Prime Minister
Ladies and Gentlemen:
There are, of course, two immediate things. First, we are sad to lose Michael Heseltinethe Defence Secretary through resignation. We shall now have to put this behind us. We have, in George Younger, got a first-class successor at the Defence Department and, of course, we regret the rise of 1%; in interest rates, but that I hope you will think demonstrates our utter determination to hold and drive down inflation.
Unfortunately, I think these two things have masked several very encouraging points.
We shall this year enter our sixth year of continuous growth. We have achieved a combination only previously dreamt of by governments since the War—both low inflation and a strong balance of payments. I think that unemployment [end p1] seems to have flattened out, although the figures yesterday, obviously any slight increase or any small increase is a great disappointment to us. We have created more jobs over the last two years than any other country in Europe. Investment is running at record levels. Our policy of returning State industries to private hands is forging ahead, and we expect that 40%; of the State sector that we inherited in 1979 will have been privatised by the end of this Parliament. So there is quite a bit further to go, but 40%; will have been privatised, which is not bad going.
We are making strides towards my great aim of every man and woman a capitalist. We have seen a vast spread of home ownership and, of course, there has been a huge increase in personal share ownership. Nothing like the amount you have in the States, but in fact, personal share ownership had fallen rather badly, and we have now got it increasing again and I think it is very important. And do not forget the transformation wrought in the trade union movement through our deliberate policy of delivering the union bosses back into the control of their members. And I think it is also fair to say that this Government really has resolved a whole host of issues that have been lying about for rather a long time. First, the budget of the European Community; we had to take two bites at that cherry: first a temporary settlement and then a longer-term one. Secondly, earlier on of course, [end p2] the Rhodesia-Zimbabwe problem. Thirdly, the agreement between us and Peking over the future of Hong Kong. And then, various other things like airports policy. I think the problems of Stansted have been actually on the agenda ever since I have been in Parliament, and when I started to read through the Reports, I realised it went back far longer than that.
We have many more issues still to tackle. A number of things in the City of London, and you will be aware that the Roskill Report is being published this morning. I think Lord Roskill is giving a press conference. We are also tackling the system of financing local government, and that Green Paper we hope will be out by the end of this month. We also, of course, on the EEC, are going hard for the completion of the internal market which ironically enough was put above the objective of the Common Agricultural Policy in the treaty, but which has taken much much longer to achieve.
At the same time, we do work closely with the United States, not least in matters of East-West relations and the matters of arms control.
Now if you take all of those things into account, I think we have every reason to face 1986 in a confident mood. There is a lot going for us. We shall persevere with a develop our policies for Britain. They are bringing about changes that six-and-a-half years ago people said were impossible, and the world, for all its problems, is a more hopeful place in 1986, thanks to President Reagan 's [end p3] Summit with Mr. Gorbachev. So there is much to do, but much has been achieved, and we shall go ahead in exactly the same way as we have formerly—consistently and persistently.
Right! Now! That is just to give you something to write about! [end p4]
Question
On the question of sanctions and Libya. At the time of the Falklands War, Britain thought sanctions were a great idea and got some help there—sanctions against Argentina. Now, of course, sanctions do not work. Is it not a question of whose bull is being gored? What is the difference?
Prime Minister
Well, if I recall correctly, we had European sanctions certainly for a month and then, as you know, there were changes. That is not what is being asked now. I do not, alas, think that sanctions against Libya would work. The materials would be supplied by other countries. In theory, sanctions work but they only work if they are adopted 100%; and, alas, I do not know any case in which they have been adopted 100%;. The sanctions to which you refer on Falklands were European ones, save insofar as they were defence sanctions which we still apply against Libya. We apply defence sanctions against Libya, but not others.
Question
Prime Minister, yesterday Mr. Heseltine was asked questions saying that in the charges and discussions about manoeuvring he suggested you and other members of the Cabinet were doing to him, he was asked what his motive was … forgive me … he was asked what your motive was and he refused to answer. Could you tell us what your motive is for supporting the American bid? [end p5]
Prime Minister
Mr. Heseltine resigned. Questions should be referred to him. He resigned after a Cabinet meeting or during a Cabinet meeting. We issued a statement. Let me repeat it:
“The Cabinet have reaffirmed that it is the policy of the Government that it is for the company to decide what course to follow in the best interests of Westland and its employees. Cabinet discussed how this decision should apply in practice to ensure that collective responsibility was upheld.
It was agreed that during this period, when sensitive commercial negotiations were in process, all statements by Government Ministers should be cleared inter-departmentally through the Cabinet Office to ensure that all answers given by the Government were consistent with the policy decided by Cabinet.”
Every other person in the Cabinet agreed that, save Mr. Heseltine, who found himself unable to accept that procedure and so left the Cabinet and I expressed my regret.
I am not going any further! That matter is over. We now have to fo forward. I am not in the business of recriminations. I regretted the decision, but it is his decision.
Question
Prime Minister, I think to Americans here, the Defence Minister is making the allegation that you are supporting the Sikorsky side of the issue. Is that true? [end p6]
Prime Minister
No. You have to look at my statements in the House. They have been clear and consistent throughout.
The statement made on 19 December, following our previous Cabinet meeting. May I say … repeat:
“The future of Westland is a matter for the company to decide. The company's decision is a matter of commercial judgment for its directors and shareholders.”
That was the position set out by my Rt. Hon. and Learned Friend—that was Leon Brittanthe Secretary of State for Trade and Industry who made a statement which was on the Monday, perhaps you will get the date, the previous fortnight I should think. That was his position, set out as a decision of the Cabinet by the Secretary of State for Trade and Industry. There should be a choice, and it was a matter for the company to decide, and it has been reaffirmed by me almost every Tuesday and Thursday. And after the Cabinet meeting on 19 December, reaffirmed and said: “That was the position set out by my Rt. Hon. and Learned Friend and that was the position reaffirmed by Cabinet this morning.”
Cross-examined by Mr. Kinnock, again I came back: “Westland is a private sector, public limited company. Its future is a matter for the company to decide and the company's decision is a matter of commercial judgment for its directors and ultimately its shareholders.
That was the position and it was reaffirmed by Cabinet this morning.”
Again cross-examined. Reply: “I have informed the House [end p7] of the position of the Cabinet this morning. The position of the Cabinet is the position of the whole Government.”
All set out very clearly. 19 December, column 564, in Hansard.
Question (Associated Press, Radio Network)
Getting back to the question of sanctions for a moment, do you agree, first, that something should be done and if not sanctions, what? And second, do you think by the European allies not agreeing with President Reagan to impose some sort of sanctions, has left him in a more or less weaker position, especially since Gaddafi seems to have the support of other Arab nations?
Prime Minister
Look! We apply, as you know, defence sanctions. I am afraid that does not stop Gaddafi getting defence equipment and one would hope, you know, that one could have managed through perhaps bilateral contacts to get a lesser supply to him. We do not apply other sanctions to Libya. I am afraid that other sanctions will not work. They only work if you go through the United Nations and get a Resolution and, even then, if everyone actually agrees to operate them.
I have never known a case in which sanctions have effectively worked. Let me say that we went to the United Nations for sanctions against Rhodesia. There were mandatory sanctions against Rhodesia. When I came to be Prime Minister [end p8] here, there had been mandatory sanctions against Rhodesia for 12 or 13 years. They did not work, and Rhodesia perhaps had a more flourishing manufacturing industry than she had before that time, when she was receiving extensive supplies.
So I have very good reason to know that they do not work. What I am saying is sanctions do not work.
What else does work?
One has to try to get at those people who supply the armaments. Since the Libyan siege at the embassy we do not in fact supply defence equipment to Libya, so that extent defence equipment, I think, is a very very special thing, and we operate it.
I wish in many ways that we could all get together against nations which have terrorist camps and practise terrorism and supply armaments to terrorists.
I see, at the moment, no possibility of that. We do our own bit in that regard. We have every reason to do so, because we fight terrorism on our shores.
Question
Do you think President Reagan is in a weaker position now?
Prime Minister
No, I do not think President Reagan is in a weaker position at all. [end p9]
Karen De Young ( “Washington Post” )
I apologise for jumping back and forth on issues like this. On the events of yesterday, Mr. Heseltine raised several specific points about the process of Cabinet government and my understanding is that the only statement that Downing Street put out was that his understanding of those events was at variance with his recollection. Some of the specific points were that Cabinet or sub-Cabinet meetings were planned and scheduled and then were never held, because of your refusal to hold them; and also that Minutes of Cabinet meetings were somehow altered or censored in order not to accurately reflect what happened at the meeting.
Could you respond to those specific questions and, in a larger sense, talk about the issue he raised in terms of your own method of handling the Cabinet and your idea of the style of Cabinet government and how it may differ from some of those of your predecessors, if in fact you think it does?
Prime Minister
We have a style of great discussion and great debate. That has always been characteristic of my handling of government. As you know, we had two meetings of a particular group of Ministers and then I decided to go to full Economic Committee of the Cabinet augmented, to be certain that the decision was taken in full Economic Committee of Cabinet.
The decision was announced to the House as Government policy by Leon Brittanthe Secretary of State for Trade and Industry. You have only to go and look at that to see what it was. [end p10]
After that we had, as is customary, our Reports to Cabinet. Yesterday, we had our Reports to Cabinet. I told you what I said to the House on 19 December after that meeting of Cabinet and you know what happened yesterday.
I am not going any further. I am not going into recriminations or detailed points. You go back and look at the public statements taken after a meeting of the Economic Committee of the Cabinet. Many decisions—indeed most—are taken in Committees of Cabinet. They are slightly smaller than the full Cabinet. It was taken. The decision of the policy of the Government was announced by the Secretary for Trade and Industry. It was reaffirmed by me after other Cabinet meetings, 19 December and yesterday again, the discussion went on for nearly an hour, and you know what happened.
Leon Brittan made his statement … 16 December 1985 … which was column 35, finishing up:
The Government have ensured that Westland had an alternative European-based offer to consider, but as a private sector company it is for Westland to decide the best route to follow to secure its future and that of its employees.
I did the reaffirmation on 19 December.
Question
One of the points Mr. Heseltine tried to make yesterday was that he could not seem, in his view, to get the Cabinet to have a full and fair discussion of the implications [end p11] for British, and finally, European technological industrial position as a separate … . of the alliance from the United States.
In your view, do you think the Cabinet had a full discussion of these issues? Was there full and complete understanding of at least the point Mr. Heseltine was trying to make?
Prime Minister
We had, in fact, not the full Cabinet, but two separate meetings of the Ministers involved and then I went to the full Economic Committee of the Cabinet. It was after that full Economic Committee of the Cabinet that an official statement was made of Government policy, to which there was no dissent. That was reaffirmed after our discussion in Cabinet on the 19th and yesterday we were discussing how the doctrine of collective responsibility should in fact be put into practice.
Now you may go on and on, but I am not going any further. Follow it up as you wish, but I am not going any further. I have lived through this. I know every single document, every single phrase, every single nuance.
Question
Do you agree that trust had broken down between yourself and your former Defence Minister?
Prime Minister
I am not going any further. I wrote a letter to Mr. [end p12] Heseltine; I regretted his decision. I am not going any further.
Question
Prime Minister, I am sorry to go back to the Middle East. I was wondering how you felt about the fact that we are focussing on Libya at this time, rather than on Syria, where obviously some of the training can be performed of young terrorists, which does not take all that long. Aren't we in a sense restricting the fight against terrorism to one area and perhaps not focussing on international terrorism any more?
Prime Minister
In a way, I think you are probably making the point which I made in a different way: that sanctions against one country, even defence sanctions, will not work unless they are operated by everyone. As I say, we have occasion to operate defence sanctions against Libya, but not others, and you are reinforcing what I say. I think that things will probably get through by one means or another.
Question
Why do you leave Syria out of all discussions and practically all coverage? [end p13]
Prime Minister
No, we do not leave Syria out of all discussions, but the attitude of Syria is of course important in the end to get a settlement to the Middle-Eastern problem and one has constantly to think in terms of getting a wider settlement to the Middle-Eastern problem. At the moment, as you know, the initiatives which had been taken through Ambassador Murphy have not been pursued to their logical conclusion and King Hussein therefore is trying to get—and I think President Reagan agrees that before you can get negotiations going between King Hussein and the Palestinians and the Israelis, it would have to be done in an international context, and the question is what precise international context.
We often have to consider the wider things and you are on to the point immediately.
Mike Lee (ABC News)
As you have just pointed out, there are practical political considerations in combating this sort of thing, but do you not think that many Americans might be wondering if the lady who made such a forceful speech before Congress against terrorism might owe the world and the American public a bit more specifics in terms of what could be done? Specifically, given the fact that you do not believe in sanctions, do you believe in pre-emptive strikes when it can be proved that there are bases involved, or retaliatory strikes? [end p14]
Prime Minister
Look! Sanctions do not work if other people supply the goods. Other people do supply the goods. Nevertheless, when it comes to defence sanctions, one does have a special reason not to supply them, so they are not supplied. The fact that other people do not supply them—I am afraid they do—and I wish we could stop them.
But when it comes to retaliatory strikes, I must warn you that I do not believe in retaliatory strikes which are against international law. We suffer from terrorism in this country and in Northern Ireland. What would you think if I said would you accept that we would be entitled to go in hot pursuit or engage in retaliatory strikes? You would be absolutely against me, and so would I, because it would be contrary to international law, and once one failed to observe the boundaries of other countries, then I think that you would be making much greater chaos. You must uphold international law.
Now, I quite agree terrorism is against international law, but I believe that one has to fight it by legal means. I agree we need wider cooperation. We have as much cooperation as we possibly can get and please may I remind you that we have suffered over 2,000 deaths at the hands of terrorists, so we are well aware of the problems and at no stage has anyone in this country suggested that we make retaliatory strikes or go in hot pursuit or anything like that.
Tony Clifton ( “Newsweek” )
Prime Minister, this is an unwieldy question again. What would you say to critics like, say, Professor … . [end p15]
Prime Minister
May I just add that the position of the Republic of Ireland is that it is against terrorism and we work therefore with the Government of the Republic of Ireland against terrorism. This of course is a position wholly different from Libya. But once you start to go across borders, then I do not see an end to it and I uphold international law very firmly.
Tony Clifton ( “Newsweek” )
Prime Minister, what would you say first of all to critics like Professor Terence Morris of LSE who say that your crime conference on Wednesday was a piece of political PR and that the Tories in fact are looking for a convenient issue for the next election?
Secondly, when the police have never been stronger and when Britain has more people in prison than just about any other country in Europe, does the crime rate keep rising so inexorably?
Prime Minister
Was the gentleman you mentioned here? I did not think he was because we had someone from Cambridge if you recall.
All of those who came were absolutely delighted with it. We all learned a great deal about what the others were doing. We learned a great deal which can be disseminated. We took decisions about what we should take forward and what Government could do and how we could constantly involve people more, because [end p16] the battle against crime is of course a battle in which you need not only police in numbers and equipment, but you need the cooperation of people as a whole, and a fantastic amount of crime prevention could be done, because quite a bit, for example, of burglary and auto-crime—that is an awful piece of jargon—is opportunistic. They go around looking either for houses which look as if they can be attacked easily with windows or doors open and cars that are not locked. You can do a lot for crime prevention. So those that were here, they were here in this room; it was rather fuller than it is today … were absolutely delighted with it; delighted at the coordination, and we shall have a follow-up seminar. I really do think that as they are involved in crime prevention and able to do something about it, their opinion might be predominant.
Crime, as you know, has gone up in almost every country in the world. I think it has gone up in the States. It has gone up in Europe. We are doing a certain number of things on crime prevention in some areas and discovering that where we do certain things the rate of crime in a particular form of crime falls. I think it is burglary that is the biggest. It is the kind of theft that is the biggest form of crime that we have at the moment.
You asked me why. One does not know. I think it is that there is possibly greater personal freedom for young people, because our peak offenders, peak age for offences here in this country, is 15. Young people have perhaps more [end p17] personal freedom than they used to have, less discipline, a less-accepted framework of family and of church and of the various institutions—not the State, but the other institutions—and at the same time, they have a great deal more money than we ever used to have. It is a very very powerful combination and really needs, I think … . well there has been a good deal of work done on unemployment as you know, and I think you will find that crime has gone up in places where there has been virtually no unemployment as much as the rest. And you are obviously asking with a feeling in mind—which I have in mind—that the devil makes work for idle hands, but he also makes work for hands that are not idle if they are inclined that way, and I think if you look at the figures, you will find that in areas where there is virtually no unemployment and often a considerable amount of prosperity, the crime rate is unfortunately very high.
That is what we are presented with and we have to tackle it on many fronts: more police, more equipment is one. It is only part of the story. It is getting things like neighbourhood watch people to do things for themselves; it is saying yes to parents, you must be responsible for your own family; it is saying yes to schools, you must in fact teach certain things; and we had some schoolteachers here and fascinating they were how they are getting down crime in their own schools, how they are having groups seeing that the schools are not, in some areas, having their windows broken at week-ends. There is a fantastic amount that can be done in crime prevention. We [end p18] were constructively trying to do it. We are used to that kind of attack, but it is a destructive attack, whereas we are a constructive government.
Mr. Marshall ( “Los Angeles Times” )
The larger issue that surrounded the Westland affair is one that, increasingly, European companies and governments must face: whether to group together to develop a high-technology product that is competitive in the world markets, to achieve the economies of scale, or to purchase and cooperate with American technology, or cooperate with American companies.
Many Europeans, as Mr. Heseltine obviously was yesterday, are concerned that if the option is always to purchase American technology or become adjuncts of an American company, Western Europe will decline further as a source of 21st century technology.
I would like to know what your feeling is on that issue.
Prime Minister
Yes, I hope that Westlands will cooperate. We are not facing a take-over bid for Westlands you know. That is point number one. We are facing two different packages for financial reconstruction, which involves minority shareholdings. They are not facing take-over bids but financial reconstruction.
Whichever Westland shareholders decide, we of course will help Westlands to enter into collaborative projects, which they are already in in Europe, and let us face it, Europe will need [end p19] Westlands for those collaborative projects, and they will need the business for the collaborative projects. So it is for Westlands to decide which way they go and whichever way they go, obviously when governments are involved we fight for Westlands because it is a company here, and we will continue to do so, and we are very keen on collaborative projects, whatever happens to the Westlands decision.
We are involved with Agusta in the EH.101. It is almost an Italian-British project. We are involved with other parts of Europe and if you are going to have collaborative projects open to the whole of the European market, then Europe does need the cooperation of the British companies. So of course we shall fight for collaboration on the part of Westlands, regardless of the decision which the Westland shareholders make.
Of course, we are very interested in the Eureka projects and are encouraging our companies to get involved in them. The vital thing is that when they get collaborative projects, that they do have access to the whole of Europe and that separate countries do not say: “Well we are going to purchase our own companies' product” as against the collaborative project. Because do not forget there are a number of countries who have their own home-produced projects, which compete against the collaborative project and when it comes to purchasing in their own country, say: “We will support our own national industry!” and so when you are going to get the collaborative projects, it is going to be very very interesting to see whether they do get access to Europe as a whole. [end p20]
Question ( “New York Times” )
Prime Minister, leaving aside Mr. Heseltine and Westland for the moment, do you accept the argument that technological cooperation with American high-tech companies tends to undermine Britain's competitive position and that technological cooperation with Europe is fundamentally preferable?
Prime Minister
What I think is totally wrong is to say either Europe or the United States. We obviously do a good deal of cooperation with both. We obviously have Secretaries of State for Scotland, for Wales, and to some extent DTI, urging inward investment into this country. We profit from that inward investment.
IBM has done a very great deal for this country. It has got a lot of its research in this country. IBM and various other computer companies have gone to areas where we need jobs. Now you cannot say: “Look! We want inward investment and cooperation on technology but we will discriminate against you!” We want cooperation in all directions and, if I might say so, America does make full use of some of our most able scientific people here. Sometimes it has contracts with universities on doing specific things; sometimes they will have consultancies; but please do not say either America or Europe. We are part of NATO. We cooperate in many ways with America technologically and will continue to do so. Yes, we want Europe to be an internal market the size of the American market, so that collaborative projects in Europe have as big a market as they [end p21] have in America. That depends not only on the collaborative projects, but whether national companies which have products which compete with those collaborative projects are prepared to purchase on a basis of competition, value for money and value for design or are going to go nationalist. It is much bigger than the way in which you are presenting it.
Question (Philadelphia “Enquirer” )
It has been almost a month now since you and Dr. FitzGerald signed the Anglo-Irish Agreement at Hillsborough and there has been quite a loud reaction from some of the Unionists in Northern Ireland. Many have said that the reaction has been much more strongly against the Agreement than had been anticipated in Dublin and London.
I was wondering what your comments are about that and how you view the elections in Northern Ireland in a few weeks.
Prime Minister
I think the reaction was much stronger than we thought it would be and we had, of course, very carefully avoided some of the things which had previously led to a very strong reaction post the Sunningdale Agreement. For example, the Sunningdale Agreement had a kind of All-Ireland Council. There was no such thing in the present Anglo-Irish Accord. We were very careful not to have a kind of parliamentary body imposed by Governments. We said it was for the Parliament in the Dail and the Parliament at Westminster to see if they wanted an [end p22] inter-parliamentary body; not an umbrella but an inter-parliamentary body.
We were very careful to make it abundantly clear that so long as the majority of people in Northern Ireland wished to remain part of the United Kingdom, that the Republic of Ireland recognised that fact and recognised that they had to stay part of the United Kingdom.
We were very careful to avoid, therefore, any solution that was reunification of Ireland. That is avoided. Any solution which was joint sovereignty, which would have been anathema to the Unionists. Any solution which was joint authority, which would have been anathema. So we had avoided all of those things which caused so much trouble before, but the fact is that in Northern Ireland the majority still wishes to stay part of the United Kingdom and I frankly hope that it will continue to do so, and believe it will continue to do so.
But you have got two traditions, and we simply must make renewed efforts to reconcile them together. We must. There are in some countries in the world strong minorities and they all have to learn to live together with majorities amicably. It was to try to achieve that and to try to provide a new impetus, a new way, to it that we entered into this, and we shall continue to do so. Otherwise, you are going to go on with division, with the kind of problems that we have been having, for years. It does not seem to me to be unreasonable. Indeed, it would seem to me to be both reasonable and had Government not tried, it would have been reprehensible if we had not tried. [end p23] It is reasonable to say: “Look! We have had these problems for a long time now. You all live in Northern Ireland. It is part of the United Kingdom. We agree it is going to stay part of the United Kingdom so long as the majority wish. Now we have got to make supreme efforts to reconcile the two communities and get them both involved in the process of government.”
That is what we have done and that is what we shall continue to do, and I said: “Do not forget, we have lost over 2,000 people through terrorist attacks!”
Question
Prime Minister, you and President Mitterrand are shortly going to be announcing a decision on a Channel fixed link. I wonder if you could tell us, first of all, do you expect to be announcing a specific project of proposals that have been submitted or are you trying to work out a compromise between them, and more generally after that, could you tell us what you really think a fixed link to Europe is going to mean for England? What do you think is the true significance of this kind of project?
Prime Minister
First, I am very much for it. It seems to me something that we can do for our generation. We have not had many exciting projects. I think many people would love to have an easier way of getting across to Europe than having to book on [end p24] an aircraft or book on a ferry, and you could get that either by a rail link or by a road link. We do not know which or whether it will be both. I think it will be exciting to young people. I think it will bring new trade, new business, a new sort of atmosphere, and therefore I am very much for it.
There are a number of different proposals which we are looking at and it is possible that each one looking at the other's proposals might think that they have things in common and they could get together. What we are saying is that it must be private-sector-financed. Therefore they will have to look to see what can be financed. But does it not strike you as both natural and exciting and reasonable that we should do something? I hope to see one in place before the end of the century.
Question
very faint but regarding more than one of the proposals
Prime Minister
We are still negotiating. No decision has yet been made.
Dave Mason (Associated Press)
Prime Minister, what do you see down the road in 1986 in East-West relations, specifically arms control? Do you think that President Reagan can do business with Mr. Gorbachev, taking a line from what you said in the past? Secondly, what are [end p25] your plans for the coming year? Would you consider going to Moscow to return Mr. Gorbachev's 1984 visit, for instance?
Prime Minister
Yes, I think that they can do business together. I think you do business when you make a pretty accurate assessment of the other's position and their room for maneouvre and what their objectives are and what your objectives are, and what you have in common in spite of a totally different way of life. Because Mr. Gorbachev is obviously a deeply ingrained Communist. We are deeply ingrained in the system of freedom under the law and free enterprise. We both have to live on the same planet and people have something in common: people want peace, security and a higher standard of living. Those are the things we have in common. That is the basis on which you can do business.
I think that one of the most remarkable things that came out of the Summit was that the television of the final press conference, the television of a number of things in Geneva, right into the heart of the Soviet Union … they had, I believe, often been given the impression or had received the impression that the United States may attack. We have never been able to get across the view that NATO is a defensive alliance and defensive only—we are not an attacking alliance. They sometimes have been given the impression that therefore the United States is a great danger from the attack viewpoint. Then they see President Reagan. They see him as a very impressive person, a most humane person, the most honest person, giving his views. [end p26] They saw it again at the New Year message. And so what you are getting across, people-to-people, is a different impression from one which has been given before. That is very very good, because in my view, even in a closed society like a Communist system, you cannot totally ignore public opinion and if public opinion has a chance to form that is a factor which must be taken into account. And we are used to this in the West. They are not quite so used to it there. So if you look at it from that viewpoint, quite a lot has been achieved. I think it is an excellent basis from which to go forward to secure arms control agreements. Negotiating the nitty gritty is always more difficult than the generalities and you have to watch that you do not in any way undermine your own secure defence by giving something that would reduce your deterrent factor or the security of your defence. You have to watch your verification.
I do think think that we have a better basis. That was really one of the reasons I said I think we enter 1986 with much more hope and confidence than previously.
I have no plans to go to Moscow. I think at the moment the action is between the United States and the Soviet Union. Mr. Shevardnadze we are expecting to come here and we will always do our part. As you know we are always closely in touch with the United States and also with our European partners, through NATO. It is NATO that has been our shield, not any one country. It is NATO. It is the togetherness and the total loyalty of the alliance which has been our strength. We, as you know, took Cruise missiles first; Germany Cruise and [end p27] Pershing. Then, as you know, Holland and Belgium and of course Italy. But you know, the alliance stood staunch in face of a lot of propaganda from the Soviet Union. The view that I take is it is the staunchness of the alliance, and I do not want anything ever to undermine it. Yes, I am very pro-European. I am pro-European as part of the NATO alliance.
I regard the centre of freedom as the whole of the Atlantic Community.
Question ( “… . Financial News” )
Would you comment on some criticism in the City that the Government acted precipitously in raising interest rates in response to sterling easing on oil price worries, as this will force the Government to raise already high rates greatly if oil prices do start to fall sharply?
Prime Minister
I refer you to Sam Brittan 's article, I think it was yesterday. The inter-bank rate had gone up very considerably in the City as you know, very considerably, and is still actually slightly above the present rate, but there is nothing unusual in it being slightly above. So the market had in fact taken it up. Now in fact of that, if you do nothing, you get round tripping on a considerable scale as people borrow money at one rate and promptly lend it into a market at a higher rate and it is too jolly easy and then you really do get enormous [end p28] problems. So the market had in fact taken it up and that was our problem. To do nothing would have led to inflation, the creation of artificial money, as people went into round tripping considerably.
I often ask why it went up. You ask sometimes why your temperature goes up, but you do not delay doing something about it until you know why. You actually have to treat the symptoms, though you might not even wholly know their causes. We had to respond to the market. They had already taken it up.
Question (Inaudible)
Prime Minister
I do not know what will happen but you know oil is only 6%; of our gross domestic product. I think people often forget that. Oil is only 6%; of it.
Question (United Stations)
An Under-Secretary of State, I believe Mr. Whitehead, is coming over next week. Obviously somebody in Washington feels sanctions will work and possibly Britain, West Germany, Italy together could apply some pressure. Will your Government meet with him and is there anything he can say or offer to convince you to consider economic sanctions?
Secondly, what do you say to critics who say possibly your statement should not be sanctions do not work, but sanctions do not work for the economy of Britain? [end p29]
Prime Minister
No, in the last part of your question, you have just not taken into account something which I have said. I came into the Rhodesian problem when we had full mandatory sanctions for over 12 years—full mandatory United Nations sanctions, Security Council Resolution. They had not worked for 12 years. They do not work. You know full well that if you get some countries observing sanctions and others not, you know full well the speed with which goods get through and the fact is they do not work.
Question
Somebody in Washington obviously believes they do otherwise they would not be sending over officials to try to encourage you. …
Prime Minister
Of course we will see Mr. Whitehead. I expect that the Foreign Secretary will see him; there can be no question that will see him and discuss and consult with him, but we are in the position to say look at Rhodesia.
Question
The Westland affair seems to have highlighted a conflict in this Government between its commitment to the free market and its commitment to coordinated European defence procurements. Can you tell us how you stand on this and if there is any concern about sending mixed signals to your European partners? [end p30]
Prime Minister
I do not think we have made the fundamental point clear enough. Westlands is a private sector public limited liability company. Its board of directors has legal obligations to its shareholders and comes under the law. The Government is not baling out Westlands in any of its difficulties. Therefore, we do not have locus as to which solution it favours. It is a private sector public limited liability company, and we are leaving it … a private sector PLC.
Now if that is so, then it is not for us to intervene in the choice of directors responsible to shareholders and the way in which shareholders decide, because it is a private sector public limited liability company. That is the fundamental thing.
Question
But in a conflict between the two commitments, where do you stand? Which would you give higher priority to?
Prime Minister
I do not. I have repeated it time and time again. It is a private sector PLC. It is therefore for the shareholders to decide. It is for the board to decide what they recommend, if anything. It is for the shareholders to decide which they accept. The Government as such does not have locus because we said right at the beginning: “Look! We are not going to bale out Westlands” and therefore it follows that if we make a choice for them, we are making a choice without a locus because it is a [end p31] private sector private limited company.
Robin Knight (US News and World Report)
You gave us the good news at the start of this session: six years of economic growth, strong balance of payments and so on.
Prime Minister
I felt if I did not, no-one would!
Robin Knight
Quite so! I have been back in this country for a year now after nine years living abroad and I am very struck by how gloomy people are, how pessimistic they are, despite the good news that you have put forward, and I wonder if you could explain from your point of view why this seems to be so.
Prime Minister
I think first we tend to be that kind of people, but secondly, I think there is another reason. I think that people tend to judge economic success by the unemployment figure and unemployment is one of the most difficult problems because even though we have created in the last two years more jobs than any other country in Europe, the numbers of school-leavers in a period of ten years greatly exceeds the number of people retiring. So even though you create more jobs, you have got more people in the population of working [end p32] age—extra jobs that you are able to create. For example, there are nearly 1½ million more people in the population of working age than there were 7 years ago, so you have got to go very very fast. The position will not change until 1990, when it reverses. There are fewer school-leavers than there are people retiring. And then, if we are still doing job creation on the scale we are, and then when you have got that, the position becomes radically different. So people tend to judge by the unemployment factor. Not by the number of jobs that are being created, which in the end is the important thing, because it will overtake, we hope, the other factor, but by the numbers of unemployed and the numbers of unemployed are very worrying indeed and that is why we have got the Youth Training Scheme. We have just had our 1,000,000th young person through the Youth Training Scheme, and why we have got the Community Programme which is for people who have been unemployed—younger people—more than six months, which are jobs in the community, to help people to get back into work, back into the habit of work. And then, of course, why we have done things like, for example, saying on lower-paid people we would reduce the National Insurance Contribution, so that encourages, we had hoped, employers to take on more young people. But of course, they are concerned about higher productivity and being competitive and they are getting competitive and I do sometimes say to them:
“Look! You blame me for unemployment while you are making people redundant! It so happens that I do not blame you for making people redundant if that is the price of keeping [end p33] your company in business, but please, would some of you also create new products and extend your business, because what you want is a faster rate of the growth of new small businesses” and in that we have not the same enterprise culture yet that you have.
That is quite long, but you can see that it is a possible explanation.
Question
Are you reconciled to going into the next election with the same sort of level of unemployment?
Prime Minister
I am not reconciled to anything save doing the utmost I can to solve Britain's problems and I do not know of any way to do more and if I did I would do it.
Question (Washington Times)
Of the whole of the national leaders in the world, you are and seem to be perhaps the closest friend and ally of President Reagan and on the question of Libya he appears to be reacting particularly to the strength of feeling within his own country. … . First of all, do you regard Libya as a terrorist state? Secondly, do you have any information as Chancellor Kohl certainly had of the direct involvement of Libya in the Rome and Vienna situations? Third, going back to the point of being a close friend, do you not think that the Americans would [end p34] expect to hear more from you? Rather than saying that sanctions do not work, to do something more like putting restrictions on Britons working in Libya or on restricting Libyan flights to British territory?
Prime Minister
Look! You do not have to tell me about Libyan terrorism. We saw it on our streets, the murder of a policewoman by shots fired from the Libyan Embassy. We broke off diplomatic relations, you will recall. We have not restored diplomatic relations since then. We ceased to supply defence equipment to Libya.
Now we have not gone further than that and we do not intend to go further than that, because as I said, first, sanctions do not work; secondly, even in Europe, I do not think that there could be any consensus that sanctions should go on. There are countries in Europe which have very close relations with Libya. We are actually represented in Libya by the Italian embassy, because you have to have someone. You have some people there. The United States has some people in Libya. We have quite a lot and you have to arrange for someone in someone's embassy to look after the interests of your people.
I am not quite sure the number you have there now. I think it is something like 5,000 we have there. We did have some considerable problems when we had people in the Libyan embassy here after that shooting and all of ours for no reason there rounded up. [end p35]
I am very much aware of the intricate and difficult problems that have to be faced. I think you must also look at … I am not sure who does the most trade in Europe though I have got a pretty good idea. …
Voice
Italy.
Prime Minister
That is what I thought, yes, because they have had a historically close relationship. Quite a bit. And so I do not think that there is any possibility of getting the whole of Europe to agree to sanctions first the reason which I have given, but do not accuse us of not having done a good deal. And we have occasion to do it, and of course, one looks to see sometimes where the IRA gets some of its money and equipment from. We cannot prove things but obviously one is suspicious that countries do terrorist training help terrorists from many different causes. We have no proof of that but we have of Yvonne Fletcher!
Dave Winter (Christian Science Monitor)
While appreciating the point that Westland is a private company, there are nevertheless implications for your government, specifically if the Sikorski bid should succeed, what would be the response of your Government to warnings that have been coming out from European leaders that Westland would be shut out of the European helicopter market and secondly, while [end p36] appreciating your point that you do not want to push either solution, your reluctance to push a pro-European solution might be interpreted in Europe as a lack of commitment to Europe and how does this affect your position in trying to push for a united voice among European leaders on foreign affairs if this includes defence matters as well?
Prime Minister
The European Economic Community is not a defence entity. It includes among it a country that is neutral. The defence entity is NATO. I will give you a letter that I wrote to Sir John Cuckney on the general question which said that we would fight for Westland collaborative projects in Europe regardless of which decision the shareholders took and pointing out that Europe needed the collaboration of a British company which it will still be—of a British company in collaborative projects and of course needed the markets as well. We are not dealing with take-over bids. We are dealing with a financial reconstruction. We are dealing with a company which, after the financial reconstruction, will continue to be a British company.
Question (AP Dow Jones News Service)
How high are you willing to see interest rates go to control inflation and why are you using interest rates to try to control inflation? [end p37]
Prime Minister
Because once your interest rate had gone up in the City, that is what you have to use to control inflation. Otherwise you will get the artificial creation of money which will come through in inflation later. We took action, I hope fairly quickly, and that made clear therefore our intention to continue to get inflation down.
How high do you expect interest rates to go is a common question. You have to respond to the circumstances with which you are faced and that is what we have done.
Question (Forbes Magazine)
In the last three months, the Group of Five has succeeded in bringing down the dollar significantly. In the last week it has stabilised at about $1.45 to the pound. Do you believe the dollar should decline further or do you believe like the Japanese that perhaps it has declined enough?
Prime Minister
I do not think I am going to answer that question because it really involves what I think would happen or should happen to the markets. There are only certain things one can do to influence the markets and those things you have to do. You have to control your inflation and if you get a sudden surge on your interest rate you use one of two things, either your reserves or you use your interest rates and we prefer to use interest rates because otherwise your reserves are used very quickly and in fact, once you use your reserves if you are not careful speculators tend to [end p38] pile in, unless you have got an agreement between several of you as we had at the G.5. But I do not know quite what will happen to them and if I did it would be a great pronouncement of headlines so I am not going to get involved in that.
Question ( “Business Week” )
Has the fluctuation in sterling caused any rethinking about joining the EMS?
Prime Minister
We do not yet think that the time is ripe for us to go in the EMS.
I think there is one enormous difference between us and the rest of the currencies in the EMS and that is that we do … people regard us as having an oil factor in the price of our currency. As I have said, the oil factor is only 6%; of GDP. They seem to regard it more highly, but the fact is that they do regard it as that.
The other factor is that apart from Germany, I think we are the only country that has absolutely no foreign … well we are one of the countries that has no foreign exchange controls. Most other currencies in Europe have foreign exchange controls. That of course is a very considerable difference and of course we are traded, apart from Germany, much more wider than some of the other currencies, so there are a number of differences and therefore we do not yet think the time has come for us to join the EMS. [end p39]
Question
What factors would change. …
Prime Minister
I have indicated some of the factors which are considerable and at the moment I suppose … . well first there is the oil factor and I do not know how long people will continue to look at us as having perhaps a bigger oil factor in the sterling price than we have warranted.
Secondly, of course, there is a great deal for the European countries to do to get monetary systems more closely together than they are. As I just pointed out, we have no exchange control, foreign exchange control; neither has Germany. That is not true of many of the other countries and that is a colossal difference, particularly when you get a run on your currency.
Then countries run very different monetary and fiscal systems. Those again are colossal differences. I think in the end, if I might put it this way, many of them come closer to Thatcherism than they had ever intended. That is not because it is Thatcherism; it is because it is common sense!
Frank Melville (Time Magazine)
How seriously do you take the threats of the Unionist leaders in Ulster to make the province ungovernable by withdrawing … .
Prime Minister
It seems very strange to proclaim your loyalty to a [end p40] unionist link and then to say we are going to make a country ungovernable by the unionist link on an agreement which has no joint sovereignty, has no joint authority, but which leaves the decisions north of the border solely in the hands of the United Kingdom Government.
So it would seem very very strange to proclaim your loyalty to the union by making it ungovernable under the union and, of course, we would take every step in our power to keep the government and the supplies running north of the border.
We will do everything in our power. There are quite a number of British troops there already as you know in aid to the civil power, but the main point that I used is “Look! Do just think. Is it the right way to proclaim your loyalty to the union by attempting to make a country ungovernable under the union?” and I do not think myself that they would succeed in making the country ungovernable.
You have in fact to give an agreement a very good chance to work, if the reason for the agreement is a right one. It is right to expect a majority and a minority community to reconcile their differences and live together in a country north of the border to get the greater peace and stability. Otherwise we go on having enormous difficulties without any possibility of hope.
Question (Inaudible)
Prime Minister
Firm, firm.