John MacGregor – 1978 Speech on Investment Income Surcharge

Below is the text of the speech made by John MacGregor, the then Conservative MP for South Norfolk, in the House of Commons on 5 April 1978.

I beg to move,

That leave be given to bring in a Bill to abolish investment income surcharge.

This Bill is about jobs, about economic growth and about fair play. Whatever the earlier case for an extra impost, on investment income, the developments on the tax front and the growth in the tax burden over the past four years now mean that the surcharge is having seriously damaging effects in a number of important directions, and I seek this opportunity of drawing attention to them and tackling them. I wish to make six main points in relation to jobs, economic growth and fair play.

First, concerning jobs, there is now widespread agreement that in dealing with the appallingly high level of unemployment one of the main contributions in the future will have to come from the small businesses, because the public sector and the large and medium-sized companies in this country will be seeking in many cases to shed labour rather than to promote new jobs. Yet the small businesses are quite inadequately encouraged at the present time.

Much of the evidence to the Wilson Committee on the City has drawn attention to the problems of finance for small businesses. Indeed, the institutions, the banks and so on, are now doing much to assist in that area. But the real gap—and, I suspect, an increasing gap in the future—is for finance in start-up situations, in venture capital, and for the very small businesses, because the banks and institutions naturally do not wish to risk equity capital at that point since they have their own depositors to take care of.​

Getting the small business off the ground is still one of our major problems. Previously, this used to be done by private investors who knew the locality, knew the people and were prepared to risk some of their spare capital in order to get these businesses going. It is done in this way in America and in other countries where positive fiscal incentives are given compared with the fiscal disincentives that we apply here.

Even the National Research Development Corporation, in its recent evidence to the Wilson Committee, said:

“The mortality rate of small companies is high, and this in turn inhibits support for new technology-based firms in general. Special measures, including increased fiscal incentives (or the removal of current fiscal disincentives), may be required to promote the growth of small innovative enterprises.”

The plain fact is that the risk of losing one’s money in small businesses is high and the reward is virtually nil, especially at a 98 per cent. tax rate. I believe that it will be right—as I believe the Chancellor of the Duchy of Lancaster is considering—to introduce relief for losses against other income in order to assist start-ups. But the abolition of the investment income surcharge is also necessary to assist and encourage jobs in small businesses.

Secondly, turning to the more general aspects of growth, we are all agreed that we want to see more investment in British industry and commerce and, perhaps more important, better use of the investment. I would be the first to admit that encouraging saving is only one part of this problem. There is a need first to see the demand side increasing, as we do not have demand for new investment and for new capital on the scale required as we would all wish to see at the present time, because of the lack of confidence in British industry.

But at some stage the importance of the saver and the investor will come back into play. We do need to encourage new capital. Again, the investor gets poor rewards for subscribing to equities at present. For the high taxpayer the return is minute and after inflation is often acutely negative. Each year today there is a 5 per cent. decline in the number of shareholdings in British companies, and it is the individual small investor who is getting out. To a considerable ​ extent that is a tax matter because of the fiscal benefits to the pension funds, on the one hand, and the fiscal disincentives of high rates of taxation, especially investment income surcharge to the direct investor, on the other.

Another worrying aspect of this matter is the ever-increasing reliance on institutional investment in the Stock Market. I believe that this should give us some considerable cause for concern, because it means intensified volatility in the market, possibly less investment in the secondary, middle and smaller public companies and hence greater difficulty for them in raising new capital, and some would also argue the risk of only a small number of investment decision takers in stock market investment tending to concentrate on investment fashions. The abolition of the investment income surcharge would help to redress that balance and to get more investment directly from investors into British industry through equities.

Thirdly, I want to turn to one particular aspect—growth in farming. About 45 per cent. of agricultural land today is tenanted. Yet the fiscal burdens on the agricultural landlord—unless again it is an institution—are now penal, partly because his returns are treated as investment income. If he is paying between 80 per cent. and 98 per cent. in tax, he is less likely to be willing to invest in improvements to land, buildings and machinery because of the feeble after-tax return at the end of it. This is harmful to agricultural production as well as to all the allied industries which depend on a successful and growing agriculture.

It also means that many are tending to bring land in hand as soon as they can, for fiscal reasons, which is harmful to future tenant farmers in this country. I believe that we should be seeking a definition of a working landlord and enable him to benefit from current agriculture fiscal reliefs. That is the way mainly to go forward to the benefit of agriculture generally. Meanwhile, the abolition of the investment income surcharge would help.

My last three points relate to fiscal justice and fair play. Fourthly, we now have an appallingly muddled position in relation to tax on savings. Wins on the pools or on horses are virtually tax-free. Savings through pension funds and life assurance obtain a variety of tax benefits ​ which significantly affect the investment decisions of the saver. Gilts and other forms of Government savings, such as the Trustee Savings Bank, have considerable tax-free advantages which much distort the flow of savings patterns. It is important here to realise that the Government by their tax decisions are greatly benefiting themselves in relation to savings, especially in connection with high-rate taxpayers for whom gilts held for more than one year are enormously more advantageous than any other form of saving.

Only equities, building societies and other forms of private sector saving have to suffer the whole battery of taxes on savings. Investment income surcharge is one of the significant ones. Its abolition would help to remove distortions—indeed, gross distortions—which fiscal measures have so sweepingly introduced into savings.

Fifthly, I turn to the international comparisons. Few countries today have an investment income surcharge at all. None among our industrial competitors has rates on earned or on earned and investment income combined anywhere near ours reaching up to the top rate of 98 per cent., nor at the levels of income at which we impose them. I believe that it is no coincidence that we are not only so far out of line with them in our tax measures and tax burdens on direct and investment income but frequently out of line in our success in growth rates.

Sixthly, and most troubling of all, I want to draw attention to the quite unfair burden that the investment income surcharge now imposes on those with comparatively low incomes and on those aged over 65. Indeed, it is these groups with whom I am most concerned, despite all the other very important arguments, in pushing this measure today. One hundred and sixty thousand of those who pay investment income surcharge—or roughly one-third—have incomes below £4,000 a year. Indeed, this morning I had a letter from a constituent aged 58, who has just been declared redundant and who will have to make use of his redundancy payments and the savings which he has developed over his lifetime. He has an income—which he will expect not to grow from now on because he does not expect to get a job at his age—of about £2,000 a year and is naturally ​ infuriated as he now finds that he is paying a marginal tax rate of 44 per cent. on that income.

Over 45 per cent. of those paying the investment income surcharge are pensioners. What I find so appalling here is the quite unfair situation where those who are fortunate enough to have occupational pension schemes or self-employed schemes have their savings treated as earned income after the age of 65. But there are those who are not able to be in that position, perhaps because they were in a company which did not operate such schemes or had a small business and were not able to afford the self-employed annuity schemes which were not so generous in the past. Those who concentrated their savings on building up their businesses and get their retirement savings out of that business, or in other ways, find that they have this huge burden at a very modest rate of income of a 49 per cent. marginal tax rate.

It is scandalous that those who built up their savings in this way should be discriminated against. As the Building Societies Association points out, a single pensioner pays at a rate of 49 per cent. with an income of £3,410, whereas someone single and of working age has to reach an income level of £6,945 before he pays above the tax rate of 34 per cent. That is quite monstrous discrimination.

What particularly riles these people is that this is not unearned income at all. What they are getting after the age of 65 is income out of savings earned out of a hard working life and out of taxed income during that working life. There is no wonder that there is so little incentive to save in certain directions today, especially after inflation is taken into account. No wonder that the children of so many of these people—[HON. MEMBERS: “Too long.”]—should see themselves what has happened so that they no longer wish to save.

In conclusion, I recognise that there are many priorities in tax today. I have been among the first to argue for many of them, especially for those on low incomes and many others. I recognise that it may not be possible to carry through this measure exactly in this form at the present time. But I do believe that we should at least have amendments to this Bill to raise the threshold to £4,000 to ​ bring it back in real terms to where it was only a few years ago to help the pensioners, or perhaps to abolish it altogether on the pensioners as the Building Societies Association has urged.

But it is because I believe that the arguments long term for abolition are so compelling that I have sought to bring the Bill forward in this way today in order to encourage the wealth creators and the risk takers.

Anthony Steen – 1978 Speech on Inner City Land

Below is the text of the speech made by Anthony Steen, the then Conservative MP for Liverpool Wavertree, in the House of Commons on 4 April 1978.

I beg to move,

That leave be given to bring in a Bill to make it compulsory for local authorities, nationalised industries, other public bodies and statutory undertakings to dispose of vacant land in their ownership in certain circumstances; and for connected purposes.

The aim of the Bill is to compel those local authorities guilty of land hoarding either genuinely to develop vacant land in their possession within a limited period or to put it on the open market by way of public auction so that others can do just that.

The scale of land hoarding by local authorities and nationalised industries is not fully known. Suffice it to say that ​ 250,000 acres of prime land, mostly in the city centres, lie dormant. There are over 16,000 acres of derelict or vacant land in London. There are over 2,000 vacant acres in Liverpool and 1,100 in Birmingham. In Liverpool 60 per cent, of the vacant land in the inner city belongs to the local authority, and a further 20 per cent, is in the ownership of British Rail, the water authority or other public undertakings. Much of this vacant land has come about as a result of massive demolition programmes and the failure of the public authorities to rebuild on it.

The consequences of this land remaining dormant are far-reaching. It creates an artificial demand for what is left in the inner city. It sends land prices soaring, and rents with them.

Secondly, as a consequence, new factories and offices are preferred to be built on the green field sites on the edge of the city, where land is cheaper.

Thirdly, the failure to create jobs or to provide homes in the inner city results in a mass exodus of population. Between 1966 and 1976, Liverpool lost 22 per cent, of its population—150,000 people; Manchester lost 18 per cent.—110,000 people; and Birmingham lost 8 per cent.—85,000 people.

Fourthly, by reducing the rate base, the city councils have inadequate funds to provide services for the businesses that remain. The small firm is, therefore, penalised by massive commercial rate demands, and often loading on top of it for refuse collection.

Fifthly, inadequate rate income in the inner areas means that domestic ratepayers in the middle and outer bands of our cities are increasingly subsidising the provision of services in the city centres. If wealth is to be created in our cities, a prerequisite is that the dormant land there must be used to the full. So long as it lies idle, it attracts an artificial value which, as it continues to rise, makes it less and less possible, for anyone to buy.​

The Bill would therefore force public authorities to make up their minds. Either they can develop their land and build homes and factories on it, creating new jobs and providing accommodation to tempt back skilled workers who left many years ago, or, if they prefer not to develop the land themselves, it will automatically be auctioned at the market value to the highest bidder and with a covenant that the buyer must develop it within a limited period.

If vacant land remains tied up with public authorities, our cities must continue to die. Small businesses will continue to be driven out and the domestic ratepayer will get less and less value for his money.

The nation’s attention is focused on the revival of our cities, yet without the release of dormant land there can be no such revival. It is the cornerstone of our return to prosperity, but there is no hint of such a plan in the current Government legislative programme. That is why I seek leave to introduce this Bill.

Bill Rodgers – 1978 Speech on Trunk Roads and Motorways

Below is the text of the speech made by Bill Rodgers, the then Labour Secretary of State for Transport, in the House of Commons on 4 April 1978.

With permission, Mr. Speaker, I should like to make a statement about the Government’s policy for the trunk road and motorway system.

The transport policy White Paper published last June outlined a new approach to the planning and improvement of the national road network. In the spirit of this approach I have now carried out a review of the objectives and methods of the trunk road programme in England and completed the first stage of a reassessment of all the schemes in it The results are brought together in the White Paper “Policy for Roads: England 1978” ​ which I have today presented to Parliament.

My Department, jointly with the Department of the Environment, has also been reviewing the procedures for public inquiries into trunk road schemes. We have been guided by the Council on Tribunals, with which we have worked closely. The Government’s intentions are set out in the White Paper “Report on the Review of Highway Inquiry Procedures” which I have today presented jointly with my right hon. Friend the Secretary of State for the Environment.

Copies of both White Papers have been available in the Vote Office since 3 o’clock.

To devise and implement the right policy for roads presents many problems and dilemmas. Within the framework of the national transport policy, we need a road system that will support our major national objectives—the industrial strategy, regional development and the regeneration of inner city areas—as well as relieve the serious local problems caused by traffic. The inter-urban road system has been transformed over the last 15 to 20 years but many deficiencies remain. The routes to the major ports are not yet complete. There is an urgent need for an orbital route round London. Certain of the assisted areas still lack adequate communications, and many bypasses are required. Hon. and right hon. Members in all parts of the House continue to urge priority for new roads to serve their constituencies.

Yet people are now less inclined to take for granted the assumptions on which road planning has proceeded in the past—for example, about future levels of traffic. They are less willing to accept the lengthy disruption caused by major construction projects. They are alert to the possibly damaging consequences, as they see it, of major new roads for the areas in which they live. As a result, there has been some dissatisfaction with the way that my Department and its predecessors have explained their proposals and apparently made their decisions. Public inquiries have on occasions been disrupted.

I shall not take up the time of the House by detailing all the changes which I propose. But the main elements of the new approach are these. First, in place ​ of a predetermined strategic network, our approach will be selective. Within the planned level of investment on trunk roads and motorways of about £300 million, there will be a more rigorous approach to priorities, with emphasis on vital industrial routes, but also increasingly on schemes with high environmental benefits.

Secondly, there will be more flexibility in applying design standards in the light of greater uncertainty about future traffic levels and the cost and supply of oil. Greater flexibility also reflects my concern that roads should be fitted into the environment in a discriminating way.

Thirdly, in the appraisal of road schemes my Department will apply a comprehensive framework for decision, as recommended by the Leitch Committee, whose report was published in January. It will set out the range of factors that need to be taken into account—economic, social and environmental: those that can be quantified and those that cannot. In this way, each can be given its full weight, and a balanced judgment can be made.

Fourthly, there will be a greater openness at the various stages of planning, from public consultation to the inquiry. In the arrangements for inquiries, my Department will secure that realistic alternatives are genuinely explored. It will make available information covering the range of factors on which road proposals are based and decisions reached so that, as far as possible, there can be equality of information for all those concerned.

Finally, we need to put beyond doubt the impartiality of inspectors who are appointed to conduct trunk road and motorway inquiries. With the approval of my right hon. Friend the Prime Minister, my right hon. Friend the Secretary of State for the Environment and I will, in future, in exercising our statutory obligations, ask my noble and learned Friend, the Lord Chancellor, to nominate a particular individual considered by him to be suitable for a particular inquiry.

On this basis, Mr. Speaker, I believe that we can have a road programme that meets the country’s needs and commands a very wide measure of approval.

Where there are conflicts of interest, they can be resolved openly and fairly. “Policy ​ for Roads: England 1978” is the first of a new series of annual policy statements which will enable the House, if it chooses, to discuss the principles underlying the decisions of Ministers. I shall also welcome wider public discussion of these important issues.

Kenneth Warren – 1978 Speech on Ceefax and Oracle

Below is the text of the speech made by Kenneth Warren, the then Conservative MP for Hastings, in the House of Commons on 4 April 1978.

Tonight I should like to raise the subject of Government support for the Viewdata and Teletext projects. These are means of transmitting information by both television and telephone to the public, industry and the community. They are brilliant British inventions. I think that they rank with the inventions of the jet ​ engine and radar in this country and that they are superb examples of British technical genius in action. Of particular importance is that they are two years in advance of any foreign rival. They are now on test and are not only proving that they work but that with good will they will meet the great expectations of the engineers who have developed them.

I have nothing but praise for the way in which a dozen British companies, including the Post Office, have worked together in harmony but quietly in developing these new communications systems. More is the pity that in the quietness of the House we shall be told a story of British achievement, bearing in mind that the House is so often filled to hear the story of a British industrial disaster. Perhaps it is a reflection on all of us that we have become too used to failure and are not used to success when we see it.

Our need tonight is to talk of the way in which we can bring this project, which is on the threshold of success, to the reality which I am sure both sides of the House want to see.

I particularly praise the inventor of the system, Mr. Sam Fedida, who was once in the Post Office, and also the entrepreneurial style of Sir William Barlow and Dr. Alex Reid, who in the Post Office have shown a vigour, enthusiasm and entreprenuerial style which has been too long invisible in the Post Office. Praise also goes to those who worked on CEEFAX and ORACLE in the IBA and the BBC, who in parallel are leading the world—and my superlatives are carefully gauged—in this “first” in information technology. As a technologist myself, from what I have seen to date I believe that we have here a brilliant system, which will be a winner.

The problem to which I wish to address myself tonight is the role that should now be played by the Government to ensure that the systems developed to date achieve the success that they deserve. For too long this country has failed to harvest the fruits of its own technology. For too long we have suffered industrial policies which have subsidised failure rather than stimulated success.

The beauties of Viewdata and Teletext are that they are simple and will help ​ all the people of this country, and I hope, the world to gain a new freedom of access to information, not only across their own nations but across the frontiers of the world. They can be signal contributions to understanding between peoples.

The clever parts of Viewdata and Teletext are translations of the concepts that started off as thoughts, drawings and views in the minds of people which now have been translated into systems that are proving that they are real and reliable. They are—I hope that the Government will recognise this—the first recognition in this country that a world information revolution is upon us. They are both systems which are built by venture capital from private industry and from the Post Office. Ranges of work have been done by companies such as Mullard, GEC, ITT, Rank, Decca—a dozen companies which make up the forefront of British communications technology.

I have no doubt that the Minister will dispute my view, but I must say that I am delighted that the heavy hand of Whitehall has not been on the motive power of the project. On the other hand, I will be the first to say that if any Government are needed in an industrial project their presence in specific areas where help is required needs to be timely and of sufficient strength to complete the job properly.

I should like to propose certain ways in which the Government could and should now help. The first is to endorse the systems as viable ways in which information can be conveyed between people. This may sound an unusual proposal to put before a House or to a Government—that all they have to do is to shout “Hurrah”—but this is such a wonderful invention that an endorsement by a British Government would be tremendous, timely and completely fair and reasonable.

Secondly, I believe that the Government should give leadership in establishing that the viable and reasonable international standards for all these systems can be achieved.

Thirdly, I ask that the Government should recognise that these systems are means of improving the process of government at all levels of government in the United Kingdom, whether it be at ​ national, county or district level, or within the national corporations of the State.

To enlarge briefly on each of these proposals, taking endorsement first, a public expression by the Government of good will towards the project would not only be a spur to those who have quietly given so much of their time and their effort but also would be a tremendous help, I understand, to export sales projects. Before I came to the House, I knew what it was like to try to sell electronic goods in a very competitive market in the United States and the difference it makes or does not make to have the support of a British Government. I did not have it and it was like going up the north wall of the Eiger. Why not give these people the chance of a smoother ride round the softer side?

I understand that the Post Office export division is all ready to go. I think that it should be assisted.

We must also, I hope, look to the Government to ensure that any necessary legislation—this needs to be examined—is on line on time.

On the question of leadership, to put it bluntly the French came in two years after we had started, and now, as is too often the case with our French allies, they are unwisely, from a technical viewpoint—I do not think it is my place in the House tonight to give way any technical secrets to which I might have become privy—trying to force through international specifications in favour of their equipment without the authority of technical backing which they should have.

The Government could give leadership and I believe should give leadership in the relevant international authorities such as the Conference of European Posts and Telecommunications to make our systems and their systems acceptable rather than to find a situation where the French are trying to make our system unacceptable and theirs acceptable. We must speak through the Government with one authority for telecommunications and broadcasting at the debating tables where these international standards are agreed.

Thirdly, I think that the Government should explore immediately, in collaboration perhaps with the central computer authority of the Civil Service Department which I recognise is another Department ​ from that of the Minister who is kindly replying to the debate tonight, the use of this breakthrough in information processes to improve the process of government.

I have absolutely no doubt that the Viewdata and Teletext could bring to the Department of the Environment, the Home Office, the Department of Trade, the Ministry of Defence, the Department of Health and Social Security and the Minister’s own Department, new ways in which information could be gathered and exchanged.

I hope that it would help the market surveys of the Department’s own requirement boards, which, I was told in a parliamentary reply, are unable to carry out their own surveys through a lack of expertise. I hope it would help the Foreign Office in the United Nations debate on direct satellite broadcasting, because these systems provide a means of supporting the British contention that we can supply world-wide freedom of access to information across frontiers.

However, the Luddites are at work, and it is not unusual with new technologies to find people speaking sourly of something that looks like progress. I understand that the National Union of Journalists is already in dispute over one of the systems about who should get the jobs involved. But this is a new project which offers more than enough jobs for everyone, and everyone should welcome the chance of many more jobs. I hope that all the unions will look upon this development as an opportunity for new employment.

I understand that the Advertising Standards Association feels that someone should censor what is available. The deputy director of that authority believes that Viewdata could become “a haven for all sorts of crooks and misleading advertisers who could not find a home in the existing media”.

That Luddite attitude must be dismissed rapidly, so that it does not present an obstacle to what should be a great British venture. To achieve that I should be happy to give Mrs. Whitehouse the chance of acting as a temporary censor.

In this century we have seen two great revolutions in communications. The first was that of the Wright brothers, who opened the door to Concorde, by which ​ the world can be spanned in a day. The second has been the revolution in communications by which we have literally moved from smoke signals to Viewdata and Teletext. We have changed communications so that instead of people having to travel to find facts they simply use television and the telephone. It would not be going too far to say that here for the first time in 20 or 25 years since the world first saw the computer we can look to a new world of communications which is dawning before us.

The systems are a world of enterprise for industry. New jobs will replace old and more jobs will be waiting. We are only one year away from the systems being available in the High Streets of Britain, yet their names have never before been mentioned in Parliament. We now need a combined effort by industry and Government to reach out for the international success that these systems truly deserve, and I look forward to the Government tonight meeting me in that request.

George Robertson – 1978 Maiden Speech in the House of Commons

Below is the text of the maiden speech made in the House of Commons by George Robertson, the then Labour MP for Hamilton, on 14 June 1978.

I do not need to underline to this House the pride I have in being elected as Member of Parliament for Hamilton. I hope that my presence here and the result in that constituency are of some little relevance to this debate.
It is a great honour for me to follow in the footsteps of the late Member for Hamilton, Mr. Alexander Wilson. I knew him well and I know that he was widely respected in the House. He was a man of dignity and integrity, who worked quietly and without fuss in his constituency and in the House pursuing the interests of the people of Hamilton and of Larkhall. He did so diligently, without publicity and with honour.

The work which Mr. Wilson did quietly was all designed to help the people of the area and to further the interests of his constituents. I know from the volume of work which is there and the catalogue of achievement mentioned to me during the by-election that he was a man who clearly made an impact in the House and had much to offer.

Although I am proud to be the new Member for Hamilton, I am aware that that is possible only due to the tragic and untimely death of Alex Wilson. I know that he also made a considerable contribution within the parliamentary mining group. That is an industry which he knew well and from which he came. He is well remembered within the industry in Scotland, throughout Scotland and in the mining group.

At this stage in history it is also a pleasure for me to represent Hamilton because the features of that part of Lanarkshire show all the promise of the new Scotland which lies ahead. It is an exciting mixture of ages, of classes, of population and of industry. In that mix it has changed dramatically from the older and more traditional industries of the past—especially that of mining, on which Scotland’s economy previously relied—to light engineering, electronics and the production of sophisticated clothing. In those areas it is excelling. The character of Hamilton is an indication of the way in which Scotland will go in future—not just electorally but in the areas of industry and of technological progress.

During the by-election, as perhaps during any by-election, local circumstances and problems were highlighted. Although there is much of promise in the area, one of the greatest causes for concern is unemployment. As an aspiring Member, I made it my duty and obligation to pursue the subject of joblessness in the community. We cannot rest, in the House or throughout the country, as long as the present level of unemployment continues.

At 11 per cent., unemployment in Hamilton is considerably above the Scottish and national average. It is a substantial problem. The most serious aspect is youth unemployment. The prospects for young people leaving school this year and in future without jobs are a matter of concern for them, for their parents and for us in society as a whole, because the future of the country and the future stability of society will be largely dependent on the sort of future that we can offer to young people.

I feel that we have in the country as a whole to make a concerted effort to ensure that the problems of unemployment that we now face are purely temporary, and that we can build a future prosperity which will mean that especially the young people will be assured the jobs, the training and the prosperous future that they would wish for themselves, and that their parents would wish for them.

However, I fought a campaign based on the Government’s record. I did it not uncritically but not apologetically, and I asked the people to give their assessment of the situation and their view of the future and to say which party they would trust to run the country’s affairs in the future. In the context of this debate, it is instructive and relevant to remember the answer that the people gave.

However strongly we feel about the present position of the economy, we must recognise that locally and nationally much has been done to alleviate the problems of unemployment, and especially to look after the needs of young unemployed people. In the Hamilton area, much has been done about unemployment as a whole. In the past five months there has been a positive increase in employment and a very clear decrease in unemployment which has been greater than the national trend, which in itself is welcome. As for youth unemployment, over half those between the ages of 16 and 17 registered as unemployed are already involved in job creation schemes and Government-assisted programmes. We were able to show that, although there was a level of concern that we should not in any way attempt to disguise, there has also been positive Government action to make sure that the impact was the least that was possible in the circumstances.

The area also shows other signs of Government intervention, and of the intervention of a Government in regional policy which has made a serious impact on the problems of Central Scotland. The Scottish Development Agency—of which I was privileged to be a board member until I came to Parliament—had quite a significant impact in the area. Its industrial estates employ the vast majority of the people in the area, and in companies in which investment has taken place in surrounding areas jobs have been safeguarded for people who work within Hamilton. In the steel industry—one of the largest employers in Hamilton, although it is marginally outside the constituency—investment by the Government has assured the future of Ravenscraig and associated industries.

Although temporary Government measures are not an answer, there are all the signs in the area that the jobs which are necessary for the future, the growth that is needed and the hope that is desired by the people are being promised by the Government. The people in my area gave a pretty clear and decisive answer as to which party they would trust for the conduct of their affairs in the future.

The acid test at the end of the day is the will of the people, and there have not been very many tests of public opinion in Scotland where the issue has been put to the country. Not only has the Government’s record been judged and, I think, honourably tested in this election. The future of the constitution of the country was also put to the test in the circumstances here. The policies of separation and of the disintegration of the United Kingdom as we know it were clearly put to the electorate. The electorate gave an answer which shows that people in that area, as throughout Scotland, want to see Britain united and the problems faced head on.

I also feel that one of the lessons of that by-election, and its result in my presence here today, is that the people of Britain and of Scotland are tired of the cynical manipulation of policies by whichever party may choose to pursue them. They have rejected confrontation quite clearly and precisely whether it be in industry or within the separate parts of this country. If there is an answer to be taken from any of the election results that we have had recently, it is that the constitutional settlement proposed by the Government is necessary, desirable and in keeping with the desires of the peoples of this country, who are looking for a different constitutional set-up.

The Government’s resolve in this area of the constitution, despite the frustrations with which they have clearly met so far, has been of enormous consequence in stemming the tide towards the break-up of the United Kingdom. I believe that the lesson of the present period is that the British people are tired—and clearly tired—of confrontation, and that they will in future continue to put their trust in this Government, believing as they do that only this Government’s competence, conviction and philosophy will be relevant to the problems of all these islands in the 1980s.

Queen Elizabeth II – 1978 Queen’s Speech


Below is the text of the speech made by HM Queen Elizabeth II in the House of Lords on 1 November 1978.

My Lords and Members of the House of Commons,

I look forward with great pleasure to receiving the President of Portugal and Senhora Ramalho Eanes on a State Visit in November, to visiting the countries of Eastern Arabia and Iran during February and March 1979, and to paying a State Visit to Denmark in May. I hope to be present in Lusaka on the occasion of the Commonwealth Heads of Government meeting.

My Government will continue to safeguard the nation’s security and make a full contribution to the North Atlantic Alliance and the improvement of the Alliance’s defence; they will continue to search for ways of developing constructive relations with the Soviet Union and the countries of Eastern Europe; and they will seek the fulfilment of all the provisions of the Final Act of the Conference on Security and Co-operation in Europe by all the signatory States.

Negotiations with the United States and the Soviet Union on a comprehensive nuclear test ban will be continued and My Government will work for more substantial progress on mutual and balanced force reductions in Central Europe.

My Government will continue to play a full and constructive part in the development and enlargement of the European Economic Community.

My Government reaffirm their commitment to the United Nations and their support for its peace-keeping role. They will work for a fair settlement in Cyprus and will support all endeavours to ensure a just and lasting peace in the Middle East.

My Government will make every effort with the United Nations to achieve peace and justice in Southern Africa. In Rhodesia, they will continue to strive, with the United States, to achieve a ceasefire and a negotiated settlement, involving all the parties, which will be acceptable to the people of Rhodesia as a whole. In Namibia, they will maintain their effort to secure free and fair elections and independence in 1979, under United Nations auspices.

My Government will continue to play an active part in the development and strengthening of the Commonwealth. They will make every effort to promote successful co-operation between industrialised and developing countries for the benefit of both. They will maintain an effective and increasing programme of assistance to developing countries, and in particular will direct help towards the needs of the poorest peoples of the world.

Members of the House of Commons,

Estimates for the public service will be laid before you.

My Lords and Members of the House of Commons,

My Government’s economic policies will continue to be directed to overcoming the evils of inflation and unemployment, the two most serious social problems facing the nation today, and to sustaining the growth of output which is now under way. They will pursue every available means of moving to full employment. They will continue to play a leading part, with our international partners, in seeking an end to the worldwide recession. Building on the stronger domestic economy now established and using the benefits of North Sea oil further to improve long-term recovery, they will vigorously pursue their policies designed to promote the success of industry and to increase productivity. In all these matters My Ministers will co-operate closely with the Trades Union Congress and the Confederation of British Industry.

New ways will be sought to help small businesses. Special encouragement will be given to the education and training of young people and others to safeguard and increase the supply of skilled manpower. Legislation will be introduced to provide additional finance for the National Enterprise Board and for the Scottish and Welsh Development Agencies. Following continued consultations with industry, legislation will be introduced to improve arrangements for compensation of workers on short-time, and to reduce redundancies at times of high unemployment by encouraging the alternative of short-time working.

Social justice and racial tolerance will be promoted through My Government’s social policies. The partnership between the Government and the local authorities in Inner City areas will be pressed forward. A Bill will be introduced to improve the funding of schemes designed to help ethnic minority groups.

My Government will seek to ensure that respect for the law is maintained, and will give full support to strengthening the Police Service. Every effort will be made to recruit the aid of the whole community to defeat crime and vandalism.

In Northern Ireland, My Government will maintain their efforts to establish a form of devolved government acceptable to all sections of the community and to ensure that those responsible for violence are brought to account before the courts. My Ministers will work energetically to improve living standards and increase opportunities for employment. A Bill will be introduced to increase the representation of Northern Ireland in the House of Commons, in accordance with the recommendations of the Speaker’s Conference.

My Government are resolved to strengthen our democracy by providing new opportunities for citizens to take part in the decisions that affect their lives. A number of the following measures include provisions for that purpose.

Draft Orders will be laid early in the Session to provide for the referenda on devolution to Scottish and Welsh Assemblies, to be held when the new electoral registers are available.

Following further consultation on the proposals in the White Paper on industrial democracy, legislation will be introduced to ensure that employees and unions are able to participate in discussions of corporate strategy and to provide in due course for employee representation on company boards.

The proposals set out in the White Paper on Broadcasting will be pursued, with a view to legislation on changes in the constitution, structure and organisation of broadcasting, including improved arrangements for the views of listeners and viewers to be heard and taken into account.

Further proposals will be brought forward to achieve more open government. It remains My Government’s intention to replace Section 2 of the Official Secrets Act 1911 with a measure better suited to present day conditions. My Government will continue to make information on public policy more readily available.

My Government will bring forward proposals to amend the Local Government Act 1972 in order to secure the better functioning of local democracy in a number of the large towns and cities in England. A Bill will be introduced to strengthen the consumer voice in relation to nationalised industries.

Legislation will be introduced to improve the law on education in England and Wales and to enable grants to be made in Wales towards the cost of bilingual education. A Bill on housing will include provisions for a new charter of rights for public sector tenants, a new scheme for subsidies in the public sector, more flexible arrangements for the charging of interest on local authority mortgages, and further assistance towards the improvement and repair of existing homes.

Bills will be introduced to improve safety and discipline at sea, to help to control marine pollution, and to amend other aspects of Merchant Shipping legislation, and also to strengthen the enforcement powers necessary for the safety of offshore oil and gas installations.

My Government remain committed to the establishment of a Public Lending Right for authors, and will introduce a Bill for this purpose as soon as possible.

My Government will continue to press for improvements in the Common Agricultural Policy and to promote an expansion of food production in the United Kingdom and its efficient processing and distribution. They will also take all measures necessary to conserve fish stocks and will continue their efforts to achieve an acceptable Common Fisheries Policy within the EEC.

My Government re-affirm their commitment to the reorganisation of the electricity supply industry in England and Wales and will introduce legislation for this purpose.

Fresh support will be given to enable the National Health Service to fulfil and extend its services to the public. Bills will be introduced on the regulation and training of the nursing, midwifery and health visiting professions on the lines recommended by the Briggs Committee on Nursing; and to provide for the scheme of payments for those who have suffered severe vaccine damage. A measure will be introduced to extend benefits for the disabled and to correct and clarify the law relating to social security. My Government are examining schemes to provide compensation for those such as slate quarrymen who have suffered respiratory diseases from dust in their employment, but who are unable to obtain such compensation through the courts because their employers have gone out of business. A Bill will be introduced to improve the arrangements for legal aid.

Legislation will be introduced to extend protection for individuals who entrust their savings to others. It will include Bills relating to banks and other deposit-taking institutions, to credit unions, and to estate agents. There will be legislation to amend company law, including strengthening the provisions governing the conduct of company directors, and to establish the Crown Agents as a statutory corporation. A Bill will be introduced to improve procedures in commercial arbitration.

Scottish Bills will be introduced to improve criminal justice and criminal procedure in Scotland, to establish a system of registration of title to land, and for other purposes.

My Government will continue their programme of law reform.

Other measures will be laid before you.

My Lords and Members of the House of Commons,

I pray that the blessing of Almighty God may rest upon your counsels.

Roy Jenkins – 1978 Speech at the European League for Economic Co-operation

Below is the text of the speech made by the President of the EC Commission, Roy Jenkins, at a dinner held by the European League for Economic Co-operation at the Mansion House in London on 17th April 1978.

If the mechanisms of the European Community are economic its aims are political.  This statement, commonplace enough now, after twenty- five years of the Community’s existence is still likely, in Britain at least, to provoke from some quarters cries against federalism and resonant pronouncements reminiscent  of the books of A.V. Dicey about sovereignty.  But the economics of the Community involves jobs and declining industries  – monetary stability; regional policy; energy options – all these are the stuff of politics not of bureaucracy.  And, although there may be some who believe to the contrary, the institutions of the Community have been carefully constructed, and indeed adapted over time, to allow for the interplay of argument and its resolution at both technical and political level.  They are not perfect.  The enlargement of 1973 put them under strain.

The future enlargement from nine to twelve will require changes, but the framework for decision is there.

I make these introductory remarks because I firmly believe that there is at the present time an opportunity to use the Community machinery to begin to resolve the economic problems which face all Member States and so enhance the political and economic stature of Europe.  The size of the stakes we are now paying for in the world economic game is high.  I believe this at least is appreciated in the United Kingdom.  What I am less sure about is whether, here, there is a full enough or clear enough recognition of the common  nature of the problems and of the advantages of a common Community response to them.

Despite the real benefits of North Sea oil the economy of the United Kingdom remains as vulnerable, particularly given its special dependence on overseas trade, as other Community countries.  It has at least as much therefore to gain from common Community action as the stronger Community economies.

I would ask whether, despite the much- vaunted practicality of the British people, they do not find their view of the practical opportunities of the landscape before them obscured by drifting clouds of unreason, market ‘Beware – federalism’ – or ‘Warning: bureaucracy’.  I should therefore like this evening to try to set before you the main problems we face, the way in which I believe the Community can contribute to ease them, and could, indeed should, in my view, be the response in the United Kingdom.

There are three principal areas of difficulty: the internal Community economy, our external economic relations, and world monetary instability.  I take each in turn.

The average growth rate of the Community remains sluggish. We are well short of our target  for this year, and behind the other main industrial  units in the world.  The consequence of a persistence of present levels of performance would be depressing.

First, there would be no prospect of making an impact on unemployment.  It now stands at 6 1/2 million for the Community as a whole.  No Member State is unaffected.  40% of those out of work are under 25 years of age.  Other things being equal the situation will get worse and no better over the next few years, as 9 million more young people come onto the labour market than those who leave it.  Second, a sluggish economy breeds business hesitancy and trade union resentment.  It creates a bad climate in which to carry out the adaptation and restructuring of industry which is urgently necessary to restore any real chance of lasting competitiveness in many sectors.  Third, it slows down the full integration of the Community market, and puts at risk much of what has already been achieved.  Intra-Community trade grew by only 2% in 1977 compared with an annual average of 9% in the previous decade.

It may be tempting to argue that we are still witnessing a delayed response to the shock of the 1973 oil price rise.  But that is, in my view, self-deceiving.  That shock was severe but it has been a fact of life for nearly five years and if we were fundamentally healthy we should by now have absorbed it.

Nor, when the other main industrial countries are expanding faster than we are, can we put the major blame on the rest of the world.  As the world’s biggest trading bloc we have a major responsibility.  We must offer our own solutions and not simply press others to substitute for us.

Second, we face acute problems in relation to what is now becoming known as the “international division of labour”.  Beyond its intensive internal trade between the Member States the Community is more dependent upon external trade than either the United States or Japan; its interest, therefore, in the maintenance and development of an open world trading system is immense.  In addition, the Community, more than the other industrialised parts of the world, has an especially close interest in its relationship with the Third World.  This is true of trade and true of politics.  We have been in the lead in the North/South dialogue.  We have invested a lot of political, capital in this relationship, the Lomé Convention has been one of our major success.  We are the threshold of its renegotiation.

At the same time it is from the Third World, together with the non-Community countries of Europe, that our surpluses come.  Yet we are competitively very vulnerable not only to Japan and to other Far Eastern countries which have developed in its wake but also to the “industrialised pockets” in the Third World.  The impact of this competition on our industries is great.  The Community has had to undertake a series of difficult negotiations, notably in steel and textiles, to gain a breathing space for these industries.  But some of these actions give us only a short breathing space – time in which we have to restructure industry or face the alternative of growing and permanent uncompetitiveness.

Our lack of growth and the potential frailty of our external trading strength are two of our major continuing problems, but the most pressing is the interlocking crisis in the international monetary system – or rather the lack of system.  Since 1971 we have lived without the rules of Bretton Woods.  The experience of the last seven years, compared to that of the preceding decades, does not suggest that the absence of such rules is a rewarding national freedom.  But the one feature of Bretton Woods that remains is the monetary predominance of the dollar.  This is something separate from the weight and importance of the economy of the United States, which is necessarily great and will continue to be so.  But the weight of the dollar is still greater and more pervasive.  It remains the only effective medium of international exchange.  Its position greatly affects our intra-Community relationship and the nexus of the Euro-currency markets as well as our trading position with the rest of the world.  The present weakness of the dollar leaves Europe, and the world as a whole, unstable and vulnerable.  To say this is not to be hostile to the United States, any more than it was hostile to Britain to try to deal with the over-extended role of sterling in the Sixties.  I do not join with those who put the main blame on American policy.  It is much more that the system is out of joint, with a large part of the legacy of Bretton Woods remaining but its central mechanisms having been removed.

These are the central economic and monetary and, therefore political issues, which we have to tackle at the present time.

Alongside these is the fact that our problems have to be seen in the context of the imminent enlargement of the Community to ten member and in the not long delayed enlargement to twelve.  What is obvious is that such an enlargement will be a weakening factor for the Community unless, in advance, it is given greater internal coherence both economically and institutionally.  The need for Community resources is bound to be increased by the inclusion of three new relatively poor members.  At the same time, it would be quite unacceptable politically to treat the new applicants more favourably than parts of the existing Community where the need is equally great.  In this respect, there was an important but so far publicly neglected recognition by the European Council in Copenhagen that the pursuit of greater internal coherence in the Community implies the determined reduction of regional imbalances.  This is indeed in the words of the Council one of the key objectives of the Community enterprise.  The result is a commitment to deal not just with our existing regional differences but, if we are to make a success of enlargement, as we must, we have to think from here forward in terms of twelve and not of nine.

The prospect of enlargement has proved again, as did the enlargement of 1973, the Community’s power of attraction.  And that attraction is not just for membership but for relationship – especially from the Third World.  The problem is how to match that with equivalent internal strength.  I believe the opportunity is there to do so in the central economic and monetary field and that there are short-term steps and long-term strides which can be taken.

Let me first comment on the longer-term prospect for Community action.  From the autumn of last year, both in public speeches and private discussion, I have proclaimed and defended the thesis that an economic and monetary union of the Nine is not a distant academic dream but a necessary future reality.  The problem of monetary discrepancies within Europe threads its way through all our policies, disrupting the mechanism of the common agricultural policy through monetary compensatory amounts and weakening our external trade negotiating position.

What could our strength be if we had to currency stability between Hamburg, London and Rome, that there is between New York and San Francisco or Tokyo and Osaka?  It is no accident that of the three major industrial areas we are both the one with the weakest economic performance since monetary disorder became endemis, and the only one which suffers that disorder internally as well as externally.  The cost of disunion in terms of internal and international trade is becoming increasingly obvious and heavy.  On these two points at least the number of the converted now seems greater than the number of sceptics.

But there remains a good deal of scepticism about some of the internal effects of union and about its practicality – about the effects on prices, jobs, and standards of living.  I hope you will agree that as this is not an academic lecture but an after-dinner speec h I can proceed, at this stage, by assertion rather than argument.  First, the current economic situation places all our traditional assumptions in flux.  The old familiar relationships between reflation and employment and the balance of payments are like  navigational aids which have lost their validity as we sail into strange seas.  And their invalidity breeds intense discontent – in all countries.  But given the existing interdependence of the European economy, a break-out from the straight jacket of nationalist monetary policy could alter these relationships in our favour.  A single, homogeneous monetary policy could set, and maintain, a common high standard of price stability provided it were based on a well- prepared currency reform.  There are, of course, buried here a whole range of both political and technical issues.  All will have to be solved, but the prospect in their resolution would be a new economic environment, with stronger internal monetary disciplines and more relaxed external constraints.  The process of transition will require a mechanism for adjusting internal economic differences.  It would, therefore, have to be coupled to greater Community budgetary and financial powers, to give better geographical balance both, for example, in cyclical conditions and in the structural reconversion of declining industries.  The need for such action is already there within the Community in the disparities between its regions.  The prospect of enlargement underlines its importance.

The discussion of economic and monetary issues at Copenhagen was interesting and useful.  There we neither aimed at nor took decisions in this area.  But the common understanding of our problems was clear.  What we now need to do is to prepare with vigour proposals for common action.  Between now and the next European Council at Bremen we need to work out new dimensions of Community activity in the perspective of economic and monetary union.  President Giscard d’Estaing has pointed to our need in terms of a zone of monetary stability in Europe. In my view we can achieve this by seeking greater exchange rate stability between the currencies of Member States.  For this purpose it would in the judgment of the Commission be necessary to extend the Community exchange rate system beyond the snake; to create scope for the Community to develop new dimensions to the European Unit of Account – doing better service as a point of reference and a unit of account for credit and settlement in  our internal exchange rate relationship; and to increase the functions and resources of the European Monetary Co-operation Fund.

I hope the United Kingdom will be able to play a major part in producing achievement out of expectation, as much in its own interest as that of the Community.

Britain has now been in Europe for five years and the Community that now exists has been in part moulded by British influence.  Some of that influence has been beneficial.  For example, on the vexed question of the harmonisation of laws there is now a much greater recognition  than there was that the objective should not be as much as possible but as much as necessary.  But there is still in my view too great a tendency to concentrate attention on the minor issues and dodge political debate on the major ones.  There are historical reasons for this.  I know them better than most.  But to discuss Community policy we do not need to enter the realms of political theology although we do need a conception of what the Europe is about.  That view can be very simple.  The Community is, in part, a recognition that the economic conditions of coexistence in the late twentieth century are such that the scope and effect of decisions cannot be limited to a narrow national area.  We are interdependent, and that includes the world outside the Community as well as within.

Indeed, we work for an increasing degree of complementarity and common decision making on a worldwide scale.  Of course, the greater the scale, the greater the difficulties involved and often the greater the time that decisions can take to be realised.  But here in Western Europe we have been fortunate and intelligent enough to work out procedures and machinery for taking decisions in common on common problems.  It would be remarkably foolish to fail to co-operate fully in this established framework on the pretext of seeking wider solutions in a much vaguer framework.  Better European co-ordination should be the foundation and not the enemy of world advance.

I have put before you this evening what I believe some of these problems are and one major, systematic route of policy which could underpin our ability to deal with them all.  It is also a policy route along which real practical steps can now be taken.  It is time to think in these terms.  For too long Member States have tried  to grapple largely on their own with the most serious continuing economic situation we have know since the War.  We have wasted too much effort in arguing about whose responsibility it was to go for higher economic growth.  Let us now replace the outdated locomotive theory of economic advance with a plan for common action.  The four months which began with the Copenhagen European Council present the Community with an unusual combination o f test and opportunity.  We need to present a common and powerful front at the Western Economic Summit in July.  In order to avoid the confidence- weakening cynicism of a flabby outcome to that meeting, we need a clear sense of our own direction.  But that is an occasion and opportunity not the reason for advance.  The reasons exist already in our lack of growth, our need for external strength in a world of monetary instability and in the prospect of enlargement.  We can out of the present fragility of the European and world economy pluck a set of decisions which can lead to a strengthened European Community.  And that is in the interest of Britain in Europe.  The European League for Economic Co-operation has played that part in the past.  I hope that all of us here today will do so in the future.

Roy Jenkins – 1978 Speech to the Basle Society

Below is the text of a speech made by Roy Jenkins, then the President of the Commission of the European Communities, to the Basle Society of Statistics and Political Economy on Monday 13th November 1978.

This is the right place to talk about money, and in particular the monies of Europe. I intend to take full advantage of the opportunity you have given me today.

Next year it will be the 10th anniversary of the decision taken by the Heads of State and Government of the Community to work towards an economic and monetary union. The progress which has been made since then has been disappointing, but the objective remains intact. We are now making our second major effort to move towards it through the establishment of a zone of monetary stability in Europe to be achieved through the creation of the European Monetary System. If we succeed we shall give our Community the most creative impulse since the first achievements after the signature of the Treaty of Rome; if we fail we shall risk not just a minor seatback but the frustration of one of our fundamental purposes with all the political and economic consequences which that would entail.

Before looking at the choices which now face the Member States of the Community, I want to say a word or two about how and why we arrived where we are. Just over a year ago I tried to set out in a speech at Florence the reasons for re-examining the case for economic and monetary union. I wanted thus to take the issue out of the realm of academic debate and bring it back into that of live politics.

I do not need to rehearse the main arguments I then advanced but I will briefly mention them. I drew attention to the need for a more efficient and rationalized development of industry and commerce in Europe. I spoke of the so far unexercised ability of the Europeans to create a currency of their own, based on a spread of wealth and power comparable with those of the United States: in doing so I said that although I thought floating exchange rates were here to stay, they should be between continents rather than between the countries of Western Europe, all of which are intermingled in thickly populated half continent, and nine of which are united in a common market and pledged to political and economic integration. I said that control of a single European currency by a single European monetary authority could achieve a measure of anti-inflationary discipline beyond the reach of most individual Member States. I argued that policies which would favour stability and expansion, strengthen the demand on a broad geographical basis, and avoid exchange rate crises, would give a much needed new impulse on an historic scale to the European economy with the effect of reducing unemployment and creating new wealth throughout the system. I referred to the need for redistribution and transfer of resources within the system so that public finance could be channelled to poorer areas and the imbalances which continue to disfigure Community Europe could be counteracted. I called for decentralization in some fields to balance the centralization which would be necessary in a limited number of others. Finally I spoke of economic and monetary union as a means towards political integration and the ultimate European union to which the Members States of the Community are committed.

Since then things have moved further and faster than I – or I think anyone else – thought possible. Perhaps I should single out two main reasons for this change of climate. The first is that people became better aware that the differential movement of European currencies against each other was making nonsense of the notion of a common market, and still more that of a Community, and indeed affecting the ability of national governments to run their own economies alone or with other members of the Community. Those countries in surplus, most strongly export oriented, found that decline in demand from countries in deficit held back their ability to stimulate their economies; while those in deficit were frustrated in their efforts to achieve higher growth by a succession of exchange rate crises.

Hence in part the relatively poor productivity of Europe, the relatively poor rate of growth and the relatively high rate of unemployment, all of which stood in market contrast with what had been achieved in Europe in earlier decades of relative monetary stability. The United States and Japan, subject to intercontinental but not internal monetary upheavals, performed better.

The second major factor was the continuing weakness of the US dollar and the increasing precariousness of the international monetary system of which the dollar remains in practice, although not in theory (as under the Bretton Woods arrangement), the essential pivot. To keep some sort of system going and discharge their responsibilities in the common interest, the Europeans took in more dollars than they could conceivably want or need. This in turn had drastic effects on the ability of European governments to control their own money supply. In circumstances in which the world system was manifestly failing the Europeans not unnaturally felt that they should try to achieve some stability among themselves both for its own sake and in order to make a contribution to a new and better balanced international system in the future. I shall have a word or two more to say about this point later on.

Now we have been talking about the creation of a European Monetary System, and I hope – as is appropriate – that the birth is about to take place. Since the Copenhagen meeting of the European Council in April much work has been done, thanks in large measure to the impulse given by Chancellor Schmidt and President Giscard d’Estaing. The measure of agreement reached at the European Council at Bremen astonished the world and laid the basis for the detailed and technical work which is under way. As you know, we then envisaged that the European Council at Brussels next month should approve the creation of a European Monetary System to come into being on 1 January next year.

The creation of such a system would not of course be the same as European economic and monetary union, but it would be a major stride towards it. Success, while far from certain, is still well within our grasp. I want in the rest of my talk to consider some of the problems which have arisen and what might be done about them. First let me say as clearly and firmly as I can that there must be no back-sliding from what was envisaged at Bremen. There is a particular responsibility on those who then took the lead. The detailed and technical work to which I have just referred and which is of course essential if we are to achieve anything worthwhile, must not nevertheless be allowed to obscure or diminish the fundamental perspectives of Bremen. Let me recall what these were. First the European Council agreed that the creation of a zone of monetary stability in Europe was a highly desirable objective: the European Monetary System whose purpose was to bring it about must be durable and effective. Secondly the European Council agreed to work on the basis of a specific scheme for the creation of a European Monetary System although it naturally left this scheme open to amendment if necessary. Thirdly the European Council agreed that there should be concurrent studies of the action needed to be taken to strengthen the economies of the less prosperous member countries in the context of a European Monetary System, and stated that such measures would be essential if the zone of monetary stability was to succeed.

The essentials of the scheme on which all agreed to work can be stated as the creation of an ECU (or European Currency Unit) at the centre of the system and as a means of settlement between Community monetary authorities; the depositing of reserves for use among Community central banks (an illustrative but impact-making figure of 20 per cent of the gold and dollar reserves of Member States and 20 per cent of their national currencies was cited); the co-ordination of exchange rate policies with regard to third countries; and the eventual creation of a European Monetary Fund. I recall these points because they are in some danger of being buried beneath the leaves of an autumn of detailed discussion. But the decisions at Bremen and the essentials of the scheme on which all agreed to work are the indispensable basis of what we intend to set in place next year.

Some of the arguments which have taken place in and out of the Community institutions and between governments necessarily have a highly technical character. At the same time most cover points of underlying importance. First there has been the discussion about the choice of a numeraire for the new system. Should exchange rates be defined in terms of a parity grid, as in the present snake? Or should they be defined in terms of a basket of currencies, the basket in this case being the European Currency Unit whose composition would be the same as that of the present European unit of account? There are strong technical arguments for using the grid as the method of intervention but there has also been an underlying division between those countries at present in the snake who fear that the introduction of a basket system would impose unwanted responsibilities on them and promote inflation; and those at present outside who fear that the introduction of the parity grid would tilt the system in favour of creditor countries and impose an unwanted degree of deflation. I will not enter into the details of the argument, which I have no doubt are well known to you, but will simply draw attention to the so-called Belgian compromise which would define intervention obligations in terms of a parity grid, but use the basket as an indicator of divergence, that is to say would show whether creditor or debtor countries were getting out of line, and thus impose a certain symmetry of obligation. This argument is not resolved; but I have no doubt that it can and should be in the near future.

Second there has been discussion about the width of margins to each side of the numeraire, and the possibility of adjustment. Here again there is some conflict of interest between those who are happy to retain the present margins of the snake and those (one at any rate) who would prefer wider margins. This is an argument over percentages into which I shall not enter. The question of adjustment is more important. Any participant in the system must be able to change its central rate if its costs and prices move out of line with those of its competitors or if it has undergone a structural change in its balance of payments. This is already true of the existing snake arrangements. It would obviously be contrary to the spirit of the whole enterprise if certain countries, in particular those with relatively high rates of inflation, availed themselves too often and too easily of the possibility of change and made no sustained effort to bring their inflation rates down to the level of their partners. Nevertheless some flexibility must be built into the system, and some of the fears which have been expressed about its absence seem to me ill-founded.

Next there has been substantial discussion about the extent to the reserves on which members of the system can draw, and the conditions on which they could do so. The Commission’s position is clear: we support the arrangements set out in the scheme discussed at Bremen. This will take a good deal of time to work out.

There are a number of legal and even – in some countries – constitutional obstacles to be overcome but in order to ensure that when the new system comes into operation there will be sufficient financing to back it up we must at least agree substantially to strengthen the existing network of credit facilities. Here I think two improvements could be introduced: first the duration of the very short-term financing – the unlimited bilateral support that central banks can draw upon to finance their intervention operations – could be extended; and secondly the present network of short and medium-term credits should be increased in amount, from around 10 billion European units of account at the moment to around 25 billion.

Obviously the larger the credit facilities, the less they are likely to called upon. The more you have the less you need. There is no economy more self-defeating and short sighted than to fail to provide adequate reserves. The issues underlying the so-called technical points are obviously a great importance. But they must be seen in the wider context of our continuing and now more determined and successful efforts to bring about greater convergence in the economic policies of the Member States of the Community. Any arrangement for the future which was exclusively monetary would be bound to fail. The economies of the Community are now moving along more parallel paths than was the case a few years ago. Their trade with each other is immense. But the differences between them are still substantial. Inflation rates vary considerably. Resources are not evenly distributed. Growth rates are different. Budgetary and fiscal policies are different as well, with each government naturally doing what it finds best for its country’s particular circumstances and with only some regard for the interests of the Community as a whole. Clearly if the new European Monetary System is to be, in the words of Bremen, durable and effective, it must take account of the economic as well as monetary circumstances of each Member State, and be matched by a still greater effort of co-ordination on the part of member governments than any have been willing to attempt in the past. The Commission has made a series of proposals for such co-ordination, and has emphasised – as I do again today – the need for such co-ordination to be seen in the framework of an eventual economic and monetary union.

This general point was fully emphasised at Bremen. The specific argument which has since arisen is over the phrase then accepted which said that there would be “concurrent studies of the action needed to strengthen the economies of the less prosperous member countries”, all put clearly in the context of the European Monetary System. This is obviously of crucial importance to those countries which are less prosperous, and I betray no secret if I place in this category Ireland, Italy and the United Kingdom. What action should be taken to strengthen the economies of these countries is still under lively discussion. Some have talked of the need to produce a more rational transfer of resources inside the Community than arises out of such existing Community mechanisms as the Community budget and the Common Agricultural Policy. Others have spoken of the need for extension and reinforcement of such Community instruments as the Regional Fund and the Social Fund. Yet others have spoken of special loans at favourable rates of interest arranged through the European Investment Bank or other mechanisms. None of these questions is settled. The debate about them has opened up some pretty fundamental questions about the functioning of the Community and the equity of its present mechanisms. This is all to the good. But I think we all recognise that the problems of this magnitude cannot be fully settled very quickly with a speed sufficient to meet the stringest timetable – desirably stringent – for the setting up of a European Monetary System. But settled they must be if we are to have a Community which genuinely represents the common interests of Member States.

Before concluding I want to underline one fundamental point. The interests of our Member States are not in all cases the same. There is, for example, an obvious temptation for the existing members of the snake to conceive of a European Monetary System which would in many of its essentials be no more than the present snake writ large. There is another temptation to which my own country of Britain is subject: to see the system as yet another continental entanglement conceived in the interests of countries whose economic performance and problems are different from their own. My answer to those who would like the system simply to be a super snake is that it would simply be unworkable if it included, as it should, all or nearly all members of the Community. My answer to those who see it as a new entanglement in the interest of others is that first they should be less defensively suspicious (such suspicion has not served them well in the past); and second that if it should prove an entanglement it would mean that the system did not properly reflect the common interest and was for whatever reason badly designed. I appeal to all members of the Community to play a full and responsible part in the creation of a new institution in the interest of all.

I now give a warning. If it turns out that all members of the Community do not feel able to join, at least at the beginning, and we are obliged to work out ways of squaring some very uncomfortable circles, then I foresee the real danger of the evolution of a two-speed Europe, or perhaps even of a three-speed Europe when the Community is enlarged. In such circumstances the very sense of a Community would be imperilled. A European Monetary System must be to the benefit of all and take account of the circumstances of all. Responsibility for failure would not necessarily rest only with those who felt unable to join. It would rest also with those who insisted over-much on setting things in a mould which fitted some well, some not so well, and others not at all.

I conclude with a word on the international system of which the European Monetary System would be no more than a part. I repeat now what has been said many times before: that the European Monetary System is in no way directed against the international system nor against the US dollar. The health of the dollar is essential to the health of the international system, and we greatly welcome the measures recently taken by President Carter to strengthen the dollar. At the same time we must face the fact that the Bretton Woods system as we knew it after the war has broken down, and that we must gradually seek some new arrangements to take its place. No-one has suggested that the European Currency Unit should take the place of the dollar for which a leading role in the international monetary system remains necessary and unquestioned. But it is possible to envisage a system in which responsibility is more widely shared and in which both the European Currency Unit and of course the Japanese yen would play a more important part. This is to look further ahead than is perhaps now easy to do. Today I want simply to emphasise that we live in one interdependent world and that what we plan for Europe must from the beginning be seen as something which does not conflict with but assists the interests of the world as a whole.