Paul Reynolds
Prime Minister, are you satisfied with this agreement you got in Fontainebleau today?
Prime Minister
Yes, I think taken all round, it is a very satisfactory agreement for Britain and we not only got the agreement on the 66%; refund, but also we got the previous sum which they had withheld unblocked—ECU 750 million, about £450 million. They were holding that against getting an agreement and now they have made the regulation to unblock it.
Paul Reynolds
And the agreement itself is satisfactory?
Prime Minister
The agreement itself, all round, I think is good. It means that the Community gets an increase in the amount of VAT it can get from countries, but the price of that increase is to give a very fair settlement to Britain on refunds, and as you know, a the margin of increases it is 66%; refunded. [end p1]
Paul Reynolds
But it is also 66%; of a smaller gap than had been calculated before. Why did you make that concession?
Prime Minister
They felt that that was a reasonable amount to make. There is not a lot of difference. There is a little difference. You are quite right. What happens is, you take the levies and you calculate them as if they were VAT and at the moment that gives a slightly smaller gap than it would have done the other way.
Paul Reynolds
Are you not afraid that this whole thing will have to be re-negotiated in three of four years time?
Prime Minister
The fact is that this percentage refund lasts as long as the income of the Community from each country is 1.4%; of their VAT. Now, they cannot put up that 1.4%; to anything higher without the consent of each and every country. As far as we are concerned, without the consent of Britain, without the consent of the British Parliament. Now, we are not likely to agree to any increase in that VAT contribution unless, similarly, they carry on the existing system of refunds or they substitute another one which we adjudge to be satisfactory. So in fact, we are locked in to the 1.4%; and that cannot be changed except with our agreement. [end p2]
Paul Reynolds
What was this meeting like in the atmosphere? The previous meetings, we have been told, were rather bitter and sometimes rather angry. Was this one different?
Prime Minister
There was a determination to try to reach agreement today, although last night I did not think we could get it and I was very down in the dumps; very down in the dumps indeed, because what they were offering was way below anything that we could have accepted and also they were trying to take two years of ad hoc refunds at a 1,000 million ECU and that would not have done. So I was down in the dumps last night.
We had a card to play, certainly, that we would not agree to them having any greater income unless they agreed to us having a fair deal, so there was a two-way interest this time, which we have not had before. But even so, last night, what was on offer just would not have done, and it was not easy to get it today. You know, we had a discussion round the table. Then, when things get very difficult, we break up and you do the negotiations one by one with the main people and go and say: “Look, this means that you have to contribute so much more, are you prepared to do it?” and during that negotiation, Monsieur Mitterrand was very helpful and M. Dumas, who was doing a lot of the negotiation, and also Chancellor Kohl was very helpful and all other friends were reasonable. [end p3]
Paul Reynolds
You will be asking Parliament at Westminster for an increase in the Value Added Tax money which Britain sends to the Community. Why should Parliament agree to that increase in VAT?
Prime Minister
Yes, but you see, the way in which we have got it operating at the moment is that our refunds are paid to us by knocking them off our Value Added Tax contribution for the next year and so I think you will find that we have got a better deal on 1.4%; VAT, because we have got the refunds, than we would have had on 1%; VAT without the refunds. I mean, that is the essence of it. I know it is complicated, but when you are negotiating on figures you have got to watch them.
Paul Reynolds
But do you anticipate any Parliamentary problem?
Prime Minister
I believe that we will be able fully to recommend this to Parliament and I believe that it will be accepted. It really is, as I say, a good deal for Britain. It is for them. I mean they look and they say: 66%; refund. My goodness, they think that is a lot. It is enormous. It was very much more than they thought they were going to offer and very much more than they started with. [end p4]
Paul Reynolds
I notice throughout the interview, you use the word “they” all the time. Do you feel it is always one against nine as it seems to be?
Prime Minister
Well, basically, at the moment, it has been two of us financially in the Community, that is Germany and ourselves, because the rest have got more out than they put in. Now, Germany of course has taken on very substantial burdens. France will become a net contributor and ourselves, but the others have to take less out of the Community than they have been taking out.
Paul Reynolds
But that is not the way “they,” as you put it, like to see the Community. They see it as a more general club in which everybody shares the burdens to a greater or lesser extent, but gets a tremendous benefit from it. Is there not still a philosophical gulf between Britain and the other members?
Prime Minister
Philosophy is all right, and I indulge in it frequently myself, but you have got to look and see how it works out in practice over the years. Certainly, I have a rival philosophy. Let me put it that way. That if you are partners, you must act fairly between one another, and that system they have got now is not fair. They have changed it once in history. The system of what is called the Community [end p5] having its own finances, like taking in the levies and the VAT, was not the way it started. It started with percentage contributions from each country, so they changed it once because it suited them. And they changed it to what is unsatisfactory for us; so now it has been changed again as far as we are concerned.
Paul Reynolds
Are you against moves towards greater political integration in Europe?
Prime Minister
You are talking about European union. Do you know that phrase is never defined. I always find it very irritating. I do not like something being used without it being fully understood, and I have thought about it a lot and I do not know of any country, least of all Britain, that wants to submerge its sovereignty in Europe. Each wants to keep its own sovereignty. The decisions are made through the national parliaments, each wants to keep that. So I think that is what it does not mean. It does not mean the sovereignty becoming submerged in what, for want of another word, would be a kind of United States of Europe.
I think what it means if full implementation of the Treaty of Rome. That is a better Common Market in services. We also need closer political cooperation, because we are much more powerful when we have closer political cooperation. We are very powerful in trade, but that is a part of the Community. [end p6]
So I think it really means bringing the Treaty of Rome fully into operation and if there are things which do not work, well then changing them as time goes by, and today's was a change.
Paul Reynolds
They do say about you that you are intransigent. Do you have any feelings about you negotiating partners?
Prime Minister
Do they say I am intransigent? No, what they mean is I fight in Britain's corner and I go on and on and on tenaciously fighting in Britain's corner. Being British, I am fair. I expect them to be fair. I think there are times when they have been very difficult. I think that there have been times when they have used the argument, this is the treaty, you knew about it; that was the argument, but that was not the feeling. The feeling was that the treaty suited them all right and that is why they wanted to carry on with it. But there came a time when it was not going to suit them, because they were running out of money and that gave us an opportunity to get a reasonable settlement.
Paul Reynolds
Has it soured your attitude towards Europeans?
Prime Minister
No, no, no. We are much bigger-minded than that in this country.