon. and learned Member for East Surrey (Sir G. Howe) on assuming the difficult and somewhat dangerous office of Secretary of State for Foreign and Commonwealth Affairs. We have been sparring partners for many years and I look forward to continuing our familiar tournament on this new court. However, I deeply regret the circumstances in which he has assumed that office. His predecessor, the right hon. Member for Cambridgeshire, South-East (Mr. Pym), showed courage and persistence in pressing British interests as seen by those with knowledge and experience of international affairs on a Prime Minister who was always reluctant to entertain on any matters opinions that are different from her own. The right hon. Member paid the price of offending the Empress and he has been excluded from the court. I dare say that he may come not to regret it as the years pass.

The right hon. Gentleman's presence below the Gangway should remind the Foreign Secretary that the greatest diplomatic problem facing him in what is the most dangerous decade since the war will not be thousands of miles away in Moscow or Washington or hundreds of miles away in Bonn or Paris, but a few yards away across the street in No. 10, where he must face an opinionated and ignorant Prime Minister who is always convinced that she knows best about everything. His predecessor, Lord Carrington, had the same problem. He handled it with perhaps more urbanity than the right hon. Gentleman, although his success until the disaster of the Falklands war led him to resign office perhaps owed less to his diplomatic skill than to the fact that he was not seen as a political rival for leadership of the Conservative party.

The Foreign Secretary now has a colleague in Washington facing a similar problem. Time and again, Mr. Shultz has seen his responsibilities overidden and his advice rejected by men as ignorant and opinionated as the British Prime Minister but working in the White House. No one can feel happy that power in two of the most important countries in the world is now held in hands so dogmatic and insensitive.

I hope that many Conservative Members were as shocked as we were by the extraordinary jamboree at Wembley a few weeks ago—a rally all too reminiscent of others held elsewhere half a century ago—at which the appalling performance of Mr. Kenny Everett was received with ecstatic rapture by the Prime Minister and thousands of young Conservatives. Anyone tempted to regard that extraordinary performance as an accidental excess at the end of an election campaign must have had his complacency rudely dashed by the speech of the Prime Minister herself last Friday at the inaugural meeting of her Comintern, as The Times has already described the new organisation of half the Conservative parties in the world. It was an orgy of anti-Soviet rhetoric, but the problems that humanity now faces are far too serious and dangerous to yield to such comic-strip vulgarities.

As this is the first foreign affairs debate of a new Parliament, I think that it should take a somewhat broader look at the problems in the medium term. Our motion focuses on three—Europe, the crisis in the Western economies and the prospects for disarmament.

Mr. A. J. Beith (Berwick-upon-Tweed)

How has the right hon. Gentleman managed to persuade his colleagues to put on the Order Paper a motion that reflects more nearly the manifesto on which I fought the election than that on which the right hon. Gentleman fought it? What has happened to the commitments to withdrawal from Europe and removal of all American nuclear bases from British soil?

Mr. Healey

All will be made plain to the hon. Gentleman as my speech proceeds.

There are other matters of perhaps equal importance with the three that we have singled out. There is the crisis in southern Africa, where Western failure to persuade Pretoria to accept independence for Namibia could plunge half a continent into war. The Government's decision to rely on South Africa to provide a base for building a military airport in the Falklands is bound to be seen by the friends of apartheid throughout the world as a signal of support, if not surrender.

There are grave problems in the Middle East, where the breakdown of the so-called Reagan plan has gravely damaged Western influence in the whole of the Arab world and given the Soviet Union a key role in negotiations for a lasting settlement—to be played whenever Moscow judges the time to be right.

There are problems, too, in central America, where Washington is drifting, consciously or unconsciously, into a Vietnam type of military intervention which could ruin half a hemisphere and could impose strains on American society that would fatally weaken the ability of Washington to play a constructive role in world affairs in the coming years.

All these are vital issues to which the House will have to return time and again in the next few years. It is clear from even a cursory look at them, however, that at a time when the prospect of helpful initiatives from Washington is clouded it is highly desirable that western Europe should play a more coherent and constructive role in the world. Yet western Europe has been paralysed in recent years by the growing impossibility of making sense of the Rome treaty in its present form. As the Prime Minister reminded us last week, the whole financial structure of the Common Market will break down within a year with the exhaustion of the resources available to finance an ever more voracious common agricultural policy and to meet the legitimate needs of the Mediterranean countries which are already members, or are soon to become members.

My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) will deal in more detail with the problems of the Community, but I wish to say a word about the Stuttgart summit, about which the Prime Minister grossly misled the House last week when she said: The arrangement that we reached on this year's refund is separate from the long-term arrangement."—[Official Report, 23 June 1983; Vol. 44, c. 149.] I do not accuse the Prime Minister of wilfully misleading the House but merely of the failing to which she is so prone —selective amnesia, or the refusal to read or to notice anything disagreeable to her. That trait was well described in an interview which she gave during the election campaign to Miss Jean Rook. I wonder, incidentally, what became of that lady's peerage, but perhaps it will come up next time.

Chancellor Kohl, chairman of the Stuttgart meeting, said that the proposal for a British rebate, which itself was barely half what the Prime Minister was promising a few months ago, was "indissolubly linked" with that of Community financing as a whole. As he made clear, that means in practice an increase in own resources which will be essential once Spain and Portugal join and even more essential if there is not a draconic cut in spending on the common agricultural policy.

Prime Minister Mauroy of France was even more specific. The statement reads: Mr. Mauroy said that enlargement and development of the Community must go hand in hand. He regards the compromise concerning the British problem as conditional, which is to say that it is connected with the search for a long-term solution. On this matter the French delegation made a statement which had been included in the minutes, stating that the sum on which agreement was finally able to be reached was a one-off sum, invariable, with no reference to the past or the future, the actual payment of which is linked to the results of the negotiation on the future financing and the associated problems. That statement was supported at a press conference the same day by the Belgian Prime Minister.

In other words, nothing has yet been finally decided about the British rebate this year. All these matters will come up again in Athens in December and if there is then no solution to all the financial problems—the problems of increasing own resources, of the common agricultural policy and of enlargement to include Spain and Portugal—as the President of the European Assembly made clear publicly in London last week, it is likely that whatever Governments may then agree the European Assembly will block the budget in which the United Kingdom rebate is included.

In the light of those facts, no Member could regard the Prime Minister's statement in answer to questions last week as in any sense wholly candid. She was wrong time and again in saying that the agreement on the rebate was unconditional when it is clearly tied to agreement of all those other matters which will be extremely difficult to reach in the next six months and perhaps most difficult to reach at the meeting to be held in Athens just before Christmas, to be followed a few days later by a meeting of the European Assembly.

Meanwhile, the idiocies of the common agricultural policy continue. The Minister of Agriculture, Fisheries and Food announced yesterday that the European Commission is now selling 30,000 tonnes of butter, including British butter, to the Soviet Union with a subsidy of 47p per pound. The Russians will thus pay half the price that British housewives have to pay in British shops. I am forced once again to the conclusion that the common agricultural policy is a device invented by the Central Intelligence Agency of the United States of America to undermine the red army by pumping its veins full of cholesterol from cheap Common Market butter. It is impossible to find any other rational explanation for what Western Governments are tolerating.

Yesterday the Minister told us that 62 per cent. of CAP spending goes on export subsidies and internal dispersal subsidies, compared with only 46 per cent. six years ago. In other words, the position has grown worse and not better under the Conservative Government's policies.

Unfortunately, the row about the British rebate and the CAP has completely blotted out European initiatives on world problems. However, I notice that the statement on central America by the summit meeting last week was encouraging. It said that the Heads of Government were convinced that the problems of Central America cannot be solved by military means, but only by a political solution springing from the region itself and respecting the principles of non-interference and inviolability of frontiers. They, therefore, fully support the current initiative of the Contadora Group. They underlined the need for the establishment of democratic conditions and for the strict observance of human rights throughout the region". There could be no more direct and blunt a rebuttal of the main elements of the United States' policy for central America than that statement. Will the Foreign Secretary tell us today what steps the Government are taking to further that approach, which was endorsed by the Prime Minister in Stuttgart last week? For the past four years the Prime Minister has acted as President Reagan's poodle in central American affairs. Britain was the only European country to vote against aid to Nicaragua. I hope that the Foreign Secretary will tell us now that he will withdraw the British objection to aid to Nicaragua and restore diplomatic representation there, and that he will explain what steps he plans to take to fulfil the commitments he made at the Stuttgart summit.

The second major issue that the Labour Opposition wish to raise involves the crisis in the Western economic and financial system and the refusal of the British Government to take or to support the initiatives necessary to overcome it. The Foreign Secretary will realise better than many of his predecessors how important the economic health of the Western world is for its efficiency and influence in world affairs. Will he tell the House how he sees the future on the issues that I shall describe?

The civil wars proceeding and the external intervention continuing in central America pose a re al risk of collapse of organised government in that important area. The problem is not confined to central America, but the whole of Latin America from Mexico in the north to Chile and Argentina in the south face the risk of economic and financial collapse with a consequent risk of political revolution. There are similar risks in many other important countries, especially in Nigeria in western Africa.

Barclays Bank pointed out that the main cause of the problems facing those countries was not the increase in oil prices brought about by OPEC but the action of the Western industrial countries, which in their pursuit of the holy grail of sado-monetarism have raised interest rates to unprecedented heights — there is no country in the Western world where interest rates are not far higher in relation to the rate of inflation than they have ever been over a sustained period—and the recession engendered in part by those stupendously high interest rates. Those interest rates have meant that, in 1982, 50 per cent. of the debt service of the developing countries that do not produce oil was devoted entirely to paying off interest, as against only one third in 1975. The recession in the Western world has produced a collapse in commodity prices to the lowest level for 30 years.

I was glad that the Prime Minister took credit for the word "patchy" in relation to present recovery in Britain. Recovery throughout the Western world at present is patchy and spasmodic. Most observers believe that it is likely to sputter out within 12 months unless interest rates can be drastically reduced. Unemployment in the OECD countries, according to the end year study by that organisation, is likely to reach 34 million human beings 12 months from now, which is an increase of 8.5 million in only three years. The human tragedy involved in figures of that magnitude does not need explanation. The political as well as the economic risks in continuing increases in mass unemployment should be equally obvious, but the risks to the world banking system are also great. If the world banking system were to collapse, all those problems would be grossly aggravated.

The Mexican crisis last summer exposed the fact that the failure of central banks to control lending by private banks, or even to monitor the complexities of the inter-bank market, have brought the entire financial system close to catastrophe. Castastrophe has so far been averted, thanks largely to the personal energy and professional skill of three men, all of whom I shall meet in Downing street this evening. They are the head of the International Monetary Fund, Jacques de Larosiére, the chairman of the New York Federal Reserve Bank, Paul Volcker, and the chairman of our central bank, Sir Gordon Richardson. The Prime Minister's personal prejudice has pushed Gordon Richardson from a continuing role in those affairs, and I wish to pay tribute here to a man who has been an outstanding central bank governer in Great Britain and who has made a major contribution in dealing with the economic and financial problems of the world during the past two or three years. He has been replaced by a personal favourite of the Prime Minister's, who told us within a week of his appointment that the banking crisis was over, if it had ever existed. I hope that the crash course that he has been undergoing during the past six months has taught him a little better.

Fortunately, President Reagan was finally persuaded to overcome his personal prejudice and to reappoint Mr. Volcker as chairman of the Federal Reserve Bank. Mr. de Larosiére has also been reappointed as managing director of the International Monetary Fund within the past few weeks. However, all that those men have been able to achieve with support from Governments and private banks all over the world is merely first aid. The central problems that risked producing catastrophe nine months ago are still there. None of the major debtors has any prospect of solving its problems during the coming years as a result of decisions already taken.

By 1987, only four years from now, Mexico's debt, even if it carries through all the policies urged on it by the International Monetary Fund and by the banks that are lending money to Mexico, could be $101 billion as against $86 billion this year and $80 billion last year. Brazil faces similar problems, and its central bank warned the world yesterday that the conditions imposed for the aid already given could produce revolution within 12 months.

In a week or two, Argentina will get another $1.5 billion from the private banks, including a significant proportion from British banks. That is on top of the $1.1 billion that the Argentine Government received earlier this year. But the British Government have sought to set no conditions on those loans. They have not insisted that the money should be spent on getting the Argentine economy right. They have not insisted that the money should not be poured down the drain in buying weapons of war to be used, according to our Prime Minister, for attacks on British forces in the Falklands. Exactly the same is true of the aid that is now going to Chile.

I see that the British Government are hoping to sell the carrier Hermes to Chile in the coming months. Chile will no doubt use the aircraft carrier to attack the Argentine, or perhaps to join the Argentine—one never knows in that part of the world—in an attack on the Falklands. The fact still remains that the Prime Minister authorised British firms such as Rolls-Royce and David Brown to put essential equipment into warships that are now sailing from Hamburg to the Argentine to be used, according to the Prime Minister, at will against British forces in the Falklands.

Mr. Ivor Stanbrook (Orpington)

In dealing with the conditions to be imposed upon any loans to Argentina, has the right hon. Gentleman considered how such conditions might be enforced?

Mr. Healey

Oh yes. I had the experience, which the new Foreign Secretary enjoyed as Chancellor of the Exchequer, of chairing the interim committee of the IMF. When the IMF makes loans, it makes them strictly conditional on performance. With regard to official IMF loans to Latin America, performance must be monitored month by month as each additional tranche of assistance is offered. There is no reason why similar conditions should not have been enforced by Western Governments who have supported British banks in similar loans — [Interruption.] I am glad that the new Under-Secretary of State at the Foreign Office was nodding his head. I presume that it was in agreement with me, because he showed no signs whatever of exhaustion.

Incidentally, I congratulate the hon. Gentleman. If there is such a thing as a wet in foreign policy, the hon. Gentleman is undoubtedly a wet. We respected the courage with which, though sometimes in coded language, he attacked the Government's policy on the Falklands over the years. I hope that the hon. Gentleman is successful in shifting them somewhat in his new important position at the Foreign Office. He is not a wet in domestic affairs, but I think that he is in foreign affairs. There is often a distinction between the two.

If we lend money, or allow our private banks to lend money, to these Latin American countries, and allow them to spend it on arms rather than on reconstructing their economies, that money not only goes straight down the drain but risks bringing economic breakdown nearer and makes it certain that any political struggles that follow will be bloodier than they would otherwise have been. In this situation we have an opportunity to try to halt the arms race at least in Latin America, and I hope very much that the Foreign Secretary, no doubt ably assisted by the Under-Secretary, will find some way of persuading his international colleagues to follow that route.

Mr. Dennis Skinner (Bolsover)

Does my right hon. Friend appreciate that one of the reasons why the banking sector and this Government are so lax about imposing any conditions on these various loans to Argentina, Brazil or anyone else is that according to the Inland Revenue statement at the beginning of the year the banks can set off all those bad debts against tax? That means that the £962 million already set aside by the top four banks will in the end be paid for by people who still have a job and are paying tax. That sum set off against tax is, roughly speaking, a loss of £400 million to the Chancellor of the Exchequer, and the rest of the British people will have to pick up that tab. Is it any wonder that the banks are not bothered about churning out money to these countries that are up to their necks in debt? They play the entrepreneurial role and the British people must pick up the tab. That is why the banks are not bothered about conditions.

Mr. Healey

My hon. Friend, with whom on this series of issues I have long agreed, or he has agreed with me —I am not sure which is more dangerous—is absolutely right. It suits the private banks very well to lend this money at high interest rates and to make large profits by doing so. I only wish that there were more Members in this House like the members of the American Congress who take very seriously the record profits that have been recorded by private banks out of unsound lending, backed by their own Governments, which is a charge on their own taxpayers.

That brings me to the next problem that I wish to raise with the right hon. and learned Gentleman. The problems that are now being faced in the international financial system are largely due to the fact that Governments have privatised the problem. When Governments first faced the stark reality of this nine months ago, I think they agreed that it was important to reduce the strain on the private banks and to expand the resources of the IMF and the World Bank so that they could play a larger role in financing the deficits of the major debtors. But last year IMF lending financed only 8 per cent. of the deficits of the non-oil less developed countries, and there was a heavy fall in overseas development assistance and other official flows of aid.

I read today that the 60 per cent. increase in the IMF cash resources, which the right hon. and learned Gentleman helped to arrange as Chancellor a few months ago, is not likely to be enough even to finance the IMF's existing lending commitments over the next two or three years. The plain fact is that the right hon. and learned Gentleman as Chancellor completely failed, along with his colleagues, the Ministers of Finance in other Western countries, to increase the resources available for official financing on the scale required. He has now helped to produce a private banking system in the Western world that can survive only by lending ever more money to bad debtors, and is bullied into doing so by central banks and international institutions that are supposed to guarantee their prudence rather than to promote their profligacy. That is the situation which the world now faces.

It is not surprising that a proliferation of ingenious plans are now being developed on both sides of the Atlantic to provide more official guarantees for the restructuring of private debts. The plain fact is that there is no answer to this problem. The financial system is likely to collapse unless the Western world can achieve collective growth so that the demand for the commodities produced by the debtor countries increases and interest rates fall.

That is not only the view of the French Government. It was the view of American leaders, for example, put to the Chancellor by the Secretary for International Monetary Affairs at the United States Treasury some months ago. It is the view of all the international economic institutions, including the central bankers and the Central Bank—The Bank for International Settlements—in its report last week. Yet every such proposal has been turned down flat by the United Kingdom Government. The Foreign Secretary, who a few weeks ago was Chancellor of the Exchequer, turned it down flat even when it was put to him by the CBI the week before the general election was called.

One can only hope that in his new role the right hon. and learned Gentleman will pay more attention to the international consequences of sado-monetarism. Unless he does so and can persuade others to do so, the risks which the financial system still faces, the suffering caused to the developing countries by the draconic deflationary policies imposed on them either by events or by the IMF, and the suffering caused to the 34 million unemployed in the Western industrial world next year will produce political consequences immensely damaging to any attempt to sustain, still less develop, world order.

I come now to the most important issue of all: what steps can now be taken to halt and reverse the nuclear arms race? I think—at least, I hope—that all right hon. and hon. Members agree that we want to maintain the military balance between Russia and the West but to do so at the lowest cost and risk. So far, the search for agreement between the West and Russia, at least to control the arms race, has had some useful results—the non-proliferation treaty, the test ban treaty, and the first and second treaties on strategic arms limitation. Despite nose agreements, both sides have continued to increase their nuclear arsenals, and each now has enough to blow up the world 10 times over. Worse still, during the period arms spending in the Third world has been increasing faster than arms spending in the Soviet Union and the Western world, and in many countries in the Third world the arms race is now going nuclear—in the far east, the middle east, and perhaps soon in Africa.

Until recently, it was possible to argue that although the arms race involved an intolerable waste of money, it has not so far particularly increased the risk of war. That, I fear, is no longer true. First, some new weapons systems are being developed in the United States and the Soviet Union which may appear to offer the prospect of a successful first strike which would destroy the enemy's retaliatory power. Some systems are being considered, notably President Reagan's so-called "Star Wars" speech which appeared to offer the prospect of launching an attack on an enemy without any risk of suffering nuclear retaliation. I wish that Conservative Members would wipe the silly smirk off their faces when I mention these matters, because all who have studied them carefully over recent years are deeply disturbed about the prospects, unless action is taken quickly to deal with these new threats.

Once such systems, either the first strike systems or the watertight defensive systems which President Reagan appeared to contemplate, begin to be deployed, the side which fears that its adversary possesses them will inevitably be tempted to strike first in a crisis, because it would risk losing everything if it did not do so. That is the first great risk facing the world if the arms race continues along the lines at present contemplated in both Washington and Moscow.

The second risk is that other new systems, particularly the cruise missile, are so small and easily hidden that once they are deployed in any numbers an arms control agreement would be almost impossible to verify without the degree of on-ground interference in national life by international bodies which not only the Soviet Union but certainly the United States would never agree to.

Both Russia and the United States now have the capacity to deploy those systems. If either does so, the other will certainly follow suit. Marshal Ustinov made that clear, not for the first time, in a speech that he made only yesterday. Yet if one sits back and looks at the problem, one has to accept that there is now an overall global equivalence between the super powers. At a recent meeting in Hamburg I was interested to find that the three leading officials dealing with defence and disarmament in the United States all agreed that there was a rough overall global equivalence at the strategic nuclear level.

There is, of course, a regional imbalance in nuclear forces in Europe which favours the Soviet Union, but there has been for the past 20 years, ever since NATO withdrew its land-based missiles in favour of submarine-based missiles allocated to SACEUR for use in the European theatre. The fact is that, by 1970, the Russians had 650 medium-range nuclear missiles SAM 4s and 5s, with ranges of 2,000 and 4,000 kilometres, deployed against the West. The West never felt it necessary to deploy similar land-based missiles, rightly judging that it was much better to counter that possible threat with submarine-based missiles, which are invulnerable to attack and therefore do not pose any temptation of a first strike. I was glad that the chairman of the military committee of NATO made that point again in an interesting speech only last week.

Here we have the dilemma. On the one hand, both sides are on the point of deploying systems that would immensely increase the risk of pre-emptive attack, which would make arms control infinitely more difficult. On the other hand, both sides already have not only a sufficiency but a gross superfluity of nuclear weapons, in rough equivalence with each other. In such a situation, we should adopt the first law of holes which, in a different context, I put to the House just before the general election. The first law of holes is that when one is in a hole one should stop digging. That is precisely what the world should do in the present arms race crisis.

Mr. Bill Walker (Tayside, North)

The right hon. Gentleman has mentioned SAM 4s and 5s. Would he care to explain the difference between SAM 4s and 5s and SS 20s?

Mr. Healey

The essential difference is that SS 20s are more accurate. Incidentally, they are nowhere near as accurate as Pershing 2, because the American Air Force journal pointed out that their accuracy is not sufficient for them to be used against point targets. What is also important is that they are faster to react than the earlier missiles. Moreover, they are mobile. Of course they represent an improvement. However, there is no reason on earth why the answer to those missiles should be to do something that the West has deliberately avoided doing for very good reasons—and that is to put land-based missiles of a similar nature on the continent of Europe. I shall come to that in more detail in a moment, because it is a central issue.

As I said, the important thing is to stop digging. There is now an overwhelming case for seeking rapid agreement on a multilateral freeze on the development and deployment of new nuclear systems, and that would have to include cruise, Pershing, and Trident, and similar systems on the Soviet side. However, Her Majesty's Government, far from supporting the freeze, propose to move as rapidly as possible into each of these three new areas. They are strongly in favour of unilateral rearmament. To argue, against the background of the policy contained in the Gracious Speech, that the Government are in favour of disarmament is like Sir Campbell Fraser yesterday supporting a 2 per cent. increase in wages for the rest of the population after accepting a 30 per cent. increase for himself.

The Government are already—very belatedly —becoming a little uneasy about the nature of their commitment to Trident. The cost is likely to surpass £10 billion—that could be an underestimate—and it will pre-empt 40 per cent. of our equipment budget at the end of the decade, when all three Services will need major re-equipment. But it also represents a stupendous increase in British striking power. Our present Polaris submarines have a theoretical capacity to destroy 64 targets, because each of the three nuclear warheads in each missile is pointed at the same target; they are not independently targetable. The proposed Trident D4 system would have the capacity in theory to destroy 896 targets, because each missile carries 16 independently targetable re-entry vehicles.

The Secretary of State for Defence had to admit during the election campaign that if Russia and America, in our absence, made progress in disarmament, Britain would have to think again about the number of warheads in the Trident force. The Foreign Secretary went further—that no doubt explains why he is sitting a little detached from the Defence Secretary at this moment—and said that Britain would have to think again about the whole question of having an independent national deterrent.

We believe that the time to think again is now. We think that Britain should press to join negotiations and offer to put its existing Polaris forces within the negotiations, because we do not believe that we can trust President Reagan and Mr. Andropov alone to reach agreement. After all, President Reagan has recently appointed, as head of his arms control and disarmament agency, a man who said, just before his appointment, that he regarded arms negotiations as a sham, and that their only purpose was to console or comfort public opinion. I fear that the Prime Minister went almost as far as that, according to a report in The Toronto Star, at the Williamsburg summit, when, in the course of a furious argument with the Canadian Prime Minister, she described talks with Russia on arms control as "an exercise in futility". Prime Minister Trudeau well replied that they were an exercise in necessity.

Mr. Peter Blaker (Blackpool, South)

Will the right hon. Gentleman say a little more about his party's policy? He will be aware that the British strategic nuclear deterrent represents 2½ per cent. of the total of the Russians' strategic nuclear forces. Is it the policy of his party that we should negotiate away the whole of our strategic nuclear deterrent in return for the Soviet Union's reducing its nuclear deterrent by 2½ per cent.?

Mr. Healey

I think that we should be prepared to put it in the negotiations. Lord Trefgarne said the same in the House of Lords two days ago, directly contradicting the Prime Minister, who said during the election campaign that she regarded—

Mr. Skinner

Ask the hon. Member for Blackpool (Mr. Blaker) why he got the sack.

Mr. Healey

I know why he got the sack, but I am much too kind to refer it. The plain fact is that we should put our force into the negotiations and see what is the best we can get for it.

Mr. Churchill (Davyhulme)

rose—

Mr. Healey

I have given away a great deal already. Conservative Back Benchers must not be too jealous of one another's success in persuading me to accept their interventions.

I believe that there is immense confusion in Her Majesty's Government's policy. The Prime Minister said —as did the hon. Member for Blackpool, South (Mr. Blaker), whom she sacked the other day — that she regarded our force as the irreducible minimum. The Defence Secretary said that he would be prepared to reduce it if the Americans and Russians had already reached agreement on drastic reductions in armaments. Lord Trefgarne said last week in another place that we —meaning Her Majesty's Government—have not ruled out putting the British deterrent into the strategic arms negotiations talks. There is a total inconsistency between the three statements. No doubt the Defence Secretary, who appears to be somewhat discomposed by this revelation of inconsistency on the Government Front Benches, will clear it up for us this evening. I shall be ready to intervene if I feel that his explanation is unsatisfactory.

With regard to the cruise and Pershing programmes, nobody now argues a military case for them. Even President Reagan, who originally argued for them in the context of the possibility of limiting a nuclear war to Europe, has ruled out the prospect of a limited nuclear war in Europe; in fact, the United States never believed that there was a military case for cruise and Pershing.

Mr. Churchill

That was your friend, Helmut Schmidt, was it not?

Mr. Healey

I shall be referring later to Helmut Schmidt. The missiles—certainly the cruise missiles—are still facing immense technical problems. Indeed, if the Prime Minister were to have the cruise missiles in place by the end of this year and they had to be fired next year, they would be as likely to fall on our European allies as on enemy country, but perhaps that is her intention. It has been argued—certainly by Chancellor Schmidt when he was still Chancellor—that the missiles were politically necessary to keep the Alliance united.

Mr. Churchill

And by your Government.

Mr. Healey

Absolutely not. The hon. Gentleman knows that that is totally untrue.

It is now clear that the prospect of having the missiles deployed is already dividing the Alliance. Nobody now believes that the Belgian and Dutch Governments will agree to deployment. The possibility of the next Italian Government agreeing to deployment is very open after the general election in Italy yesterday. Helmut Schmidt has now had second thoughts about the military sense and political wisdom of the programme.

I have always believed—I think that the right hon. Member for Plymouth, Devonport (Dr. Owen) will confirm this, because we were two of the small group of Ministers who discussed the problem when we were in power in 1979 — that to attempt to construct a Euro-strategic balance confined to the European continent was likely to weaken the American commitment to Europe, and therefore to decouple the American deterrent rather than to strengthen the link.

Above all, putting new missiles on land is directly contrary to the whole trend of American policy at the present time. Its proposals for strategic arms control are based entirely on trying to get the Russians to give up their land-based missiles in favour of submarine-based missiles. Indeed, it has always been a sensible triolet to say: Put those missiles out to sea Where the real estate is free And they're miles away from me. There is no doubt whatever that to introduce two whole new sets of land-based missiles into the towns and villages of western Europe will be profoundly destructive of popular support.

Mr. Churchill

rose—

Mr. Healey

No, I shall not give way.

It is certain that if we proceed with the proposed course we shall be no better off, because there is no reason not to believe the Soviet spokesmen, Mr. Andropov and Mr. Ustinov, who said that they will follow suit and take similar measures if we take those steps.

It would be far better to recognise that the December 1979 decision was a mistake, as NATO recognised that the MLF proposal was a mistake 20 years ago, as President Carter recognised that his proposal to put the neutron bomb in Europe was a mistake six or seven years ago, and as the United States now recognises that its refusal to negotiate a ban on MIRVs in the SALT II treaty was a disastrous mistake. The Americans, having gone ahead with MIRV in the belief that they would have a lasting advantage out of it, are now trying to produce an arms control treaty which will ban MIRVs on both sides. I have not the slightest doubt that within a year or two they will be doing the same with the cruise system, but probably too late.

It would be far better for all countries now to support a nuclear freeze. It has overwhelming support in the United Nations, it has growing support among the people of the United States and Britain, it has support in public opinion on both sides of the Atlantic, and the Soviet Government have formally endorsed the proposal in detail in a recent statement.

To cover as vast a canvas as the affairs of the world at a time of immense change and danger inevitably means using a broad brush. However, unless we examine the picture as a whole we risk losing sight of some of the major underlying factors that will determine the way in which the world moves during this Parliament. The major underlying factors make the years of the present Parliament by far the most dangerous since the second world war. They present us with the risk of convulsions, economic, military and political, which could threaten all our hopes of prosperity and, indeed, threaten our survival. Because the approach to those underlying problems in the Gracious Speech is gravely deficient, we have tabled the amendment, which we invite the House to support.

4.30 pm
The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe)

As the right hon. Member for Leeds, East (Mr. Healey) pointed out, this is the first time that I have addressed the House as Foreign Secretary. I do so at the beginning of my fourth week in the job. I take some comfort in being able to begin on an unusual note of harmony with the right hon. Gentleman. I thank him for his congratulations and good wishes on my appointment. We did not often have the opportunity to exchange such words in our previous partnership. To be received in that way by the right hon. Gentleman is rather like being nuzzled by an old ram.

Mr. Healey

I hope that the right hon. and learned Gentleman will not spoil a beautiful friendship by accusing me of necrophilia.

Sir Geoffrey Howe

There is overwhelming evidence to rebut such a charge against the right hon. Gentleman. However, he did not sustain his good-humoured approach for long. We soon heard him unjustly accusing my right hon. Friend the Prime Minister of being dogmatic and insensitive. He should know because no one shows more evidence of those characteristics than he. I fancy that his reference to comic strip vulgarity was an apt description of his undistinguished part in the recent election campaign.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley

Get on with it.

Sir Geoffrey Howe

The hon. Gentleman is getting extremely sensitive.

Although this is the beginning of a new Parliament, the Gracious Speech outlines a programme in foreign and defence policy which continues and builds on the work done by the previous Government. I see my task as continuing and building on the work done by my two distinguished predecessors as Secretary of State—my right hon. and noble Friend, Lord Carrington, and my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). The policies they carried out have proved good for Britain and good for our friends, and they have earned the respect of those with whom we disagree. I am fortunate in my inheritance and I am grateful to my predecessors for the part that they played in building it up.

The range of issues with which my predecessors had to deal—indeed, with which any Foreign Secretary has to deal—is enormous, as the right hon. Member for Leeds, East recognised. Rather than try to comment on all of them, I propose to concentrate on two major areas of foreign policy that were the centre of attention during the general election campaign. I have in mind two of the three issues with which the right hon. Gentleman dealt—defence and disarmament and membership of the European Community.

I shall deal briefly with three topics that are mentioned in the Gracious Speech—the Falklands, Hong Kong and Gibraltar. I should emphasise that they find themselves in the same paragraph as a matter of convenience, not because the Government want to make artificial links between the different subjects or to underestimate the importance of individual circumstances. In each case we have special responsibilities and in each case we shall fulfil in good faith the commitments that we have made.

In the case of the Falklands, we shall maintain the level of forces necessary to ensure the security of the islands and work to ensure that the islanders have a viable economic future. After the events of last year, we have a special duty to protect the rights of the Falkland islanders. The decision to build a strategic airfield on the islands at Mount Pleasant —which my right hon. Friend announced yesterday—is an illustration of our commitment.

We are also committed to do everything in our power to ensure the continuing well-being of the people of Hong Kong. As is made clear in the Gracious Speech, we aim to reach a solution on the future of the territory that is acceptable to this Parliament, China, and the people of Hong Kong.

Various rumours have been circulating about what may or may not be under discussion in the talks taking place through diplomatic channels in Peking. I hope that the House will accept that, at this stage, the talks must be confidential if they are to be successful. The Government do not regard anything said outside the talks as in any way prejudicing their outcome.

The background of good relations between the United Kingdom and China, and our common interest in ensuring the future stability and prosperity of the people of Hong Kong, give grounds for confidence that we shall be able to reach a satisfactory negotiated settlement.

In the case of Gibraltar, we shall continue to respect the wishes of its people, as the constitution provides. We have a long-standing commitment to support Gibraltar in face of the present restrictions. If, when the Royal Naval dockyard closes by the end of this year, it is decided to set up a commercial yard to take its place, we are prepared, as my right hon. Friend the Prime Minister said during Question Time today, to offer a generous package of assistance to get the venture off to a good start. She and I will discuss that further with the Chief Minister of Gibraltar tomorrow.

Sir John Biggs-Davison (Epping Forest)

As the Government are committed to supporting Spanish entry into the European Community, will not it be made virtually a condition of such entry that Spain respects the wishes of the people of Gibraltar?

Sir Geoffrey Howe

I had intended almost immediately to say something about that. I see no contradiction between our support for the people of Gibraltar and our continued desire for good relations with Spain, both bilaterally and, we hope, soon, as full members of the Western Alliance and the European Community.

We consider that the joint statement that was agreed at Lisbon in April 1980 and the letters that were subsequently exchanged by the two Governments provide the right basis for progress in relation to Gibraltar. In particular, they provide for the lifting of Spanish restrictions, the existence of which is, of course, quite incompatible with Spain's fellow membership of the European Community.

Mr. Foulkes

I am surprised that the Foreign Secretary has not said more about the Falklands. Would he care to comment on the fact that there are to be elections in Argentina later this year and that a democratic Government will be installed in Buenos Aires on 30 January? Is not that a significant matter on which the Foreign Secretary should comment? Is he aware that both the Peronists and the radicals in Buenos Aires have been making much more helpful comments about possible discussions and negotiations with the United Kingdom? Does the Foreign Secretary intend to conclude his remarks on the dependencies without commenting on that?

Sir Geoffrey Howe

Even in Britain, remarks made several months ahead of an election campaign by some of the parties to that campaign are not necessarily a clear guide to the outcome of the election. I should not like to pursue the hon. Gentleman's analysis in regard to Argentina.

Mr. Robert Hughes (Aberdeen, North)

Will the right hon. Gentleman give way?

Sir Geoffrey Howe

No, I should like to continue.

The right hon. Member for Leeds, East devoted much of his speech to the Community. The nation's verdict at the election could not have been clearer. The electorate gave its overwhelming support to parties which want to stay in the Community and to make a success of British membership. It rejected the sterile alternative of withdrawal. I hope that the signs of fresh thinking by those who are contending for the right to lead the Opposition means that there, too, the message is beginning to be understood.

The hon. Member for Berwick-upon-Tweed (Mr. Beith) drew attention to the limited nature of the amendment on that topic. I am sure that the House will look forward to hearing the hon. Member for Liverpool, Walton (Mr. Heffer) expound on the matter. When the hon. Gentleman was pressed during his leadership campaign recently to explain Labour party policy on the issue, he replied with the immortal words, "Over the next five years, anything can happen."

For our part, we shall set out with confidence to do what the British people overwhelmingly want us to do—to make a success of British membership and to play a leading role in reshaping the Community for the next phase of its existence.

The election campaign, and above all the decisive result, marked a change in the climate of discussion in Britain at a critical moment for the meeting in Stuttgart. That meeting marked what I think will turn out to be an important stage in the development of the Community as a whole.

Understandably, the reports of that meeting were dominated by our budget refunds for 1983. We were determined to secure an acceptable solution. Contrary to the right hon. Gentleman's extravagant denunciations, we secured just that. The result, which provided for a refund of almost exactly two-thirds of our net contribution over four years, is a satisfactory outcome for our efforts. It is in sharp contrast to the so-called Dublin mechanism which the Labour Government secured and which never produced a penny piece.

By contrast, the settlements that we have secured have been worth £2,500 million to Britain since 1980. The provision and agreement recorded in relation to that settlement are distinct from, and unrelated to, the agreements also recorded to deal with the longer-term Community problems. It was recorded and agreed at Stuttgart that provision should be made for the 1983 settlement in the provisional draft budget for 1984. In that way, the Community has shown that it is prepared to deal with unacceptable situations when they arise. We recognise that our partners have been willing to pay more — or receive less — at a time of general financial stringency to redeem that pledge.

As we emphasised from the start, the real focus must be on the long-term. It must be on finding a lasting solution to recurring financial problems that affect not only Britain, but the Community as a whole. It is there that the importance of Stuttgart lies, and that is why the Opposition amendment is so misconceived and untimely.

We have, albeit rather later than the House would have liked, got to the point where Heads of Government have launched negotiations to settle complex major problems that have dominated the Community agenda for too long. That will tackle precisely the points mentioned in the Opposition amendment — the twin problems of the budget and the CAP. By dealing with the problems, not by ignoring them, we shall find a solution.

The Heads of Government have set a clear timetable for the process. The objective is to reach conclusions on all the long-term questions by the Athens summit on 6 December. I attach the greatest importance to that timetable, and I welcome the decision to make an early start by calling a special meeting of the Foreign Affairs Council on 8 July.

The root of the problem is the Community budget. It has operated in a way that was clearly unfair to us, and that has made it harder to make progress towards the basic objectives of the Community. Both points are important and both are now recognised by our partners. As a result, the arrangements are at last to be overhauled. We have our own ideas of how that should best be done. In particular, we should like a safety net to be built into the Community's finances so that no member state will bear a burden disproportionate to its GNP and its relative prosperity. Our ideas will be on the table in the negotiations and we shall, of course, be ready to discuss others that may be put forward.

The objective is clear. As I said in my speech at the Hague on 3 June 1981: We must find solutions which will preserve the Community's existing achievements, not destroy them; which will bring harmony in place of discord; and which will strengthen the Community in the esteem of all our peoples. Above all, we must find solutions which will open the way for progress. As the House knows, there will also be discussion of the desirability of increasing what is known as the Community's "own resources". Some of our partners have already put their case for that, but we are not convinced and the terms of reference for the negotiations are careful not to prejudge that issue.

It is important in this context not to be misled by the attractive simplicity of the phrase "own resources". There is only one way in which such resources can be increased. That is at the expense of access by somebody else, by some other institution, to the same source of resources—the pockets of taxpayers or consumers throughout the Community.

When considering the case for such a change, we should do well to remember two things. The first is that existing arrangements for "own resources"— based on the yield of VAT—already provide a buoyant source of revenue. Secondly, as every Community Finance Minister will readily testify, we must remember that the most pressing economic need is for a reduction, and not an increase, in national budget deficits.

That is why our position is that the onus of demonstrating the need for more "own resources" lies on those who want them. That is also why effective steps must be taken at the same time to control the rate of spending on agriculture and other policies and why, at the same time, a lasting solution must be found to our budget problem. We have made those points clearly to our partners and I am sure that they have been fully understood.

The Heads of Government at Stuttgart called for an across-the-board examination of the CAP and the Commission has been asked to submit its proposals by 1 August.

Mr. Eric S. Heller (Liverpool, Walton)

On the question of "own resources", the Prime Minister was not clear and the right hon. and learned Gentleman is also dodging the issue. May we have a clear assurance that if other members of the Community demonstrate to their own satisfaction that there should be an increase in VAT the British Government will not agree to that increase?

Sir Geoffrey Howe

The proposal is not for an increase in VAT, but for an increase in the proportion of VAT revenue assigned to the Community. We have undertaken to consider whether there should be an increase in "own resources". For the reasons that I have given, we do not think that the case has been made out. Before there is any change, there must be agreement at the Council of Ministers and subsequent legislation by national Parliaments. The case remains to be proven. It must be proven to the satisfaction of each member state and each national Parliament. We cannot exclude the issue from the agenda and we have not sought to do so, but we do not believe that the case is made out.

Mr. Healey

I accept that that is the position that the Prime Minister put to the House last week, but the right hon. and learned Gentleman has not dealt with the British rebate and a satisfactory settlement of the financial arrangements which are indissolubly linked. The French Prime Minister said that one was dependent on the other, and his Belgian colleague took the same view and used the same phrase.

Sir Geoffrey Howe

I have dealt with that a ready. In the proceedings at Stuttgart the discussion was devoted to two subjects—the settlement of the British budget contribution for 1983 and putting in place a programme of work for the longer term. The settlement of the British budget dispute was arrived at and a figure was agreed. It was conditional only until we reached agreement on the other matters discussed at Stuttgart. Once we had agreed on the programme and agenda there, the British budget agreement was valid and all agreed to its inclusion in the 1984 draft budget. That is the position. There is no linkage or connection. The matter still has to be carried through the Parliament, as it was last year. I assure the House that we shall remain as determined as we were last year to secure a proper settlement and the proper payment of the sum agreed to be paid by us.

I was saying that we should be putting forward some ideas of our own about the common agricultural policy. In particular, we attach importance to the establishment of a firm financial guideline that will govern agricultural spending. The negotiations will also cover other areas of Community business, to give direction to the development of the Community and to promote a better balance of policies. But there can be no question of balancing the CAP by the indiscriminate increase of expenditure in other sectors.

Budgetary discipline is needed over the whole range of policies, but as a condition of—not as an alternative to—effective Community action, which we certainly wish to see, in areas where it makes sense to operate at a European rather than an exclusively national level.

Europe can—and must—be far more competitive internationally in the industries of the future if we can develop more effectively the Community's internal market. Despite the energetic efforts of the German Presidency over the last six months, much remains to be done. Non-tariff barriers continue to proliferate—and we are still far from having an open market in important services such as insurance and civil aviation. There is important progress to be made before air travel within the Community can become as widely—and as cheaply—available as it is in the United States.

The solution of individual problems of this type is made easier if the general principles on which the Community is based are kept firmly in mind. It was therefore appropriate that, following the initiative of Herr Genscher and Signor Colombo, the Heads of Government at Stuttgart, as well as launching the negotiations that I have described, should have signed the solemn declaration in which they recommitted themselves to the principles on which the Community was founded.

The declaration also mentioned the need to widen the scope of political co-operation. The voice of the Ten is one that counts in world affairs; and the Community must remain outward-looking, not least in relation to the Third world.

In the renegotiation of the Lomé convention which will begin later this year, we shall look to the continued constructive involvement of the Community in helping economic progress in developing countries, and, of course, the Community itself will be changing; the Government hope to see the early accession of Spain and Portugal.

The challenge is plainly there. The Community must now respond quickly and effectively, because the problems will not go away or become easier with the passage of time.

Mr. Roy Jenkins (Glasgow, Hillhead)

What does the right hon. and learned Gentleman have in mind as a possible accession date for Spain and Portugal?

Sir Geoffrey Howe

The date currently in mind is for completion of the negotiations during 1984, with a view to accession at the beginning of 1986. That is the expected pattern.

Another matter with which the right hon. Member for Leeds, East, dealt and on which the verdict of the electorate was equally clear, was defence and disarmament.

Mr. Robert Hughes

As the Secretary of State has been dealing with problems that will not go away, will he say something about the role of the Government in the Western contact group of five on the future of Namibia? That is a pressing and urgent problem, as the Secretary-General is supposed to report to the United Nations by 1 August. For six years, the contact group of five has apparently done nothing. The Foreign Secretary and his predecessors have never reported to the House on the matter in a full foreign affairs debate and it is time that the right hon. and learned Gentleman did so.

Sir Geoffrey Howe

After the six years of inaction alleged by the hon. Gentleman, which I do not necessarily accept, I am not disposed to give a full report after three weeks in office. It is an important matter and I shall refer to it later in my speech.

I return to the issue of defence and disarmament. We shall be acting, in accordance with the verdict of the electorate and with our NATO allies, to maintain and strengthen the deterrent strategy that has successfully kept the peace in Europe since the second world war, to negotiate major reductions in the numbers of weapons held by East and West, and to establish a balance of forces at the lowest possible level commensurate with our security. That is the dual strategy which makes sense, morally, militarily and economically.

If we want to negotiate successfully with the Russians, we must make it clear, as we certainly do, that it is only by negotiation, not by threat and bluster or with public appeals to the naive, that they will get the reduction in force levels that they, too, claim to want. If the Soviet leaders are serious about wanting to do business, they will abandon the shadow of negotiations with Western public opinion and concentrate instead on the substance of negotiation in the conference chamber.

Experience shows that the Russians will be quick to take advantage of any weakness on the Western side. But experience also shows that agreements can be reached and made to stick. The right hon. Gentleman mentioned several previous agreements—the partial test ban treaty, the non-proliferation treaty, SALT and the anti-ballistic missile treaty are all cases in point. We want—indeed, the whole House wants—more such successes, and nowhere more than in the talks on long-range intermediate nuclear weapons, where there is a Soviet monopoly which the Western allies cannot accept. That is what the negotiations should be about.

The Russians, perhaps understandably, find that simple arithmetic not to their liking, and have set up endless smoke screens in the hope of confusing the issue. They would do better to address themselves to the real issues. If they will not agree to eliminate the whole category of long-range intermediate land-based missiles, President Reagan has offered an interim agreement of balanced numbers but at a level higher than zero. The Russians seem barely to have given that possibility serious attention.

The same, unfortunately, seems to be true of the Soviet attitude to Western proposals in other negotiations, for example, in the strategic weapons talks in Geneva, where President Reagan has once again signalled United States flexibility in the face of the Soviet refusal to accept the United States proposals for deep cuts in Madrid, where the West has worked hard for a conference on disarmament in Europe; in the committee on disarmament in Geneva, where Britain has played a leading role in negotiations on a complete and global ban on chemical weapons; and in the MBFR talks in Vienna, where NATO participants recently put forward a comprehensive draft treaty.

The lack of progress is, of course, frustrating, but we shall not give up trying, because that would be to give up also the hope of building a safer and more stable world for future generations.

My right hon. Friend will deal in more detail with the Opposition amendment. I, for one, find it difficult to understand the reference to an "unconditional commitment" to deploy cruise missiles. On the contrary, the Western proposal to eliminate this whole category of weapons remains on the table. I find it difficult to understand how it can rationally be suggested that to abandon the NATO decision would make agreement more likely. The whole point surely is that such a decision would remove from the Russians all incentive to negotiate. And why is Trident thought to have harmful effects on the negotiating process which Polaris does not? Is it seriously contended that a system approaching obsolescence offers some negotiating advantage?

Arms control is, of course, only part of the picture of East-West relations, though a very important part. We shall continue to look for progress in other areas too. As Secretary Shultz said in his important testimony to Congress on 15 June: We and the Soviets have sharply divergent goals and philosophies of political and moral order; and these differences will not soon go away. Any other assumption is unrealistic. At the same time we have a fundamental common interest in the avoidance of war. This common interest impels us to work towards a relationship between our nations that can lead to a safer world for all mankind. That is exactly the sort of relationship that we want and we shall play a full part in working for it, and we fully accept the need to keep open the channels of communication.

Mr. Tam Dalyell (Linlithgow)

What assurances does this Foreign Secretary have from the Prime Minister that the Foreign Office—of which he is the head—would at least be consulted if he were in a negotiating position, bearing in mind that his predecessor, the right hon. Member for Cambridgeshire, South-East (Mr. Pym), was not consulted at a time of crisis in relation to the decision to attack the Belgrano? That may have been a relatively minor war, but the question is whether we have an assurance that in a crisis the Foreign Office will be consulted by the Prime Minister, who, on a previous occasion, did not consult the diplomats.

Sir Geoffrey Howe

The hon. Gentleman has waited until a late stage in my speech to find a tenuous peg on which to hang his obsessive question. I do not accept the premise on which his question is based, but I assure him that in this Administration, as in the previous one, consultation between the Prime Minister and her colleagues will be whole and sufficient. I repudiate the hon. Gentleman's point. The hon. Gentleman strayed a long way from the issue that I was discussing, which was the attitude and performance on the world stage of the Soviet leaders. They have been left in no doubt that we deeply disapprove of many aspects of their conduct. We do not forget that there are more than 100,000 troops in Afghanistan and a fifth of the population of that unfortunate country are refugees outside their homeland. We do not overlook the failure of the Soviet Government to live up to many of their commitments under the Helsinki final act. But, at the same time, we have made it clear that if they are willing to show greater restraint in their international actions, a more constructive relationship with the West is available. A good first step by the Russians would be agreement to the concluding document at the CSCE review conference in Madrid, and thus to the convening of the conference on disarmament in Europe to which I referred earlier.

It is clear from what I have said already that we attach the greatest importance to the continuing unity of the North Atlantic Alliance and the continuing commitment of the United States to the security of Europe. We see that not as an alternative to a more constructive relationship with the Soviet Union and still less as an obstacle to it. It is, rather, an essential condition of what we want to achieve.

That is not, of course, to suggest that the relationship is, or should be, static or to pretend that there will never be difficulties. British and American interests, for example, will clash from time to time. When they do, we shall represent our interests with vigour. But that will not prevent us from maintaining between this country and the United States the relationship of co-operation and candour that has served us well in the past and will continue to do so. The economic aspects of the relationship — and, indeed, the impact of American economic policy on the political as well as the economic prospects of the entire world—are so important that I hope that there may be some value in the fact that on each side of the Atlantic there is in post a Foreign Minister who has had previous experience in command of his nation's Treasury. Neither of us regards the right hon. Member for Leeds, East (Mr. Healey) as an appropriate mentor in the conduct of our affairs.

Mr. Andrew Faulds (Warley, East)

More is the pity.

Sir Geoffrey Howe

I have devoted most of my speech to the major issues of defence and disarmament and Europe. Those were the two areas under closest scrutiny during the election and they are the areas of policy on which there are still great differences between the Government and the Opposition. But no one should be tempted to conclude that my speech signifies some great change of emphasis or that I shall regard as any less important the other relationships of vital interest to us or the other great international issues with which we are faced.

My two distinguished predecessors were both great supporters of the Commonwealth. I shall take particular pleasure in maintaining that tradition. It is an institution which I came to know well through attendance at meetings of Commonwealth Finance Ministers—the last of which I was honoured to host here in London. I look forward to accompanying my right hon. Friend the Prime Minister to the Commonwealth Heads of Government conference in New Delhi in November. Britain also has a special responsibility, as a permanent member of the Security Council, to play a full part in the work of the United Nations. I look forward also to paying my first visit to the General Assembly in September.

The list of actual or potential trouble spots is long. As we have seen in Namibia, progress in reducing it can be painfully slow. We should give our close attention to that matter. The continuing tension in Central America is a reminder that the list can all too quickly lengthen.

Mr. Robert Hughes

rose—

Sir Geoffrey Howe

I shall not give way to the hon. Gentleman again.

Mr. Hughes

rose—

Sir Geoffrey Howe

I have made it plain that I am not prepared to deal with the hon. Gentleman's question this afternoon. I am approaching the close of my speech. The hon. Gentleman will have an opportunity to ask questions later.

Mr. Faulds

On a point of order, Mr. Speaker. Will the Foreign Secretary consider delaying any future debates on foreign affairs until he is more au fait with his brief.

Mr. Speaker

Order. The hon. Gentleman must address his point of order to me, not to the Foreign Secretary.

Mr. Faulds

rose—

Mr. Speaker

Order. The hon. Gentleman's point was not a point of order.

Sir Geoffrey Howe

I do not wish to follow the example of the right hon. Member for Leeds, East, who took almost an hour for his speech.

The continuing tension in Central America is a reminder that the list can quickly lengthen. None of these problems is more acute than the Middle East. Despite the Israel-Lebanon agreement, foreign troops remain in Lebanon and the wider Arab-Israel dispute looks as far from solution as ever. We must hope that President Reagan's initiative can still offer a way forward. But in any event, we shall continue to take the active role that our history and our interests dictate in searching for a solution. We shall be playing our part in co-operation with like-minded Governments in working for a peaceful, negotiated settlement. The position is too dangerous to neglect.

I have taken advantage of my new-found freedom by saying very little about economic issues. The right hon. Member for Leeds, East seized the opportunity to return to his former economic domain. On that subject, I gladly join him in paying tribute to the notable record of public service of the retiring Governor of the Bank of England, Sir Gordon Richardson. I deplore the right hon. Gentleman's gratuitous and unjustified attack on the new Governor of the Bank of England.

The Gracious Speech does, of course, refer to our economic relationship with the developing world and the importance of increased trade. A most important need for developing countries is to find a market for their goods. The key to improving their market prospects is sustained and non-inflationary growth in industrialised countries. That is why the recovery in our domestic economy and in the other industrial economies — most notably in the United States—is so crucial.

The Williamsburg summit showed the wide measure of agreement that exists on how the world can be brought most surely out of recession. The Opposition amendment and the right hon. Gentleman's speech purport to find us guilty of not taking adequate action for international recovery. The right hon. Gentleman implied that we neglected — and perversely rejected — some attractive approach that was offered for consideration at Williamsburg. But that is not what happened. At Williamsburg there was no dissent from the position adopted by Her Majesty's Government. It was recognised on all sides that continued success in reducing inflation and in curbing budget deficits as a way of reducing interest rates was the best way of strengthening the prospects for sustainable growth in the Western countries.

Mr. Healey

The right hon. and learned Gentleman referred to Williamsburg, but I did not. I said that the French Government, American Ministries — important Ministries as the right hon. and learned Gentleman knows — and all three of the big international organisations, the BIS, the OECD and the European Community, all put forward proposals for collective action to increase demand. They did so again last week. It is perfectly true that sado-monetarism ruled at Williamsburg, and the world will suffer as a result. The right hon. and learned Gentleman might at least address himself to the argument. He is the main criminal.

Sir Geoffrey Howe

I thought that the right hon. Gentleman would return to that theme. One of the least impressive aspects of his career in recent times has been his epithetical search for ways of dissociating himself from the discipline of monetary policy. He knows that he first introduced the concept of monetary policy. He knows that he sought to practise it with discipline. He now seeks to stand away from it by speaking first of punk monetarism, and when that epithet wore out he embarked on the even more curious proposition of sado-monetarism.

The Ministers represented at Williamsburg, including representatives from the French Government—which is hardly a sado-monetarist and mad capitalist organisation — all agreed on the necessity to continue the fight against inflation and to reduce budget deficits. They regarded that as the best way of strengthening the prospects for sustainable growth in Western countries. Not least, they regarded it as important in the United States. They thought that that would help to bring about a real improvement in employment, to help developing countries and to strengthen the international financial system.

Of course for some developing countries, especially the poorest, aid remains a necessity. I have already touched on the contribution of the Community through Lomé. We are also engaged bilaterally, and in support of other multilateral programmes. Our aid will continue to concentrate on those for whom it is most needed, while recognising the special claims of countries with which we have especially close links because of our history. We shall continue to look for a proper return to our own economy from the aid that we give. Above all, we shall look to the effective application of aid in support of sound policies followed by the recipient countries themselves.

Those are the points in the Gracious Speech of most concern to the Foreign and Commonwealth Secretary. Those that I have touched on only briefly are no less important than those which it seemed helpful to emphasise.