Prime Minister
I must stress how very much I am looking forward to this visit. I have met President Reagan several times before. I have met General Haig. I have met Mr. Allen and Mr Casey. I have not met many of the other members of the Administration but I hope we shall have a chance to see them and to discuss things which are of great interest to them, to us, and really to the whole of the Western world. I know it is a very brief visit but we are making maximum use of the time both in Washington and, as you know, I am going to New York for the Donovan Award. But really there is deep interest here and great pleasure that this visit it taking place so soon after the Inauguration. Now I have not the slightest shadow of doubt that we can perhaps spend the time most profitably if you ask your questions.
Question
Prime Minister, your views on the economy are remarkably similar to President Reagan 's. To what extent do you think your approach would be applicable or not applicable to the American economy?
PM
Well it is for President Reagan to set out his views on the economy, which I understand he has done. It is always said that my view is some sort of new economic theory. It isn't. My view really is applying the old principle.
Q
I am not asking you to advise President Reagan, I was wondering if perhaps your own views, whether you think that your approach is …
PM
… obviously there is some similarity. The proportion of public expenditure to the total income of the country. The more you take into public spending the less there is to put into the work of the private sector. One has to remember that it is the private sector on the whole that creates the wealth and to which you would look ultimately for future improvement in any of your services which you wish to give. So you cannot starve that sector too much. And this is one of our problems here. And at a time [end p1] of world recession the proportion of expenditure on the public sector of the whole national income tends to rise and it most certainly is a problem. You will never get an improvement in the private sector in the longer run unless you keep motivation and incentive in, this again is quite fundamental. You cannot always judge these things by what happens over a comparatively short run. In the longer run both of those things are absolutely sound. The tendency with modern democracy is for everyone to be in favour of reduced public spending in general, but nevertheless to demand expenditure on their thing in particular. And the difficulty is that you have to see that the strategy is continued and it does not become a miscellaneous collection of departmental policies and programmes but they do all add up to a consistent and firm strategy. If you are to have wealth-creation you must have motivation, incentive and sufficient resources in the private sector. President Reagan of course is not overburdened with the enormous nationalised sector that I have. He is fortunate in that respect because this year the expenditure to our nationalised sector—public sector—amounts to £3.1 billion, which is equal to about 4p on income tax.
Q
Prime Minister, could you please give us a few chapter headings for your talks with President Reagan and General Haig, that is the main international questions you will address yourself to?
PM
Obviously we will have East/West relations and attitudes towards the non-aligned countries in the developing world. We will try to see that we are very ready for consultation at any time should anything occur which needs very quick consultation. Doubtless there will be one or two defence matters we wish to consider. And the fact that, as we all know, we are getting problems very much South of the NATO line. Obviously you know what I mean, it is just a shorthand way of saying it. How do we deal with this? [end p2]
Q
Prime Minister, you have said in the past that you wanted or that you have raised the subject of closer regular consultation with the United States after the experience of Afghanistan. Do you have any specific ideas on how that can be achieved?
PM
I think that is something that we will have to work out between us. That needs more machinery. I think it is a question of making certain plans spring into action if needed. You know that we were all just a little bit concerned that perhaps at the time that Afghanistan came, over Christmas, we were a little bit slow in responding and we do not wish that to happen again.
Q
Prime Minister at the moment are you in favour of increased American military and economic aid to the Government of El Salvador?
PM
That is a matter for the United States, not for me.
Q
It is an issue which is getting a lot of publicity.
PM
I am sure it is but you won't draw me on it.
Q
Well can I ask however whether or not it is an issue as suggested in Washington last week on which the Administration seeks support from Europe?
PM
If the Administration wishes to raise it with us doubtless we shall give them our views.
Q
Prime Minister, will you talk about the neutron bomb?
PM
I have no idea.
Q
Would you raise that subject?
PM
I doubt very much whether I would raise it.
Q
What do you feel about the placement of the neutron bomb? [end p3]
PM
Well, at the moment, just leave it as it is. I think it is a matter at the moment—we have no specific proposals on the table about that particular tactical nuclear weapon. It really is an anti-tank weapon. I have always thought that the phrase neutron bomb was not an accurate one. It is a means of being able to tackle mass armour coming across the NATO line. Mass armour which the Warsaw Pact countries indeed have.
Q
Do you think that any new Administration can overcome the image of (unclear) of that particular weapon, particularly on the continent?
PM
Well, I don't think it is a bad idea to put facts down and hope that they might influence the media.
Q
Prime Minister, you said you had several meetings before with Mr. Reagan. Can you spell this out a little bit? And the circumstances?
PM
Well he has been over here when I was Leader of the Opposition. I have seen him twice. I remember once when I was in the old Leader of the Opposition's room and then in the new Leader of the Opposition's room.
Q
So this was a time when neither of you held elected office.
PM
That's right. Well you know that I haven't seen him since.
Q
But you haven't seen him since you have been Prime Minister?
PM
No. He hasn't been over here.
Q
Prime Minister, may I ask a question about defence? I have just come from 4½ years in Moscow and I have seen how they spend on defence. Defence spending is growing in real terms in the last year, year and a half. If you are asked in the United States, can the United Kingdom with its economic troubles maintain its high defence shield and its current defence roles in NATO, will you give a … . [end p4]
PM
… you have a look at John Nott 's statement in the House of Commons. It is absolutely first class. It sets out exactly what we are doing. It was just a short time ago. In the first year we hit the target of increased spending of 3 per cent in real terms. Over the next three years as a whole it will probably be 8 per cent—I am not sure, 8 or 9 per cent over the 3 years as a whole. It might not fall absolutely evenly. I mean this year I think it will be more than 3 per cent. The reasons you know. With the recession so much of what we ordered is in fact accelerated in its delivery. Now the plus about that, if I might put it very vigorously, is that not only do we have the most superb high quality forces but they will be better equipped even than we had planned because the equipment is coming forward earlier. Some of course is progress work, some is actually being delivered. But we have very, very high quality forces and equipment coming forward earlier. Now that means of course there will come a year when it isn't coming forward so fast. So I cannot tell you the precise evenness of the expenditure, but I think you will find in John Nott 's statement he said over the first three years you would expect to be 8 per cent in real terms over and above what we were actually spending when we came into office.
Q
On manpower itself rather than equipment do you think Britain can continue its current level of armed forces membership through the critical period which the Americans define as 1985?
PM
Yes. We have professional Services, as you know. We are having no difficulty with recruitment at the moment, we are getting high quality recruitment. The difficulty really comes, you know, for those who don't have professional forces—those who have conscript armies—because you are constantly spending so much time on training them and so many people allocated to training. We have professional forces and very good ones. [end p5]
Q
Prime Minister, some of the continental readers, particularly President Giscard d'Estaing, seem to be in favour of a continuing high level dialogue with the Soviet Union, even at this time of crisis. What is your view on that?
PM
Well France has always felt, since de Gaulle 's time, that she has had something of a special relationship with the Soviet Union. We don't feel that way as you know. The view that I take is that you must make a dispassionate assessment of whatever any potential aggressor is doing. You look at the increased spending son armaments, what they are spending on, what they are actually doing round the world. But you may not be able to deduce their motives but you do know what they are doing. France certainly does hold a slightly different view-point than ours.
Q
Prime Minister, will Lord Carrington be pushing the issues on the Middle East with the Secretary of State?
PM
Yes we will discuss the Middle East indeed. It is no part of our plan to do anything other than to try to be helpful in solving the Middle Eastern problem.
Q
There seems to be some controversy, namely that the United States feels that Europeans (unclear) are at issue and that the Europeans feel that any question must be faced up to and that the Americans have more or less ducked out. Do you share this view?
PM
Well as you know we felt in Venice that there probably was something that we could do to try and help sort out some of the problems. The whole Middle Eastern issue has been bedevilled by generalised phrases. No one has ever tried to sort out with the parties concerned precisely what those mean. That is what we really set out to do and also to try to see both sides—namely, the Israeli side and those representing the Palestinian Arabs—and say to both look, the problem is that you are not going to get any further unless you each of you recognise and accept the legitimate rights of the other. One is that Israel has [end p6] a right to live in security behind defined boundaries, for which one takes the United Nations Resolution 242, and the other is that the legitimate rights of the Palestinian people are recognised. But you know the problem so far has been that one has never been able to get them publicly to accept that. But we hope that we will be able to do something in the interim to bring that about and we still are of course trying to sort out what some of these phrases mean. Self-determination for the Palestinian people. A home for the Palestinian people. All of these are phrases which have been used so often but no one has actually gone round to try to talk through what they mean, and what it would mean if one tried to bring them about and what the options are. We thought that that was a very helpful thing to do. Now obviously President Reagan and General Haig will have their own ideas about how the process can be carried forward and we will wish to hear their views and to talk about it with them. But it is no part of our task to make it more difficult. It is part of our task to try and help towards a solution of the problems which really, unfortunately, have caused the Western world very great problems now for a long time.
Q
Prime Minister, do you detect in President Sadat 's visit to Europe this week any inkling that he himself feels that the Camp David (unclear)?
PM
No. I don't think so. I think we all think extremely highly of President Sadat. He is a very, very, courageous politician. And he took a lead and after all some of the Israelis did withdraw from parts of Sinai but he knows, and we all know, that that is not the solution to the problem. And we are trying to find a path through to the solution.
Q
Prime Minister, my question was do you get any inkling that he sees that Camp David has reached (? the end). [end p7]
PM
No I don't get any inkling from his visit to Europe.
Q
Prime Minister, stepping back from the specific relations … . between the United States and Britain, one hears a lot of talk and sees much evidence of the special relationship that exists between the two countries. Do you think it is likely to be enhanced by the fact that you and President Reagan share so much in your outlook, in your view of the world?
PM
Well I think there is a special relationship but then I have always thought there was a special relationship between English speaking peoples. We share the same cultural heritage, we share the same background, we share the same ideals. I am very happy that added to that special relationship there should be a particularly happy relationship between the two governments and between the two Heads of Government and that I pointed out in the Pilgrims Speech and I think that will be extremely helpful.
Q
Is it likely to be particularly enhanced by the sameness of your view on the world and economically?
PM
I think it helps if we know that we both share the same views on certain extremely important matters. Just look at his speeches and mine. There are certain things in common and a very good thing too. We are both right!
Q
Prime Minister when you meet with the Congressional leaders, if Tip O'Neil should ask you, for example, about the latest manifestations of Ian Paisley in Ulster, how would you address that?
PM
Well, I am very, very, concerned about them indeed. He is raising fears about the future of Northern Ireland that just aren't there. Our position is governed by Statute of 1973. The status of Northern Ireland remains as it is unless and until the majority of the people in Northern Ireland wish it to change and that change is put through the British Parliament. And it is absolutely laid down in Statute. [end p8]
Q
Prime Minister, do you see a possibility in Northern Ireland of some confederation in which there would be …
PM
… no. No. We are not in the talks discussing constitutional issues at all. Institutional changes, yes. Not constitutional. Because they are governed by that Statute, that law.
Q
What about consultations you have mentioned might become necessary if the wrong thing happened in Poland. What sort of things would you be discussing?
PM
I think we have to discuss and find out. We can get on to one another very quickly.
Q
What sort of things might you …?
PM
I don't think one quite talks about those things however much you may try!
Q
Two questions: one about Poland and about East/West in general. The first weeks of the Reagan Administration have been marked by pretty serious US/Soviet wrangling in public.
PM
What are you talking about?
Q
Well I am thinking about charges and counter-charges between Moscow and Washington almost daily on a variety of issues. I am sure you are informed of that.
PM
But which ones have you got in mind in particular?
Q
Well in the case of the Americans in particular the accusations of fostering international terrorism, Soviets responsible for wars of national liberation and the question of Poland which appears at the end of last week.
PM
Are you suggesting they are true or untrue? [end p9]
Q
I am not suggesting. Just asking for your assessment on the benefits of that kind of dialogue. Is it the byproduct of the new Administration?
PM
If you are asking me to comment on the speeches of the President of the United States, I just cannot do so.
Q
No. No, I am asking whether or not you thought this period would …
PM
I have been pretty forthright in some of the things I have said but I don't think you help if you try to ignore the facts and you will constantly hear me saying, first find the facts. And I don't think it does the peoples of the free world any good if their Leaders try to ignore the facts and I think we should try to find them and try to present them always.
Q
What is your assessment of/East/West relations based on?
PM
East/West relations. I can tell you. You have to make an assessment of your potential enemy—a dispassionate assessment. You hope very much for detente, of course you do. The Western world is very, very peace-loving and wishes to go on living in peace. But detente has to be a two-way business and you will have seen some of the things that have happened in Soviet Russia since Helsinki. You will have seen that Sakharov was sent to Gorky, you have seen Yuri Orlov, after all he was there to monitor Helsinki, to see how he was treated. Detente should be two-way and if it isn't then you cannot expect it just to go on being one way. It has got to be two-way. (Unclear).
Q
Prime Minister, will you tell us your views on the Canadian Constitutional patriation …
PM
We have not received …
Q
… and whether any agreement was made? [end p10]
PM
We have not received a request from the Canadian Parliament and Government yet. When we do we shall deal with it as expeditiously as we can.
Q
Did you make any agreement with Pierre Trudeau?
PM
I have nothing further to add.
Q
Prime Minister, are you disappointed that the SALT II Treaty did not cover more than the United States?
PM
What happens to SALT II now is a matter for the President and the United States Congress. The fact that it was not ratified does not prevent further discussions on arms control.
Q
Is that something that you would be encouraging and discussing with President Reagan?
PM
I have not decided what we will talk about.
Q
Prime Minister, on a domestic British issue …
PM
… because we have got the theatre nuclear weapons as well. As you know, NATO said all right, if you can talk about it with the Soviet Union and offer to talk about it, it would be extremely helpful. May be if we can get agreement on taking—down the whole level of the force we might not have to put as many in. As you know that offer has not been taken up.
Q
I wanted to ask you about race relations in Britain. As you I am sure know, among the black people in Britain you and your Government are regarded as an enemy or at least not a friend.
PM
I am sorry I would not accept that. I represent quite a large number of them in my constituency. They think I am very good!
Q
I am sure that is true. But there are other black people who might regard, who do regard, your Government as hostile and one of the reasons at issue is that nothing has ever been said [end p11] to overcome or to change the impression engendered by your comment a couple of years ago about neighbourhoods swamped by immigrants. And also because you don't seem personally at any point to have made some public demonstration of commitment to them.
PM
You are absolutely wrong, aren't you? I have constantly said that people here, once they are permanently settled here and accepted as permanently settled here, regardless of colour, have the same rights and duties as all other citizens. And we do not distinguish between colour, between citizens, as far as their rights or their duties are concerned. As you know, anyone who comes here with British citizenship and has been settled here, they have all the rights of the British people and equally have the responsibilities. And I have said that time, and time, and time again. We could not go on taking in limitless numbers of people.
Q
Prime Minister, can I ask you about the topic earlier about the British economy. Mr. Pym made a speech the other day talking about the need to be realistic. Inflation is down but the head-lines tell us the recession is continuing. Is it taking—I know you are asked this all the time by your domestic correspondents—but can you, for the maybe uniformed American point of view, what would you say if somebody asked you, without knowing all the details, is it taking longer than you thought to get the economy back on two feet and what do you see in the future?
PM
I have certainly said before that I think Mr. Reagan comes in when the recession is much further through than it was when I came in. I came in at the beginning of the world recession because it was the beginning of the sharp oil price increase. Frankly, it would have been very much better and very much easier if we had been able to deal with some of the long-standing domestic problems three years before the recession had started. Got rid of some of the over-manning out of the system, we have got some long term inflation out of the system, it would have been very, very much easier. But you can't necessarily choose your international time. It has been much more difficult because of world recession but I can only say it would not help you to come [end p12] out of world recession in a fit and able state to tackle expansion if your level of inflation vastly exceeds that of your competitors. That would be the very worst thing. Because we shouldn't get the jobs or the orders or the business. The people with very much lower inflation would.
Q
Prime Minister, if I could follow on from that question. Mr. Pym discussed that certain adjustments might be necessary in the economic strategy (unclear). Could you tell us what this might entail?
PM
Well you have seen them haven't you? British Leyland. You see that we do give selective help. Indeed I think you will find on the front page of Mr. Pym 's speech that he has set out that the strategy must continue and one must be selective in help and you will see the same in my speech the week before in the House of Commons. We did help British Leyland through because right now we couldn't have done anything else in view of the employment situation and we hope and trust that it is reducing its over-manning. BL has got a good new car and we hope it will be very successful. We do offer, and continue to offer, regional aids to inward investment in the regions. We have in fact a very considerable programme for opportunities for the young because I have been very, very concerned indeed by young people coming out of school without either training or a job to go to and so we have increased that programme very much. So we have got 440,000 places on it and we are stepping up very much the training programme. Again because I don't want to find ourselves at the beginning of a period of expansion and have not got enough skills to take advantage of that expansion. So all of those things are well in train and are being done. And they do mount up to what you call adjustment. We also have something called Enterprize Zones, where we are having an experiment to see if by reducing local authority rates, reducing planning controls, reducing government controls, we can somehow get much faster development of new enterprizes in those zones which amount up to new jobs. It is a wholly new experiment, people who haven't got them want them but we have got them scattered over the country. Glasgow, Belfast, Swansea, two we announced in the North the other [end p13] day, nine or ten altogether. But all of these are experiments and there was quite a good enterprise package for small business in the last Budget. We find, for example, almost anywhere in the country that if we put up what I would call workshops, historically you developed a new business in the shed or in the garage. Now planning laws prevent it so you have to build the small areas in which to do it. Now we are finding that there are queues for those. So there is quite a lot of new things starting. Unfortunately more people come on to the employment register each month at the moment than get jobs and go off but it is not static. They don't come on and stay on. For example usually about ¼ million people go off the unemployment register into new jobs each month.
Q
Since I moved to your country about a year ago, and I have watched the unemployment rate go up, I just don't understand why there is not blood in the streets. Is there something about the British character?
PM
Well, one moment. We actually do account. There are a number of things. Bernard InghamBernard will let you have the figures. We believe we still have a bigger proportion of—let me take it this way. Between the ages of 16 and 64, broadly speaking, your working age group, we have a bigger proportion of the people in that age group seeking jobs than any other country on the continent save Denmark. We believe a bigger proportion, it is partly to do with the number of women who seek work, we believe that even with the unemployment figures as they are we still have a bigger proportion of that age group in jobs than anywhere else on the continent save Denmark. In jobs. The last sample figures were done in 1978 but there is quite a high proportion of married women in this country seeking work, so we have a bigger proportion. It is quite interesting. And with all due respect we now have unemployment of 9–10 per cent but you know Belgium is higher than we are, Ireland, Italy about the same, France. We have our own figures up-dated, I am not sure about France, but if you look back a couple of months we and France were about level. But in fact Canada has difficult unemployment figures. You have very difficult unemployment figures, concentrated, like us, in some areas. Now [end p14] (look at the unemployment trends for the period 1951–1980 in Britain). Take the Tory Government, October 1951 to October 1964, over thirteen years. Average inflation 3.2%;, average unemployment 1.5%;. Take October 1964 to June 1970, Labour Government, average inflation rose to 4.7%;, average unemployment rose to 1.9%; but still low, 447,000. Go to June 1970 to February 1974, our period, average inflation rose 9.5%;, average unemployment rose to 3%;, still comparatively low. Now it started to catch up on us then, this inflation/unemployment spiral. February 1974 to May 1979, average inflation rose to 15.5%;, average unemployment rose to 4.7%;, average 1,098,000. But towards the end of that period it was as you know suddenly about 1.3 million, I've taken the average. So we in fact were left with a basic underlying rate of about 1.3 million. Now it's this cycle we have to try to break. Now all right, we're not yet breaking it—16.7%; is our average up to December 1980. Now, as you know, we're already down to 13%; annual inflation, which is below the average of the last Labour Government. Unless we break this terrible cycle we're not going to crack the unemployment figures. And that's why we're going so hard on inflation. Because we know that unless we can crack the steadily mounting inflation cycle as I say, we're not going to be able to crack this problem of unemployment because we're just not going to be competitive with other countries. What happened during the lifetime of the last Government was that increased wages were counter-balanced by a fall in the exchange rate, you can't go on like that. So the increased wages which made them uncompetitive were canceled out to some extent by a fall in the exchange rate. Now you cannot go on like that. You've got to go back to what I call sound policy. That's why I say I don't operate new economics, I operate the soundest fundamental principles. You've got to go to honest money, that is trying to keep the supply of money in line with your supply of goods and services, which is the only true backing of your currency and you've got to say that you do not get increased wages in something where there's no profit, whether it's services or manufacturing, unless you get increased productivity. You've got to be able to compete on design. It's not only a question of price, design and delivery dates. Now, [end p15] there's nothing new in that. It's plain straightforward giving value for money, keeping a step ahead of your competitors, and having a Government trying to run honest money. This really is fundamentally what we're trying to crack and it's not easy. Because you know as well as I do that people have come to regard themselves as almost entitled to an increase in standard of living regardless of whether the figures warranted it. And some people undoubtedly have had a substantial increase in the standard of living which has come about by a redistribution of incomes. Now the redistribution really is almost at an end in this country. You've got to get back to plain straightforward wealth creation. And motivation of your wealth creators. Now it's nothing to do with what I call new economics, it's old philosophy. And it's old philosophy equals new economics. Adam Smith of course was a Professor of Moral Philosophy!
Q
You say redistribution is almost at an end in this country, why is that?
PM
Why, because we've redistributed, redistributed and redistributed until in the end the top rates of tax when I came into power were 83%; on earned income and 98%; on savings income, which left no room for incentives and innovation and inventiveness at all. And we weren't getting it. And so in your production, you just weren't getting the growth of new industries as you should because you'd not got the motivation. So many of our people were going and starting up elsewhere. That's why one of the first things I had to do was take down the top and middle rates of tax. And the first things we did was take down the top rates, take down the basic rate from 33p in the pound to 30p. One would like to go further. Not easy under present levels of expenditure.
Q
Would you take one more question on Poland. What do you regard as the most sensible attitude that the NATO Alliance should now take, and do you from your own vantage point see the cost to the Soviet Union of invasion to be such that it really is a very effective deterrent? [end p16]
PM
Right now the best service one can do Poland is to continue to make it perfectly clear that Poland must settle her own problems. That is absolutely vital. You can see why. Absolutely vital. We must continue to say Poland must settle her own problems. In a way we try, when we're asked to help with food supplies, we try to help by extending credit, guarantees. But all within the framework that Poland must settle her own problems and must be helped in the interim to have the opportunity to settle them. I think it's best, holding that very firmly as I do, not to go any further.
Q
Are you concerned with poll indications that a new central party, the so-called Social Democrats …
PM
No, we're not within distance of an election at the moment. And I'm used in my 21 years of politics to having all sorts of problems between elections.
Q
So you're not concerned with the emergence of that sort of party.
PM
I shall carry on believing firmly that the policies which I have are the only ones that will cut through this and knowing full well that we've got to carry those through.
Q
I think it's fair to say that quite a few European countries in the Alliance had difficulty with Washington during the previous Administration, more than has been in any other period. Do you see the new Administration as offering any solid hopes for an improvement across the board?
PM
I think we're very fortunate to have General Haig, who after all knows Europe and NATO extremely well. And I just think that he will bring a dimension to the problems from experience which is unique.
Gentlemen, I came on time, excuse me, I must go on time.