(c) crown copyright

Catalogue Reference:CAB/128/56/13 Image Reference:0001

C

IfHlS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T

C(75) 13th C O P Y N O 0 o

Conclusions

C A B I N E T

C O N C L U S I O N S of a Mee t ing of the Cab ine t

h e l d at 10 Downing S t r e e t on

M O N D A Y 17 M A R C H 1975

at 10. 30 a m

P R E S E N T

T h e R t H e n H a r o l d W i l s o n M P

P r i m e

The Rt Hon E d w a r d Shor t M P Lord P r e s i d e n t of the C o u n c i l

The Rt Hon L o r d E l v/yn-Jones Lord Chance l l o r

The Rt Hon Den i s H e a l e y M P Chancellor of the E x c h e q u e r

The Rt Hon M i c h a e l F o o t M P Secretary o f State f o r E m p l o y m e n t

The Rt Hon Sh i r l e y W i l l i a m s M P Secretary o f State f o r P r i c e s and Consumer P r o t e c t i o n

The Rt Hon Anthony W e d g w o o d Benn M P Secretary o f State f o r I ndus t r y

I The Rt Hon R o y M a s o n M P I Secretary of State f o r D e f e n c e

I The Rt Hon W i l l i a m R o s s M P Secretary o f State f o r Sco t land

The Rt Hon M e r l y n R e e s M P Secretary o f State f o r N o r t h e r n I r e l a n d

M i n i s t e r

The R t Hon J a m e s Ca l l a ghan M P S e c r e t a r y of State f o r F o r e i g n and C o m m o n w e a l t h A f f a i r s

The R t Hon R o y Jenk ins M P S e c r e t a r y of State f o r the H o m e D e p a r t m e n t

The R t Hon An thony C r o s l a n d M P S e c r e t a r y of State f o r the E n v i r o n m e n t

The R t Hon E r i c V a r l e y M P S e c r e t a r y of State f o r E n e r g y

The R t Hon B a r b a r a C a s t l e M P S e c r e t a r y of State f o r S o c i a l S e r v i c e s

T h e R t Hon P e t e r Sho re M P S e c r e t a r y of State f o r T r a d e

T h e R t Hon R e g i n a l d P r e n t i c e M P S e c r e t a r y of State f o r Educa t i on and Sc i ence

T h e R t Hon John M o r r i s Q C M P S e c r e t a r y of State f o r W a l e s

The Rt Hon H a r o l d L e v e r M P The R t Hon L o r d Shepherd Chancellor of the Duchy of L a n c a s t e r L o r d P r i v y Sea l

The Rt Hon R o b e r t M e l l i s h M P The R t Hon John S i lk in M P parl iamentary S e c r e t a r y , T r e a s u r y M i n i s t e r f o r P lann ing and L o c a l

(Item 1) G o v e r n m e n t

S E C R E T A R I A T

S i r John Hunt M r P D N a i r n e ( I t e m s 1 and 2 ) M r B C Cubbon ( I t e m s 1 and 2 ) M r E J G Smith ( I t e m s 1 and 2 )

C O N T E N T S j

Item Subject Page

1 E E C R E N E G O T I A T I O N

Stocktaking 1

G e n e r a l 1

C o m m o n A g r i c u l t u r a l P o l i c y 2

C o m m u n i t y Budge t 4

E c o n o m i c and M o n e t a r y Union 5

R e g i o n a l P o l i c y 6

I ndus t r i a l P o l i c y 7

Stee l 7

F i s c a l P o l i c i e s 8

V a l u e - A d d e d T a x 8

C a p i t a l M o v e m e n t s 9

C o m m o n w e a l t h and D e v e l o p i n g C o u n t r i e s : T r a d e and A i d 9

N A T I O N A L I S A T I O N O F T H E A I R C R A F T A N D S H I P B U I L D I N G

I N D U S T R I E S 11

IEC R E N E G O T I A T I O N

I t o c k t a k i n g

Previous Reference: fC(75) 12th Conclusions, llinute 1

jeneral

1. T h e Cab ine t had b e f o r e t h e m a m e m o r a n d u m b y the F o r e i g n and C o m m o n w e a l t h S e c r e t a r y ( C ( 7 5 ) 33) on the r e su l t s of the r enego t i a t i on o f the t e r m s of B r i t i s h a c c e s s i o n to the E u r o p e a n E c o n o m i c C o m m u n i t y ( E E C ) ,

T H E P R I M E M I N I S T E R sa id that th is m e e t i n g of the Cab ine t w a s d e s i g n e d to e lu c i da t e the t e r m s wh ich had b e e n r e n e g o t i a t e d b y the G o v e r n m e n t , c o n s i d e r i n g t h e m under the o b j e c t i v e s f o r r enego t i a t i on se t out in the L a b o u r P a r t y 1 s Man i f e s t o f o r the G e n e r a l E l e c t i o n in F e b r u a r y 1974, L a t e r in the day he wou ld d i s c u s s the r e n e g o t i a t e d t e r m s w i th m e m b e r s of the G o v e r n m e n t not in the Cab ine t and wi th the P a r l i a m e n t a r y L ebour P a r t y , T h e Cab ine t wou ld r e s u m e i t s d i s c u s s i o n on the f o l l ow ing day when i t should t r y to d e c i d e whe the r o r not to r e c o m m e n d cont inuing m e m b e r s h i p . T h e y wou ld then h a v e to f o r m a judgment , no t on ly on the r e v i s e d t e r m s that had b e e n n e g o t i a t e d , but a l so on the p r e s e n t c h a r a c t e r of the C o m m u n i t y , T h e r e w a s an impo r t an t d i s t i n c t i on b e t w e e n i t s p r a c t i c a l w o r k i n g , wh i ch w a s n o w m o r e p o l i t i c a l in approach , and i t s t h e o r e t i c a l and l e g a l b a s i s . If any M i n i s t e r could not suppor t the G o v e r n m e n t r e c o m m e n d a t i o n , he wou ld be f r e e to say s o : and in th is contex t gu i d e l i n e s f o r the " a g r e e m e n t to d i f f e r " wou ld be c i r c u l a t e d wh i ch wou ld have r e g a r d to the n e e d to p r e s e r v e a un i ted Cab ine t on a l l o the r i s s u e s . In p a r t i c u l a r p e r s o n a l a t tacks on o r r e p l i e s to c o l l e a g u e s m u s t be a vo i d ed , a l though the m e d i a m i g h t t r y to p r o m o t e t h e i r a p p e a r a n c e .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y r e c a l l e d that r e n e g o t i a t i o n cou ld no t g e t s e r i o u s l y unde r w a y unti l the G o v e r n m e n t had b e en r e t u r n e d w i th a m a j o r i t y in O c t o b e r 1974, b y wh ich t i m e t h e r e w e r e n e w H e a d s of G o v e r n m e n t in W e s t G e r m a n y and in F r a n c e , In v i e w of the r e f e r e n d u m c o m m i t m e n t the G o v e r n m e n t had n e v e r t h e l e s s d e c i d e d that i t should p lan to conclude r e n e g o t i a t i o n b y the e a r l y sp r ing o f 1975. T h i s had l i m i t e d the p e r i o d of e f f e c t i v e r e n e g o t i a t i o n to about four m o n t h s : and i t had c l e a r l y not b e en p o s s i b l e t o a c h i e v e a l l the G o v e r n m e n t s o b j e c t i v e s w i th in that p e r i o d . S o m e v/ould have to be p u r s u e d in continuing E E C b u s i n e s s . H e wou ld h o w e v e r l i k e to m a k e s o m e g e n e r a l o b s e r v a t i o n s as a r e s u l t o f t w e l v e m o n t h s ' e x p e r i e n c e of the E E C , F i r s t , i t w a s changing f as t , unde r the p r e s s u r e of w o r l d e v e n t s as w e l l as of B r i t i s h i n f l u e n c e . T h e w o r l d f ood s i tuat ion w a s r a d i c a l l y d i f f e r e n t f r o m that e n v i s a g e d when w e w e r e c o n s i d e r i n g apply ing f o r m e m b e r s h i p . In p a r t i c u l a r the b a l a n c e b e t w e e n p r i m a r y p r o d u c e r s and i n d u s t r i a l i s e d c o u n t r i e s had m o v e d m o r e in f a vour o f the f o r m e r , a d e v e l o p m e n t wh i ch a L a b o u r G o v e r n m e n t could not o p p o s e ; and th is wou ld have t o be taken into account in d e t e r m i n i n g B r i t i s h f ood and a g r i c u l t u r a l p o l i c y w h e t h e r w e w e r e m e m b e r s of the E E C o r n o t . T h e p r e v i o u s p l ans f o r p r o g r e s s t o w a r d s e c o n o m i c and m o n e t a r y union had b e e n se t a s i d e , as had f e d e r a l i s t c o n c e p t s . T h e

E E C w a s now showing a much m o r e open att itude to the r e s t of the w o r l d . Second ly , t h e r e w e r e l i m i t s to the C o m m i s s i o n s p o w e r : the r e a l p o w e r r e s i d e d in the Counc i l of M i n i s t e r s , R e g u l a r m e e t i n g s of the Counc i l , e s p e c i a l l y the n ew l y i n t r oduced s y s t e m of r e g u l a r m e e t i n g s of C o m m u n i t y H e a d s of G o v e r n m e n t , w e r e g i v ing c o - o r d i n a t e d p o l i t i c a l l e a d e r s h i p to the C o m m u n i t y , T h e C o m m i s s i o n r e m a i n e d the guard ian of the t r e a t i e s , and as such tended to be suppor ted by the s m a l l e r m e m b e r s o i the C o m m u n i t y to p r o t e c t t h e m s e l v e s aga ins t undue dom inance by W e s t G e r m a n y , F r a n c e and the Un i ted K i n g d o m . T h i r d l y , the C o m m u n i t y w a s much m o r e s e n s i t i v e to, and r e a d i e r to m e e t , nat ional i n t e r e s t s of m e m b e r s ta tes than m i g h t have a p p e a r e d .

In a sho r t g e n e r a l d i s c u s s i o n i t w a s e m p h a s i s e d that any c r i t i c i s m of the r e n e g o t i a t e d t e r m s w a s not in tended as a r e f l e c t i o n on the sk i l l and v i g o u r o f the F o r e i g n and C o m m o n w e a l t h S e c r e t a r y o r of o ther M i n i s t e r s i n v o l v e d in r e n e g o t i a t i o n , who had p r o m o t e d B r i t i s h i n t e r e s t s wi th a b i l i t y . T h e Cab ine t then c o n s i d e r e d the v a r i o u s t op i c s c o v e r e d in the F o r e i g n and C o m m o n w e a l t h S e c r e t a r y ' s m e m o r a n d u m .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the F e b r u a r y M a n i f e s t o had c a l l e d f o r " m a j o r changes in the C o m m o n A g r i c u l t u r a l P o l i c y ( C A P ) , so that i t c e a s e s to be a t h r e a t to w o r l d t r a d e in f ood p r o d u c t s , and so that l o w - c o s t p r o d u c e r s outs ide E u r o p e can cont imie to have a c c e s s t o the B r i t i s h food m a r k e t " . W e had not c h a l l e n g e d the b a s i c p r i n c i p l e s of the p o l i c y - the o b j e c t i v e s of wh i ch w e r e s i m i l a r to those of the B r i t i s h a g r i c u l t u r a l p o l i c y , f r o m the A g r i c u l t u r e A c t 1947 o n w a r d s - but w e had sought t o change i t f r o m w i t h i n s M o r e o v e r , in v i e w of the changed w o r l d s i tuat ion, an a s s u r e d supply at r e l a t i v e l y s table p r i c e s (wh ich w e r e f a l l ing in r e a l t e r m s ) , as p r o v i d e d by the C A P , wou ld be in our na t i ona l i n t e r e s t . The a r r a n g e m e n t s m a d e f o r the i m p o r t of sugar w e r e advan tageous ; and the p r i n c i p l e s adopted f o r cont inuing i m p o r t of N e w Z e a l a n d d a i r y p r o d u c t s w e r e a l s o he lp fu l . T h e C o m m i s s i o n ^ r e v i e w on wh i ch the s tocktak ing of the C A P wou ld be conducted w a s on ba lance f a v o u r a b l e to our p o l i c y app roach . In v i e w of the changes wh i ch had a l r e a d y o c c u r r e d , and those wh ich wou ld be m a d e - i f w e w e r e in a p o s i t i o n to k e e p up p r e s s u r e f o r r e f o r m f r o m w i th in - he c o n s i d e r e d the pos i t i on r e a c h e d on the C A P to be a c c e p t a b l e .

In d i s cuss i on i t w a s a r gued that t h e r e had b e en no change in the fundamenta l s t ruc tu r e of the C A P - C o m m u n i t y p r e f e r e n c e , v a r i a b l e l e v i e s on i m p o r t s , and suppor t buy ing . T h e stocktaking wou ld take p l a c e outs ide the r enego t i a t i on t i m e t a b l e ; and, s ince the C o m m i s s i o n and s e v e r a l of the o ther m e m b e r s ta tes wou ld de fend the p r e s e n t a r r a n g e m e n t s s t r o n g l y , w e cou ld not say how much s u c c e s s would be

2

achieved, , E v e n i f w could not a l t e r the p r i n c i p l e s of the C A P e

f o r the who l e C o m m u n i t y , w e should have obta ined a d e r o g a t i o n f r o m t h e m f o r the Uni ted K i n g d o m ; and th is had not been a c h i e v e d . T h e a r r a n g e m e n t w h e r e b y w e could o p e r a t e d e f i c i e n c y p a y m e n t s f o r b e e f had been a g r e e d f o r one y e a r only and M r L a r d i n o i s , the C o m m i s s i o n e r c o n c e r n e d , had m a d e p la in h i s d i s l i k e o f na t iona l a i d s . I m p r o v e d a c c e s s f o r th i rd count ry foodstu f f s , apa r t f r o m sugar and N e w Z e a l a n d d a i r y p r o d u c t s , had b e en l e f t unt i l the m u l t i l a t e r a l t r a d e n e g o t i a t i o n s , wh i ch wou ld take p l a c e outs ide the r enego t i a t i on p e r i o d , w h e r e t oo i t w a s u n c e r t a i n what wou ld be a c h i e v e d . I t w a s doubtful w h e t h e r t h e r e had been a fundamenta l change in w o r l d f ood f a c t o r s : e v e n t s of the l a s t two y e a r s m i g h t const i tute on ly a t e m p o r a r y c h a n g e . N o r t h A m e r i c a had a m p l e r e s o u r c e s f o r i n c r e a s e d f ood p r oduc t i on . A l r e a d y g r a i n p r i c e s had f a l l en su f f i c i en t l y f a r f o r the E E C to r e i n t r o d u c e l e v i e s on i m p o r t s . T h e E E C but ter p r i c e w a s v e r y h igh c o m p a r e d w i th the w o r l d p r i c e , and t h e r e w a s s t i l l a g e n e r a l ban on i m p o r t s of b e e f . It could thus b e a r g u e d that the C A P r e m a i n e d a th r ea t to w o r l d f ood t r a d e and cons t i tu ted a s y s t e m of t a x e s on f o o d .

On the o t h e r hand, i t w a s po in t ed out that C A P p r i c e s w e r e now be ing d e t e r m i n e d in a c c o r d a n c e w i th c r i t e r i a wh ich e c o n o m i c a l l y w e r e m o r e soundly b a s e d . A s a r e s u l t they w e r e be ing b rough t down in r e a l t e r m s f r o m t h e i r p r e v i o u s e x c e s s i v e l e v e l s , w h i l e w o r l d p r i c e s had r i s e n . M e m b e r s h i p of the E E C no l o n g e r caused the h e a v y i n c r e a s e in f ood p r i c e s that had b e en e x p e c t e d b e f o r e our e n t r y . On b a l a n c e the e x t r a c o s t s w e r e a p p r o x i m a t e l y b a l a n c e d by the bene f i t s of the C A P , l e a v i n g our t o ta l f o od b i l l at about the s a m e l e v e l as i t w o u l d have b e en i f we w e r e outs ide the C o m m u n i t y . A l though l e v i e s w e r e now p a y a b l e on c e r e a l i m p o r t s , they w e r e m o r e than o f f s e t b y the E E C s y s t e m s of c o m p e n s a t o r y amounts , and w e w e r e t h e r e f o r e s t i l l obta in ing c e r e a l s m o r e cheap l y than i f w e w e r e outs ide the E E C ; and w o r l d c e r e a l p r i c e s w e r e n ow r i s i n g a ga in . D a i r y p r o d u c t s r e m a i n e d the a r e a w h e r e E E C p r i c e s w e r e r e l a t i v e l y h i gh ; but the on l y o th e r m a j o r supp l i e r w a s N e w Z e a l a n d , wh ich had not b e en ab l e t o supply the quant i t i es p r o v i d e d f o r o v e r the pas t t w o y e a r s and cou ld no t g i v e an a s s u r a n c e that she wou ld do s o in the c om ing y e a r s . In any c a s e the N e w Z e a l a n d G o v e r n m e n t , who had w e l c o m e d the a g r e e m e n t r e a c h e d in the E E C H e a d s of G o v e r n m e n t m e e t i n g in Dubl in on 10/11 M a r c h on the p r i n c i p l e s to g o v e r n cont inued a c c e s s f o r N e w Z e a l a n d d a i r y p r o d u c t s , had m a d e i t p la in that they w o u l d s e ek a p p r e c i a b l y h i g h e r p r i c e s f o r t h e i r e x p o r t s . A l t h o u g h future w o r l d f ood supp l i e s and p r i c e s cou ld not be f o r e c a s t , w e cou ld not b a s e our p o l i c y on the e xpe c t a t i on of a r e t u r n to cheap f o o d . S p e c i f i c a p p r o a c h e s on th is had b e en m a d e dur ing r e n e g o t i a t i o n t o our t r a d i t i o n a l C o m m o n w e a l t h s u p p l i e r s , who had m a d e i t p l a in that they d id not w i s h to r e t u r n to that s y s t e m . I f t h e r e w e r e a r e t u r n to h e a v y s u r p l u s e s , w e wou ld in any c a s e

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w i s h to take ac t i on , f o r b r o a d p o l i t i c a l r e a s o n s , to sa f e gua rd the i n t e r e s t s of p r i m a r y p r o d u c e r s . It w a s m o r e p r o b a b l e , h o w e v e r , that d e m a n d f o r food f r o m dev e l op ing count r i e s would k e e p w o r l d supp l i es t i gh t . W e w e r e l i k e l y to w ish to expand our own a g r i c u l t u r e f o r i m p o r t - s a v i n g r e a s o n s , and the C A P could a s s i s t that , T h e s tocktaking of the C A P would be an i m p o r t a n t f o r u m in wh ich to pu r sue our o b j e c t i v e s ; and it w a s u n r e a l i s t i c to e x p e c t us t o have ob ta ined a p e r m a n e n t change in the b e e f r e g i m e in advance o f t h i s . W e should a l so pu r sue fu r the r i m p r o v e m e n t s in a c c e s s f o r t h i r d count ry f oods tu f f s of c o n c e r n to us , such as h a r d whea t ; but w e had had s u c c e s s in r e d u c i n g t a r i f f s on a w i d e r a n g e of f oodstu f f s in a n u m b e r of t r a d e nego t i a t i ons , and the o v e r a l l i m p a c t of t a r i f f s on f oods tu f f s w a s now s m a l l .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the F e b r u a r y M a n i f e s t o had c a l l e d f o r " n e w and f a i r e r m e t h o d s of f inanc ing the C o m m u n i t y budge t . N e i t h e r the t a x e s that f o r m e d the s o - c a l l e d ' own r e s o u r c e s ' s y s t e m of the C o m m u n i t i e s , n o r the p u r p o s e s , m a i n l y a g r i c u l t u r a l support , on wh i ch the funds a r e m a i n l y t o be spent, a r e a c c e p t a b l e to u s . W e wou ld be r e a d y to contr ibute t o C o m m u n i t y f inances on l y such sums as w e r e f a i r in r e l a t i o n to what i s pa id and what i s r e c e i v e d by o the r c o u n t r i e s " . T h e G o v e r n m e n t had d e c i d e d not to s e ek to o v e r t u r n the "own r e s o u r c e s ' s y s t e m as such, but to c o r r e c t i t s un fa i r i m p a c t . A g a i n s t s t rong oppos i t i on w e had a c h i e v e d c o n s i d e r a b l e s u c c e s s . W e had obta ined a c o r r e c t i n g m e c h a n i s m wh i ch wou ld b r i ng ou r g r o s s cont r ibut ion m o r e c l o s e l y in to l i ne w i th our share of the C o m m u n i t y ' s g r o s s na t i ona l p r o d u c t ( G N P ) . T h i s m e c h a n i s m w a s subjec t t o a number of qua l i f y ing cond i t i ons , on ly one of wh i ch w a s l i k e l y t o b i t e ; and t h e r e wou ld b e a c e i l i ng on the po t en t i a l re fund a v a i l a b l e . But the end r e s u l t w o u l d be a w o r t h w h i l e r educ t i on in our contr ibut ion to the C o m m u n i t y budge t . W e m u s t e x p e c t to cont inue t o be ne t c o n t r i b u t o r s s i n c e , among o ther r e a s o n s , s o m e of the i t e m s of C o m m u n i t y e x p e n d i t u r e - eg a id f o r d e v e l o p i n g coun t r i e s - w e r e those w e w i s h e d to see e x t e n d e d . T h e a i m in the f o r m se t out in the M a n i f e s t o had ne t b e e n m e t , but r e n e g o t i a t i o n had r e s u l t e d in a n e w C o m m u n i t y a r r a n g e m e n t wh i ch wou ld b r i n g a c o n s i d e r a b l e f i nanc i a l i m p r o v e m e n t t o u s ; and he r e c o m m e n d e d the Cab ine t to a c c ep t i t .

In d i s c u s s i o n the f o l l o w i n g po in ts w e r e m a d e ­

i . T h e fac t that in r enego t i a t i on w e had not d i r e c t l y a t t acked the 'own r e s o u r c e s 1 s y s t e m d id not m e a n that we a c c e p t e d i t . In th i s con tex t i t w a s r e l e v a n t that s ince two o f the t h r e e e l e m e n t s in "own r e s o u r c e s ' w e r e a g r i c u l t u r a l l e v i e s and i m p o r t du t i e s , the Un i t ed K i n g d o m , as the m a j o r w o r l d t r a d e r in the C o m m u n i t y , could not avo id be ing a h e a v y

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con t r i bu t o r ; and, s ince a h igh p r o p o r t i o n of e xpend i tu r e wen t on a g r i c u l t u r a l suppor t , i n e v i t ab l y our r e c e i p t s w e r e r e l a t i v e l y l o w ,

i i . T h e l i m i t a t i o n s in the c o r r e c t i n g m e c h a n i s m mean t that, in ne t t e r m s , on ly about one- th i rd of the gap b e t w e e n our con t r i bu to r y sha r e of the budget and of the C o m m u n i t y ' s G N P wou ld be c o v e r e d . W e should s e ek to i m p r o v e our po s i t i on by , in a c c o r d a n c e w i th g e n e r a l G o v e r n m e n t p o l i c y , pursu ing p o l i c i e s d e s i g n e d to i n c r e a s e our G N P , and a l s o by a im ing to i n c r e a s e our r e c e i p t s f r o m the C o m m u n i t y budge t ,

i i i . F o r e c a s t s of ne t con t r ibu t i ons in the future w e r e . v e r y unce r t a in , as the c o n s i d e r a b l e d i f f e r e n c e s b e t w e e n

f o r e c a s t s and much l o w e r out - turn f o r the pas t two y e a r s d e m o n s t r a t e d ,

i v . I f we bene f i t t ed f r o m the c o r r e c t i n g m e c h a n i s m f o r t h r e e y e a r s in s u c c e s s i o n the C o m m u n i t y wou ld r e v i e w the pos i t i on wi th us in o r d e r t o c o n s i d e r what fu r the r ac t i on w a s r e q u i r e d . I f w e w e r e l a g g ing beh ind the c o n v e r g i n g e c o n o m i e s of the o t h e r m e m b e r s , th is fu r the r ac t ion cou ld be b e n e f i c i a l . T h e C o m m u n i t y m i g h t say that our p o o r e c o n o m i c p e r f o r m a n c e in these c i r c u m s t a n c e s w a s due to our f o l l o w i n g the w r o n g p o l i c i e s , jus t as o the r i n t e rna t i ona l o r g a n i s a t i o n s in th i s f i e l d cou ld and d id ; but cond i t i ons cou ld not be i m p o s e d upon us wh i ch wou ld a f f ec t our b e n e f i t s f r o m the c o r r e c t i n g m e c h a n i s m i f w e cont inued to qual i fy f o r a r e fund .

Economic and T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the Monetary Union M a n i f e s t o c o m m i t m e n t r e a d : " W e wou ld r e j e c t any k ind o f

i n t e rna t i ona l a g r e e m e n t wh ich c o m p e l l e d us to a c c e p t e d i n c r e a s e d u n e m p l o y m e n t f o r the sake of ma in ta in ing a f i x e d p a r i t y . . . . W e b e l i e v e that the m o n e t a r y p r o b l e m s of the E u r o p e a n c o u n t r i e s can be r e s o l v e d on ly wi th in a w o r l d - w i d e f r a m e w o r k " . T h e r e had h o w e v e r b e en a m a j o r change in the att i tude of o the r M e m b e r G o v e r n m e n t s to the p r a c t i c a b i l i t y o f a ch i e v ing e c o n o m i c and m o n e t a r y union ( E M U ) by 1980. T h e p r o g r a m m e f o r advanc ing to E M U by s t a g e s had b e e n t a c i t l y abandoned . E M U r e m a i n e d a l o n g - t e r m C o m m u n i t y g o a l , but w e should be ab le to e n s u r e that our i n t e r e s t s w e r e fu l l y p r o t e c t e d b y the v e t o i f and when any p r o p o s a l s w e r e m a d e in that d i r e c t i o n . T h e r e w a s no p r o s p e c t o f our c om ing unde r p r e s s u r e t o a g r e e to an a r r a n g e m e n t wh i ch wou ld th r ea t en the l e v e l of u n e m p l o y m e n t in th i s count ry . T h e " w o r l d ­w i d e f r a m e w o r k " r e f e r r e d t o in the M a n i f e s t o had b e e n used b y the C o m m u n i t y in r e c e n t m o n t h s , at the ins t i ga t i on o f the C h a n c e l l o r o f the E x c h e q u e r , t o c o n s i d e r m o n e t a r y p r o b l e m s .

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In d i s c u s s i o n i t w a s a r g u e d that the c ommun ique of the P a r i s Summi t in D e c e m b e r 1974 had a f f i r m e d that the C o m m u n i t y 1 s w i l l to m a k e p r o g r e s s t o w a r d s E M U had not w e a k e n e d and that th is c ommun ique cou ld be used in the future to push us in an unaccep tab l e d i r e c t i o n . On the o the r hand i t w a s po in ted out that E M U w a s a l o n g - t e r m g o a l of the s a m e c h a r a c t e r as g e n e r a l and c o m p l e t e d i s a r m a m e n t ; d e s i r a b l e in p r i n c i p l e but unat ta inable i n p r a c t i c e . T h e r e a l i t y w a s d i f f e r e n t f r o m the v i s i o n a r y concep t o f c o m m u n i q u e s . T h e r e w a s i n c r e a s i n g e m p h a s i s on c o - o p e r a t i o n b e tween M e m b e r G o v e r n m e n t s of a k ind wh ich wou ld m a k e i t l e s s i m p o r t a n t t o a c h i e v e the l i nked e x change r a t e s wh i ch had b e en p r o m i n e n t in p r e v i o u s th ink ing . P r o g r e s s a long t h e s e l i n e s w a s in our i n t e r e s t s . T h e G o v e r n m e n t s Wh i t e P a p e r on the ou t come o f r e n e g o t i a t i o n m i g h t m a k e c l e a r that the s t a g e s , adopted in 1971 and 1972 f o r p r o g r e s s t o w a r d s E M U , w e r e t a c i t l y d i s c a r d e d in the P a r i s C o m m u n i q u e o f D e c e m b e r 1974.

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the M a n i f e s t o o b j e c t i v e w a s " the r e t en t i on by P a r l i a m e n t o f those p o w e r s o v e r the B r i t i s h e c o n o m y n e e d e d t o pursue e f f e c t i v e r e g i o n a l , i n d u s t r i a l and f i s c a l p o l i c i e s " . T h e r e g i o n a l a spec t had b e en c o n s i d e r e d by the Cab ine t on 27 F e b r u a r y , when a m a j o r i t y conc luded that , sub jec t to the o v e r a l l j u d g m e n t on the o u t c o m e o f r e n e g o t i a t i o n , the C o m m u n i c a t i o n f r o m the C o m m i s s i o n m e t our r e q u i r e m e n t s . T h a t C o m m u n i c a t i o n e s t a b l i s h e d a h i e r a r c h y o f a s s i s t e d a r e a s wh i ch c o n f o r m e d w i th our o wn . N o f o r m s of na t i ona l a ids w e r e ru l ed out in p r i n c i p l e , and t h e r e w a s no i n t e r f e r e n c e w i th our e x i s t i n g r e g i o n a l a i d s . T h e C o m m i s s i o n had a c k n o w l e d g e d that na t i ona l G o v e r n m e n t s w e r e the b e s t j u d g e s of what w a s r e q u i r e d in th e i r own country and that u r g e n t ac t i on by G o v e r n m e n t s should not be h e l d up b y T r e a t y p r o c e d u r e s . A d e r o g a t i o n w a s be ing ob ta ined f o r the a s s i s t a n c e g i v e n by the H i g h l a n d s and I s l ands D e v e l o p m e n t B o a r d . P a r l i a m e n t r e t a i n e d the p o w e r to v o t e m o n e y f o r r e g i o n a l a s s i s t a n c e and to a l l o c a t e th i s m o n e y in a w a y wh ich w a s r e q u i r e d to p r o m o t e e f f e c t i v e r e g i o n a l p o l i c i e s . T h e C o m m i s s i o n s p o w e r s w e r e d e r i v e d f r o m the E E C T r e a t y , wh i ch l a i d e m p h a s i s on the n e e d to a vo i d a s s i s t a n c e wh ich g a v e un fa i r advantage t o one M e m b e r State o v e r another and he wou ld c i r c u l a t e s o m e r e a s s u r i n g s u p p l e m e n t a r y c o r r e s p o n d e n c e w i th the C o m m i s s i o n on the m a t t e r .

In d i s c u s s i o n i t w a s a r g u e d that the M a n i f e s t o c o m m i t m e n t had not been m e t s ince the l e g a l p o w e r t o g r a n t r e g i o n a l a s s i s t a n c e in th i s country r e m a i n e d f e t t e r e d by the T r e a t y and the p o w e r s o f the C o m m i s s i o n , T h e C o m m i s s i o n s C o m m u n i c a t i o n l a i d down p r i n c i p l e s wh i ch w e r e v a l i d f o r on l y t h r e e y e a r s and p r o v i d e d no s a f e g u a r d s f o r future changes in ou r a i d s . I t w a s a r gued , on the o the r hand, that the C o m m u n i c a t i o n , and our e x p e r i e n c e of the o p e r a t i o n o f the T r e a t y S p r o v i s i o n s , d e m o n s t r a t e d that w e should

encoun t e r d i f f i cu l ty in the C o m m u n i t y only i f w e used a r e g i o n a l a id t o g i v e an unfa i r c o m p e t i t i v e advantage to our indus t r y o v e r that o f ano ther m e m b e r s ta t e , o r t o outb id another m e m b e r state by mak ing s p e c i a l r e g i o n a l g r an t s t o s e c u r e an i n v e s t m e n t p r o j e c t w h i c h wou ld have o t h e r w i s e gone e l s e w h e r e in the C o m m u n i t y . T h e a s s i s t e d a r e a s in the Un i ted K i n g d o m could be a s s u r e d that t h e i r pos i t i on had b e e n c o m p l e t e l y s a f e g u a r d e d . I f w e w i t h d r e w f r o m the C o m m u n i t y , any f r e e t r a d e a r r a n g e m e n t we w e r e ab le to n e g o t i a t e wou ld be bound to inc lude c ompe t i t i on p r o v i s i o n s s i m i l a r to the r u l e s in the E E C T r e a t y . W e should a l s o s t i l l b e bound by o the r i n t e rna t i ona l a g r e e m e n t s o f th is k ind .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that we had not m e t wi th any s e r i o u s d i f f i cu l t i e s f r o m the E E C in the conduct of i ndus t r i a l p o l i c y dur ing the pas t y e a r , and i t w a s i n c o r r e c t t o sugges t that the T r e a t i e s and the C o m m i s s i o n s tood in the way o f the p o l i c i e s t o wh i ch the G o v e r n m e n t w e r e c o m m i t t e d . I f w e w i t h d r e w f r o m the C o m m u n i t y , the c o m p e t i t i o n r u l e s a t tached to any f r e e t r a d e a g r e e m e n t wou ld ex tend t o i ndus t r i a l a r r a n g e m e n t s , as w e l l as to r e g i o n a l a s s i s t a n c e . T h e p r o p o s a l s in the Indus t ry B i l l f o r the N a t i o n a l E n t e r p r i s e B o a r d and f o r p lanning a g r e e m e n t s w e r e in no w a y i n c o m p a t i b l e w i th the E E C T r e a t y , p r o v i d e d that p o w e r s w e r e not e x e r c i s e d in a w a y wh ich d a m a g e d the i n t e r e s t s o f o the r m e m b e r s t a t e s . T h e E E C T r e a t y s p e c i f i c a l l y p e r m i t t e d na t i ona l i s a t i on . T h e p r o v i s i o n in the Indus t r y B i l l f o r s topping f o r e i g n t a k e o v e r s wou ld of c o u r s e have t o b e e x e r c i s e d in a w a y wh ich d id not d i s c r i m i n a t e a ga ins t E E C f i r m s : but that l i m i t a t i o n wou ld h a v e to be w e i g h e d in the o v e r a l l a s s e s s m e n t of the o u t c o m e of r e n e g o t i a t i o n .

In d i s c u s s i o n i t w a s a r g u e d that the e x p e r i e n c e o f the pas t y e a r w a s , in the s p e c i a l c i r cum s tance s r an inadequate s a f e g u a r d f o r the fu ture , s ince p o w e r s t i l l r e s i d e d wi th the C o m m u n i t y ins t i tu t i ons , r a t h e r than wi th P a r l i a m e n t . T h e M a n i f e s t o c o m m i t m e n t had not t h e r e f o r e been m e t . On the o the r hand, our own s y s t e m of p lanning a g r e e m e n t s w a s p a r t l y b a s e d on the p r a c t i c e in F r a n c e and o the r E E C c o u n t r i e s w h e r e i t had not run in to d i f f i c u l t i e s w i th the T r e a t y o r the C o m m i s s i o n . T h i s i l l u s t r a t e d how the C a b i n e t s o v e r a l l j u d g m e n t wou ld n e e d t o b e b a s e d on how f a r the E E C , n ow and in the fu ture , w o u l d o p e r a t e in the p r a g m a t i c way wh i ch our e x p e r i e n c e had shown w a s to be e x p e c t e d , i n s t ead o f j u r i d i c a l l y and wi th an o v e r - s t r i c t r e g a r d f o r the l e t t e r of the T r e a t i e s .

T H E P R I M E M I N I S T E R sa id that he had h i m s e l f r a i s e d the ques t i on o f s t e e l w i th the o the r H e a d s of C o m m u n i t y G o v e r n m e n t s at t h e i r r e c e n t m e e t i n g in Dub l i n . H e h a d r e m i n d e d t h e m that n e i t h e r the T r e a t y e s t a b l i s h i n g the E u r o p e a n C o a l and S tee l C o m m u n i t y , n o r any ­r u l e s and p r a c t i c e s d e v e l o p e d under the T r e a t y , d e r o g a t e d in any

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w a y f r o m the r i g h t of B r i t a i n o r of any o ther m e m b e r country to ex t end the b o u n d a r i e s of pub l i c o w n e r s h i p o r to take the who l e s t e e l i ndus t r y into pub l i c o w n e r s h i p . When B r i t a i n j o i n e d the E E C the C o n s e r v a t i v e G o v e r n m e n t had r e p e a l e d the statutog?y p o w e r s wh ich g a v e the G o v e r n m e n t c e r t a i n c o n t r o l s o v e r p r i v a t e i n v e s t m e n t . T h i s had m e a n t that the G o v e r n m e n t could not dea l adequate l y w i th the p r o b l e m of the m i n i - m i l l s . T h i s pos i t i on had t o be put r i gh t , i f n e c e s s a r y by a m e n d m e n t to the T r e a t y . He had h o w e v e r t o ld the o t h e r H e a d s of G o v e r n m e n t that he wou ld be g l ad t o l e a r n f r o m t h e i r e x p e r i e n c e in so l v ing s i m i l a r p r o b l e m s , to s e e w h e t h e r o u r s could b e r e s o l v e d in a way c o m p a t i b l e wi th the T r e a t y , H e had a s s u r e d t h e m that w e should much p r e f e r to avo id a T r e a t y amendmen t , but that i t w a s of v i t a l i m p o r t a n c e to us that the p r o b l e m should be s o l v e d . I t w a s not p r a c t i c a b l e to m a k e p r o g r e s s on i t b e f o r e the end of r e n e g o t i a t i o n and i t wou ld f a l l t o be d ea l t w i th in the future w o r k of the C o m m u n i t y i f w e r e m a i n e d m e m b e r s a f t e r the r e f e r e n d u m .

In d i s c u s s i o n i t w a s po in t ed out that d i f f i cu l t i e s had a l s o a r i s e n in r e l a t i o n t o the acqu i s i t i on o f a p r i v a t e stee l f i r m . T h e r e w e r e g rounds f o r suppos ing , h o w e v e r , that the C o m m i s s i o n ^ r e a c t i o n to the o r i g i n a l p r o p o s a l m a y have b e e n due t o a f a i l u r e to unde rs tand c l e a r l y what the G o v e r n m e n t s in tent ions w e r e .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that no p r o b l e m s had a r i s e n in r e l a t i o n to f i s c a l p o l i c i e s . C e r t a i n m e a s u r e s had b e en p r o p o s e d to h a r m o n i s e the s t ruc tu r e of s o m e i n d i r e c t t a x e s . W e should be ab le t o b l o c k any p r o p o s a l s wh i ch we c o n s i d e r e d u n a c c e p t a b l e .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the M a n i f e s t o c o m m i t m e n t w a s to p r e v e n t " h a r m o n i s a t i o n o f v a l u e - a d d e d t a x ( V A T ) wh i ch wou ld r e q u i r e us t o t ax n e c e s s i t i e s " . T h e p r o p o s a l s no w be ing d i s c u s s e d in the C o m m u n i t y w e r e c o n c e r n e d w i th a g r e e i n g a u n i f o r m a s s e s s m e n t b a s e f o r V A T . T h e y p r o v i d e d f o r our s y s t e m of z e r o r a t i n g , W e should be r e a d y to r e s i s t any p r o p o s a l s in th i s f i e l d w h i c h w e r e unaccep tab l e t o u s .

In d i s c u s s i o n i t w a s po in t ed out that the n e e d f o r a u n i f o r m a s s e s s m e n t b a s e f o r V A T a r o s e b e c a u s e the budge t a r y r e s o u r c e s of the C o m m u n i t y unde r the "own r e s o u r c e s 5 s y s t e m wou ld inc lude sums c o r r e s p o n d i n g to the y i e l d of V A T c h a r g e d at a r a t e of up to 1 p e r cen t on a u n i f o r m b a s e . Our s y s t e m of z e r o ra t ing w a s p r o v i d e d f o r in the u n i f o r m b a s e wh ich had been p r o p o s e d . A l l m e m b e r s t a t e s wou ld f ind i t d i f f i cu l t t o a g r e e on h a r m o n i s a t i o n o f the actua l r a t e s of V A T .

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the F e b r u a r y M a n i f e s t o r e a d : " W e n e e d an a g r e e m e n t on cap i ta l m o v e m e n t s wh ich p r o t e c t s our ba l ance of p a y m e n t s and fu l l e m p l o y m e n t p o l i c i e s " . L a s t y e a r the G o v e r n m e n t had been ab l e , by us ing p r o v i s i o n s in the E E C T r e a t y about m e m b e r s ta tes in ba l ance of paymen t s d i f f i cu l t i e s , to r e v e r t t o what w a s b r o a d l y the s a m e exchange con t r o l r e g i m e as app l i ed b e f o r e a c c e s s i o n . A c t i o n could cont inue to be taken under these p r o v i s i o n s to p r o t e c t our ba l ance o f p a y m e n t s .

In d i s c u s s i o n i t w a s sugges t ed that the Cab ine t should h a v e fu r the r i n f o r m a t i o n about the t e r m s of the d e r o g a t i o n s w e had b e en g r a n t e d in r e s p e c t of cap i ta l m o v e m e n t s ; these wou ld be p r o v i d e d by the C h a n c e l l o r of the E x c h e q u e r . T h e T r e a t y p r o v i s i o n s under w h i c h w e had a c t ed p r o v i d e d f o r an i n v e s t i g a t i on by the C o m m i s s i o n o f the pos i t i on o f the m e m b e r state wh ich invoked t h e m , but the C o m m i s s i o n ^ consequent ia l r e c o m m e n d a t i o n s wou ld n e e d to g o b e f o r e the Counc i l of M i n i s t e r s , w h e r e we should not a g r e e to m e a s u r e s wh ich w e r e unaccep tab l e to u s , T h e I n t e rna t i ona l M o n e t a r y Fund r e gu l a t i ons conta ined s i m i l a r p r o v i s i o n f o r an i n v e s t i g a t i o n in app rop r i a t e c i r c u m s t a n c e s ,

T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y sa id that the F e b r u a r y M a n i f e s t o r e a d : " T h e e c o n o m i c i n t e r e s t s of the C o m m o n w e a l t h and the deve l op ing c oun t r i e s m u s t b e s a f e g u a r d e d . T h i s i n v o l v e s s ecur ing cont inued a c c e s s t o the B r i t i s h m a r k e t and, m o r e g e n e r a l l y , the adopt ion b y an e n l a r g e d C o m m u n i t y of t r a d e and aid p o l i c i e s d e s i g n e d to bene f i t not jus t A s s o c i a t e d o v e r s e a s t e r r i t o r i e s ' in A f r i c a but deve l op ing c o u n t r i e s throughout the w o r l d " . Our m e m b e r s h i p of the E E C had brought c o n s i d e r a b l e bene f i t s t o the C o m m o n w e a l t h both in opening up the C o m m u n i t y m a r k e t to t h e m and in a i d . H e had had c o n v e r s a t i o n s in the pas t f e w months w i th r e p r e s e n t a t i v e s of m a n y d e v e l o p e d and d e v e l o p i n g m e m b e r s o f the C o m m o n w e a l t h . In a l l c a s es they had thought that the i r i n t e r e s t s w e r e b e t t e r s a f e gua rded by our be ing i n s i de the E E C r a t h e r than out . In add i t ion to what had been a c h i e v e d in r e s p e c t of sugar and N e w Z e a l a n d d a i r y p r o d u c t s , t h e r e had b e en the i m p o r t a n t a c h i e v e m e n t of the L o m e Convent i on b e t w e e n the E E C and 46 d e v e l o p i n g c oun t r i e s , 22 of t h e m in the C o m m o n w e a l t h , f r o m A f r i c a , the C a r i b b e a n and the P a c i f i c , T h i s convent i on had b e e n h a i l e d i n t e rna t i ona l l y as a m a j o r n e w d e v e l o p m e n t , and as e s t ab l i sh ing a s a t i s f a c t o r y b a s i s f o r r e l a t i o n s b e t w e e n the d e v e l o p e d and the d e v e l o p i n g w o r l d . T h e s c h e m e f o r the s t ab i l i s a t i on o f e x p o r t e a r n i n g s f r o m c o m m o d i t i e s w a s a n e w s tep of e s p e c i a l v a l u e . T h e C o m m u n i t y ' s G e n e r a l i s e d Scheme of P r e f e r e n c e s had b e e n g r e a t l y i m p r o v e d and ex t ended to beyond 1980, A i d to d e v e l o p i n g c o u n t r i e s outs ide the L o m e Conven t i on had b e e n a g r e e d in p r i n c i p l e , but no m o n e y had y e t b e en f o r t h c o m i n g . T h i s w a s an i s sue wh i ch

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the G e r m a n s l o o k e d upon as a f f ec t ing th e i r na t i ona l f i nanc ia l i n t e r e s t , and they w e r e p r o v i n g d i f f i cu l t about i t . On t r a d e , a w i d e r a n g e of i m p r o v e m e n t s had been m a d e in a n u m b e r of t r a d e n e g o t i a t i o n s wh ich wou ld be of a s s i s t ance t o C o m m o n w e a l t h and d e v e l o p i n g c o u n t r i e s . In h i s v i e w t h e r e f o r e the M a n i f e s t o o b j e c t i v e had been m e t .

In d i s c u s s i o n i t w a s a r g u e d that the s i tuat ion on a id to Southern A s i a r e q u i r e d fu r the r c o n s i d e r a t i o n , and that the M i n i s t e r of O v e r s e a s D e v e l o p m e n t had e x p r e s s e d h e r d i s s a t i s f a c t i o n on th i s po in t . A l though the c o u n t r i e s c o n c e r n e d wou ld bene f i t under the G e n e r a l i s e d S c h e m e o f P r e f e r e n c e s and f r o m b i l a t e r a l aid, w e should k e e p up our p r e s s u r e on the C o m m u n i t y to i m p l e m e n t the p r i n c i p l e s f o r w o r l d - w i d e a id wh ich i t had a c c e p t e d . I t should be r e c o g n i s e d that our w i t h d r a w a l f r o m the C o m m u n i t y wou ld r educe r a t h e r than i n c r e a s e the p r e s s u r e f o r b e t t e r t r e a t m e n t f o r Southern A s i a ; and the c oun t r i e s c o n c e r n e d unde r s t ood t h i s ,

T H E P R I M E M I N I S T E R , summing up the d i s c u s s i o n , sa id that the Cab i ne t would r e s u m e the i r d i s c u s s i o n the f o l l ow ing day , s ta r t ing w i th the g e n e r a l i s s u e of P a r l i a m e n t a r y s o v e r e i g n t y and m o v i n g on to an a s s e s s m e n t of the o v e r a l l p a c k a g e .

T h e Cab ine t -

A g r e e d to r e s u m e on the f o l l o w i n g day t h e i r c o n s i d e r a t i o n o f the o u t c o m e of r e n e g o t i a t i o n .

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:: ' : . . . r v

LTIONALISATION IF THE

I r c r a f t AND

felPBUILDlNG IDUSTRIES

2 . T H E P R I M E M I N I S T E R i n f o r m e d the Cab ine t that the vSecretary of State f o r Indus t ry wou ld be announcing l a t e r in the day the t e r m s of c o m p e n s a t i o n f o r na t iona l i s ing the a i r c r a f t and shipbui ld ing industr ies , . In a c c o r d a n c e wi th p r e c e d e n t these had been c o n s i d e r e d by a v e r y s m a l l g roup of M i n i s t e r s under h i s own c h a i r m a n s h i p : and i t r e m a i n e d of the u tmos t i m p o r t a n c e to avo id any l e a k a g e of i n f o r m a t i o n in advance of the S e c r e t a r y of S ta t e 5 s s t a t e m e n t . N e v e r t h e l e s s he thought m e m b e r s of the Cab ine t should s ee the s t a t ement in advance of i t be ing m a d e , and c o p i e s w e r e be ing m a d e a v a i l a b l e to t h e m a c c o r d i n g l y . T h e e s s e n c e of the G o v e r n m e n t s p r o p o s a l s w a s that the p r e c e d e n t of the I r on and S t ee l A c t 196? should be f o l l o w e d and that the G o v e r n m e n t should buy s h a r e s r a t h e r than a s s e t s , m a i n l y b e cause a s s e t s a r e v a r i o u s l y v a lued in company b o o k s , o f ten at p r i c e s in f la ted w e l l b eyond t h e i r e a rn ing capac i t y . S o m e s h a r e h o l d e r s wou ld no doubt c o n s i d e r i t h a r s h to base c o m p e n s a t i o n on s h a r e s desp i t e the r e c e n t r e c o v e r y on the Stock E x c h a n g e , but such c r i t i c i s m had b e e n ant i c ipa ted by choos ing a c o m p a r a t i v e l y g e n e r o u s r e f e r e n c e period^, n a m e l y the s i x months p r i o r to the E l e c t i o n in F e b r u a r y 1974, when the g e n e r a l l e v e l of sha re p r i c e s w a s s i gn i f i can t l y h i g h e r than i t w a s n o w . N o deduct ion wou ld be m a d e f r o m compensa t i on in r e s p e c t of pas t a id g i v e n on s e t t l ed t e r m s , s ince i t wou ld be aga ins t a l l p r e c e d e n t to a l t e r such t e r m s r e t r o s p e c t i v e l y but , e qua l l y ^ no c r e d i t wou ld be a l l o w e d f o r e xpec t a t i ons of future a i d 0 P r o v i s i o n wou ld be m a d e as usua l f o r p r i c e s to be d e c i d e d b y a r b i t r a t i o n i f the S e c r e t a r y of State f o r Indus t ry could not a g r e e t h e m wi th the s t o c k h o l d e r s ' r e p r e s e n t a t i v e .

T h e Cab ine t -

T o o k no te , w i th a p p r o v a l , of the s ta t ement

b y the P r i m e M i n i s t e r .

Cab ine t O f f i c e

17 M a r c h 1975

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