‘The Awkward Partner’: 1975–1984
‘Our decline in relation to our European partners has been so marked that today we are not only no longer a world power, but we are not in the first rank even as a European one.’
Sir Nicholas Henderson, UK Ambassador to France, June 19791
‘…the UK really did have a lousy deal. The Agricultural Policy, which we had always known worked against our interests, was out of control … it was also clear that in a few year’s time the UK budgetary contribution would rise so much that we were quite likely to find ourselves the nation making the largest contribution.’
David Owen, Foreign Secretary 1978–19792
‘I must be absolutely clear about this… I cannot play Sister Bountiful to the Community while my own electorate are being asked to forego improvements in the fields of health, education, welfare and the rest.’
Margaret Thatcher, 19 June 19793
After endorsing their politicians’ decision to commit Britain to a supra-national form of government by easily the largest popular vote in their electoral history, the British people emerged from the referendum campaign to a bleak prospect. Twenty-five years earlier Britain had been the second richest country in the world but, in the mid-1970s her industries were inefficient, over-manned and strike-ridden, kept afloat only by annual injections of billions of pounds of taxpayers’ money. Nightly familiar on the nation’s television screens, trade union leaders such as Jack Jones, Hugh Scanlon and Joe Gormley were viewed as the most powerful men in Britain. Within a year Chancellor Denis Healey would be calling on the International Monetary Fund for the largest loan to which he was entitled. In economic terms, Britain was being scornfully dismissed as ‘the sick man of Europe’.
To all these problems, membership of the EEC seemed irrelevant. Although the British people had voted to stay in the Common Market, many imagining that this meant little more than a free trade area, its activities could scarcely have seemed more remote. The overriding concern of the politicians and the media was now again with domestic affairs. So began the period when Britain was to win her reputation as the Community’s ‘awkward partner’.
Although this would only catch the imagination of the British people a few years later when, in the early 1980s, Thatcher became engaged in her seemingly interminable battle over Britain’s budget rebate, the tone was set from the moment Wilson arrived at the first European Council after the referendum. His government, he announced, would stand up for British interests ‘no more and no less than our EEC partners’.4 As recorded by Professor George, this statement was seen in Brussels as alarmingly ‘negative’. But all Wilson was suggesting was that, in pursuing her own national interest, Britain now intended to follow the example set most conspicuously by France. Yet, somehow, whenever she did so, it was she alone that was considered awkward, obstructive and not ‘communautaire’.
Odd man out
In 1975, Britain’s difficulties in fitting in with her continental ‘partners’ involved such technical issues that they were scarcely noticed by the media. For instance, the Community proposed to ‘harmonise’ controls over effluent discharges into rivers. The exacting standards proposed were based on pollution problems associated with such sluggish, slow-flowing rivers as the Rhine. The British pointed out that, for the faster-flowing rivers of their island, such costly standards were not necessary. But it was argued that if Britain was allowed to adopt standards less rigorous than those imposed on the continent, her industries would gain an ‘unfair’ advantage. Britain’s objection was accepted, but the incident left a bad taste.5
There was a row over the Regional Development Fund. Under the EEC system, grants from Brussels could only be given under a principle known as ‘additionality’, whereby the money had to be used for projects ‘additional’ to those national governments were willing to fund. Given Heath’s intention that regional funding should help compensate Britain for the budgetary imbalance, the Treasury wanted to use the money to subsidise projects which would otherwise have been paid for by UK taxpayers. Britain’s failure to accept the rules was cited as evidence of a lack of good faith.
A more general charge against the British centred on the attitude shown by Callaghan. According to a contemporary comment:
‘The Foreign Secretary’s hectoring manner in the Council of Ministers would conspire to lose even a cast-iron case. He’s a man to whom rudeness comes naturally in formal negotiations, and is much resented for it. In presentational terms, his arguments in the Council are frequently disastrous.’ 6
This mix of Community sensibilities and supposed British ‘awkwardness’ took a more serious turn when the Community set out to adopt a ‘common policy’ on energy.
The problem here was that Britain was just discovering huge reserves of oil and gas in the British waters of the North Sea. Following the world energy crisis which resulted from the quadrupling of oil prices after the Yom Kippur war, the US Secretary of State Dr Henry Kissinger had called a conference of 13 major oil-consuming nations in Washington, including the EEC Nine, in a bid to establish a common approach to the petroleum cartel, OPEC. Britain, together with seven of the Nine, was prepared to accept the US proposals. The French refused, leading to a theatrical attack on America’s position by foreign minister Michel Jobert.
To Kissinger’s anger, the French then summoned another conference for Europeans only, in a bid to hatch a separate deal with Arab oil producers. However, the UK government now expected that, within a few years, Britain would be exporting large quantities of oil, thus solving the interminable balance of payments problem which had dogged Britain since the war. This meant that, while her continental partners wanted to see the price of oil reduced, Britain wanted it kept high.
This divergence came to a head through French attempts to hold another conference, in June 1975. They refused to take account of Britain’s new status and instead agreed directly with the OPEC oil producers that the rich oil-consuming nations should be represented at the conference only by Japan, the USA and the EEC acting as a single entity. Callaghan, not having been consulted, immediately declared that Britain, with her separate interests, could not be represented by the EEC, with its different interests.
This aroused the ire of her EEC partners. Despite France having blocked the original US-inspired initiative, then having set up its own conference, then having negotiated arrangements without referring to Britain, it was the UK which won odium as the ‘awkward partner’. At the European Council meeting in Rome in December, Wilson came under heavy fire from Schmidt, who is reported to have shouted at him that a country with one of the weakest economies in the Community was not in a position to negotiate on such issues without heed to the consequences.7
In the end Wilson gave way, accepting EEC representation, but only on an assurance that the Community would argue for a minimum floor price for oil. Though getting what she wanted, as George put it, Britain’s stance had cost even more of her diminishing goodwill with her partners. ‘The whole episode had been handled badly,’ he wrote, ‘and it is difficult to see any good reason for this other than stubbornness.’ 8 He failed to explain whether, if France had suddenly discovered massive new oil reserves, she would have behaved differently.
Energy was not the only issue now straining relations between Britain and the rest of the Community. There was also the contentious problem of fishing, given fresh impetus on 1 January 1977 when, after the Third United Nations Conference on the Law of the Sea (UNCLOS), the new 200-mile fisheries limit was adopted by most of the world’s fishing nations, including the members of the EEC.
The declaration of 200-mile limits by other countries meant that vessels from Community member states would now be excluded from rich fishing grounds off Norway and Iceland. This was of particular relevance to Britain’s fishing industry, because a large part of her fleet was made up of ‘distant water’ trawlers, based in ports such as Hull and Fleetwood, fishing across the North Atlantic, from Norway to Iceland and Greenland. One reason why many British fishermen had accepted the Common Fisheries Policy was that they assumed this deep-water fishing could continue. But now, it seemed, these waters could be barred to them. Already 1975 was seeing the height of the so-called ‘Cod Wars’, with British vessels being forcibly expelled from Icelandic waters by armed gunboats. The UK’s deep-water fishermen therefore turned their attention to waters nearer home, where, under international law, Britain was about to extend her own limits to 200 miles through the 1976 Fisheries Limits Act.
At a meeting in Edinburgh in April 1975, British fisheries organisations urged that Britain should now press for all non-EEC members to be excluded from its new 200-mile limit, with a 100-mile limit to be reserved for British vessels only. By way of compromise, the government agreed to press for the establishment of exclusive national zones of at least 50 miles. Predictably, the French and the Dutch demanded implementation of ‘equal access’.
At this point the full implications of what Heath had given away finally began to dawn on UK fishermen. In February 1976, the Commission proposed that it should manage the fishing resource in all but inshore waters, to be parcelled out on the basis of national quotas. Despite protests from the British and Irish governments, at a final meeting in The Hague in November 1976 the Commission came up with its proposals for a common ‘conservation policy’. The seas around Europe would be divided into fishing areas. Every year the tonnage of each species of fish allowed to be caught in each of these areas would be fixed, as the ‘Total Allowable Catch’, or TAC. This would then be allocated between member states on a quota system.
After fierce argument as to how this should be decided, it was eventually agreed that the divisions should be based on ‘historic catches’, measured over a specific ‘reference period’. This was modified by an additional allowance for areas which particularly depended on fishing for employment, known as the ‘Hague preferences’. It was finally agreed that, once national shares of the catch for each species had been established, member states would continue to receive the same proportionate share by a principle known as ‘relative stability’.
Bitter squabbling over how all this could be implemented was to continue until 1983. But it was already obvious that the biggest loser would be Britain, which had thus suffered a double blow. Not only was the new 200-mile limit now forcing her deep-water fishing fleet out of business, she was now discovering that, under the same rule, she had lost to the Community waters containing four-fifths of western Europe’s fish. They were to be allocated to her ‘partners’ under the ‘equal access’ provisions which Heath had conceded and Wilson had made no effort to regain.
‘A lousy deal’
On 13 April 1976, Wilson resigned suddenly. He was succeeded as prime minister by James Callaghan, who made Anthony Crosland his Foreign Secretary. Among the problems they had to confront was the need to create a fully elected ‘European Parliament’. When the ‘Assembly’ was set up in 1958, it was made up, like its predecessor in Monnet’s Coal and Steel Community, of delegates nominated by national parliaments. But the Treaty of Rome had included a commitment that the Community should have a parliament elected by the people of Europe.
When Giscard d’Estaing became president of France he put this on the agenda, and at the European Council in September 1974 it was agreed that the first elections should be held in 1978. Giscard’s conversion to this project, reversing his party’s previous policy, stemmed more from political calculation than conviction. For domestic reasons, he needed the support of the smaller independent parties in his National Assembly, for whom ‘commitment to European integration was an article of faith’. 9 Offering an elected Parliament for Europe was enough to woo them into his governing coalition. Wilson had agreed to this as part of his renegotiation package, and Callaghan felt obliged to abide by this commitment. He therefore asked a parliamentary committee to look into the mechanics of any election, which duly concluded that a Bill would have to be introduced by the start of 1977 if elections were to be held on the time-scale proposed.
While Giscard had won domestic political advantage by this proposal, however, it soon became clear that the same was not true for Callaghan. At his first Labour Party conference, in October 1976, the left-wing dominated NEC had tabled a resolution rejecting the idea of an elected European Parliament, on the grounds that it would compete with national parliaments. This, they predicted, would strengthen the Commission, thus increasing the power of ‘Brussels bureaucrats’.10 Conference passed the resolution, and, to avoid a damaging row with his own Party, Callaghan put the matter on the back-burner.
It was thus not until late 1977 that a Bill was introduced to permit direct elections, making it impossible to meet the timetable of 1978. There was no time for the Boundary Commission to define the new Euro-constituencies. Callaghan attempted a short-cut, but this evoked threats of resignation from left-wing Cabinet members. Thus, when the Bill came to Parliament, Labour MPs were allowed a free vote. The Conservative opposition, combined with the votes of 115 Labour ‘rebels’, defeated it. Callaghan was forced to tell his EEC ‘partners’ that Britain could not hold direct elections in 1978. ‘Because of the priority given to domestic political considerations,’ George was to write, ‘Britain again appeared to be in breach of the spirit of the Community.’11 He seemed untroubled that it was only French ‘domestic political considerations’ which had determined the timetable in the first place.
With Britain thus coming under increasing fire, the next opportunity for her politicians to shine came with the first occasion when she took on the rotating presidency of the Council, from January to June 1977. This began well enough with Wilson’s new foreign secretary Anthony Crosland assuring the European Parliament on 12 January of the importance attached by the British government to the co-ordination of foreign policy – a process that had acquired the title of European Political Co-operation (EPC). Crosland’s deputy was a rising star in Labour’s ranks, the 38-year-old Dr David Owen. He later recalled that his first task had been to brief himself on the European Community. As he did, he found
‘…that the UK really did have a lousy deal. The Agricultural Policy, which we had always known worked against our interests, was out of control – big surpluses were building up in milk products, olive oil and wine and costs were soaring. It was also clear that in a few years’ time the UK budgetary contribution would rise so much that we were quite likely to find ourselves the nation making the largest contribution. We also had to cope with a Fishing Policy which had been cobbled up by the Six members on the eve of the Community’s expansion and which could hardly have been more unhelpful to UK fishing interests.’ 12
In the early weeks of his new role, as Owen confronted the reality of Britain’s membership of the Community, he was tempted to think that Wilson had been right in 1972, and that the terms had been unacceptable.13 His main problem, however, was his own officials. With ‘notable exceptions’, he found his senior civil servants so dismissive of the reality that he despaired of being able to develop a tough negotiating stance.14 The problem, he wrote, was deep-seated.
‘Too many Euro-diplomats were reluctant to embark on any course which put us at serious loggerheads with the majority of Community members. They were intelligent people but they never had the tenacity to fight for British interests in the same way as French diplomats fight at every level for France.’ 15
The most contentious issues confronting the British presidency were those to be handled by the Agriculture Council, presided over by Britain’s new agriculture minister, John Silkin. At the time, Labour had only a small majority, haemorrhaging through by-election losses, and many fishing constituencies were Labour marginal seats.16 Silkin, therefore, was eager to show that he was defending Britain’s interests, and when the French led opposition to British and Irish demands for exclusive 50-mile fishing zones, he was not prepared to compromise. In the event, no lasting agreements were reached during the British presidency, not least because of what the other member states considered was biased chairmanship.
Again, Britain, in defending her national interests, was not being ‘communautaire’. Just as contentious was Silkin’s refusal to accept a proposed 1.5 percent increase in CAP funding which, because of the distortions in the system, would have translated into a three percent increase in British food prices. This was at a time when the government was struggling to contain price increases through a voluntary pay freeze policy. That the British, because of ‘narrow national interests’ should block an increase, most of which would go to French farmers, caused further resentment.17
However, in the fifth month of the presidency, another milestone in Britain’s relationship with the Community arrived, one not mentioned by George. On 28 May 1977, the Cabinet committee dealing with Common Market issues was told that the Commission had successfully appealed to the ECJ to have ruled ‘out of order’ pig meat subsidies paid by the British government, and had instructed that the subsidies be stopped ‘forthwith’. Tony Benn was present at the meeting. He asked whether this was the first time that a European Court decision had been taken against the British government and was told it was. In his diaries, he continued:
‘Then I asked what would be the political effect of this on pig producers in the UK. John Silkin said it would mean in effect the destruction of our industry, the mass slaughtering of pigs and the abandonment of our processing plants in favour of the Danes… I wanted to be told explicitly – as I was – that I was a member of the first British Government in history to be informed that it was behaving illegally by a court whose ruling you could not alter by changing the law in the House of Commons. It was a turning point…’18
Unsurprisingly, following the British presidency, Callaghan set out to the 1977 Labour Party Conference a six-point plan for British policy towards the EEC, rejecting any increase in powers for the European Parliament, improving the ‘scrutiny’ procedures of the UK parliament, and asserting the dominance of national, regional and industrial policies. However, this only added further fuel to the fire. When he went on to call for the Community to admit Greece, Spain and Portugal because ‘the dangers of an over-centralised, over-bureaucratised and over-harmonised Community will be less with twelve than with nine’,19 Britain’s disgrace in the eyes of her partners seemed complete.
Towards ‘European union’
Away from these difficulties centred on the British, the Community itself was again concerned with its real agenda: ever greater integration. As had been the case ever since the Werner and Davignon reports of 1970, this centred on what were now the Community’s two chief aims: to establish economic and monetary union, and a common foreign policy.
In 1971 the USA’s abandonment of the 1944 Bretton Woods agreement had thrown international currencies into disarray. In response, most nations had allowed their currencies to ‘float’ freely against each other on the international markets, but this brought with it the potentially destabilising effect of excessive fluctuations.
To tackle this, Europe’s central bankers had met at Basle in 1972 to create a European Exchange Rate Agreement, known as the ‘snake’. European currencies would be kept within a band of ±2.25 percent, thus avoiding excessive fluctuations. In addition to the Six, Britain, Sweden, Norway, Denmark and Ireland also took part. The ‘snake’ did not prosper. Britain’s participation lasted only six weeks before speculation forced her out. Italy followed shortly afterwards. France left in 1974, rejoined the following year and finally left in 1976. Only West Germany, Benelux and Denmark managed to keep within the margins, creating in effect an expanded Deutschmark zone. By the mid-1970s, therefore, any hope of implementing the Werner proposals for economic and monetary union seemed to have foundered.
Once an idea has entered the collective mind behind the ‘European construction’, however, it will always re-emerge. In early 1974 the Commission set up a study group to examine the prospects of achieving EMU by 1980. Chaired by Monnet’s former close associate, Robert Marjolin, the group included two British representatives, Sir Donald McDougall, the British government’s chief economic adviser, and Andrew Shonfield, now director of the Royal Institute of International Affairs. Their report in March 1975 stated uncompromisingly that ‘national and economic policies have never in twenty-five years been more discordant, more divergent, than they are today’. 20
This had led to a succession of monetary crises, and the problem, the group argued, was that there had been a lack of political will by the Community to take advantage of these crises.
‘Like all crises, they could have been the occasion of progress, by provoking a crystallisation of latent wills. Great things are almost always done in crises. Those of recent years could have been the occasion for a leap forward.’21
This was an early exhortation to use what was to become a major tool of the ‘project’: the ‘beneficial crisis’. Again and again some headline-making crisis would be exploited to justify extending the Community’s powers, thus furthering integration.
In this instance, the problems arising from floating exchange rates were used to revive the idea of economic and monetary union. Marjolin’s committee was in no doubt of the need to vest in supranational institutions ‘all the instruments of monetary policy and of economic policy’ currently held by national governments, to exercise these powers ‘for the Community as a whole’. The ‘common institutions’ would have to include a European ‘political power’, a Community budget and a central banking system, all of which would have to act ‘in a comparable way to those of a federal state’.22 Community taxes would be vital, to enable funding to be transferred to less-developed regions.23
The Marjolin Report was soon followed by another, produced by Belgian prime minister, Leo Tindemans. Published on 29 December 1975, it had the beguilingly simple title The European Union. It began by regretting that ‘the construction of Europe’ seemed to have ‘lost its air of adventure’.24 The ‘European idea’ was ‘partly the victim of its own successes’. But ‘an unfinished structure does not weather well: it must be completed, otherwise it collapses’, and one ‘basic requirement for achieving a European Union’25 was a common economic and monetary policy. But it would also need common foreign and defence policies, complete with a ‘European armaments agency’.26
Particularly significant was Tindemans’ view that, for ‘an integrated economic and monetary unit to operate harmoniously’, large-scale transfers of funds from the richer areas of the Community to the poorer regions would be needed. This would require a full scale ‘regional policy’, with much of its funding directed through the Community budget. Tindemans also recommended a policy for forging a ‘People’s Europe’ through ‘concrete manifestations of the European solidarity in everyday life’.
He wanted to replace both the Council of Ministers and the Commission with a new supranational body. This ‘government of Europe’ would be responsible to and elected by a more powerful European Parliament, which would include a chamber directly elected by the ‘peoples of Europe’ and a ‘Chamber of States’ appointed by national governments. ‘A return to intergovernmental co-operation would not help solve European problems,’ Tindemans decided.27 His final proposal, to speed up the process of integration, was a two-speed ‘Europe’, with an inner core moving faster towards political union than those states which were less committed. But this, Tindemans stressed, did not mean a ‘Europe à la carte’. Every country would have to work towards the same final objective.28
Wilson was dismissive of the report, and when it came before the Luxembourg European Council on 1 April 1976, only days before he resigned as prime minister, he recorded that the discussions ‘led us nowhere’.29 Nevertheless, the proposals were to remain on the Community’s long-term agenda.
Enter Roy Jenkins
With talk of a single currency in the air, a central role in what happened next was about to be played by another British politician, whose view of European integration was very different from Wilson’s. When, on Wilson’s retirement, Roy Jenkins was heavily defeated by Callaghan in his bid to become prime minister, and refused the post of Foreign Secretary, he accepted an invitation to become President of the Commission.
Curiously, this fervent ‘Europeanist’ was singularly unprepared for his new post. As he wrote in his memoirs:
‘My conviction was complete, but my experience was negligible. The only ministerial portfolio that I held after Britain’s entry in 1973 was that of Home Department, which as its name implied, and its ethos confirmed, was about as far removed from the business of the Community as any within the compass of the British government. I participated in no Councils of Ministers. I liked to say, only half as a joke, that I kept my European faith burning bright by never visiting Brussels. And this was almost startlingly true. France, Italy, Germany I knew fairly well. But the embryonic capital of Europe I visited only on four occasions between 1945 and the date of my appointment as head of its administration. I was an enthusiast for the grandes lignes of Europe but an amateur within the complexities of its signalling system.’30
Having started work on 1 January 1977, Jenkins was later to admit that his first six months as President were not a success. In July 1977, after reading criticism to this effect in The Economist, he decided a new initiative was necessary. As to the direction it should take, he wrote:
‘I was much influenced by…Jean Monnet… On at least two occasions his ideas had been spectacularly successful in gaining the initiative, and in the second case he had done so by rebounding from a setback and switching from one blocked avenue to another which was more open… The lesson he taught me was always to advance along the line of least resistance provided that it led in the right general direction.’31
Jenkins concluded that he should throw his weight behind monetary union. In December 1977 the European Council supported Jenkins, and agreed to commission various studies on monetary co-operation. One was produced under the chairmanship of Sir Donald McDougall, head of the British government’s economic service. The Role of Public Finance in European Integration was notable for its suggestion that, if the Community was to assume the kind of economic responsibilities suggested by the Marjolin report, this would require it, on the model of the federal government in America, to control between 20 and 25 percent of the Community’s GDP, amounting even then to hundreds of billions of pounds.32
In the absence of any Community action, early in 1978 Giscard and Schmidt decided to back Jenkins. The outcome was to be the European Monetary System (EMS) within which was the Exchange Rate Mechanism (ERM), a more complicated version of the ‘snake’ (and eventual nemesis of the Conservative Party).
The two leaders outlined their ideas to the Copenhagen European Council in April 1978.33 They stressed the need to insulate a western European bloc from the monetary fluctuations triggered by Japan and the United States, a refrain which was persistently to preoccupy European leaders. Their answer was to propose various measures. These ranged from pooling 15 to 20 percent of the official reserves of the member states, to the increased use of a common currency unit in central bank transactions, designed eventually to be the basis for a single currency.34 Despite discussion of this ‘plan’ being a central feature of the Copenhagen Council, no formal decision was made. Instead, secret discussions took place between personal representatives of Giscard, Schmidt, and Callaghan – whose support was being canvassed – in order to forestall opposition from central bankers, finance ministries and, most importantly, the Bundesbank. According to one commentator:
‘The other six national chief executives, their finance ministers, and central bank presidents, as well as senior officials meeting in the Monetary, Central Bank and ECOFIN committees, were left in complete ignorance. The Danish prime minister, responsible for setting the Council agenda, heard nothing and assumed plans had been abandoned.’35
Schmidt was unable to convince Callaghan that Britain should join the EMS. Having just weathered a major sterling crisis, Britain was geared to stimulating economic growth, whereas the German plan was deflationary. In addition Callaghan was more interested in taking intergovernmental action through existing institutions such as the IMF.
At the Bremen European Council in July, therefore, after a series of bad-tempered meetings, Callaghan pulled out altogether. But, by promising additional funds for regional development, particularly to the Italians and the Irish, Schmidt won agreement from the rest of the member states. Jenkins left Bremen ‘in a high state of morale’ but ‘with substantially diminished hope of Britain at last learning its lesson and participating in a European initiative with enthusiasm and from the beginning’. His interest, he wrote, ‘became increasingly that of avoiding Britain holding up the advance of others’.36
Even without the British, agreement on the details of the new system was reached only with considerable manipulation. Its complexities defy description in a non-technical briefing, replete as they were with such terms as ‘parity grid system’, ‘asymmetrical obligations’ and ‘variable geometry’. What was significant, however, was that the final details of the agreement, during a bilateral summit between Giscard and Schmidt, were kept secret.
This meeting, in September 1978, was held at Aachen, where Charlemagne had been both born and buried as the first Holy Roman Emperor. Press officials of both governments stressed the historical reverberations of this joint visit to the throne of Charlemagne, evoking memories of the historic meeting between Adenauer and de Gaulle at Rheims, nearly two decades earlier. Giscard remarked that ‘Perhaps when we discussed monetary problems, the spirit of Charlemagne brooded over us’.37
The details were agreed at the Brussels European Council on 4 to 5 December 1978. From 1 January 1979, the ERM would come into being. Currencies in the system could join the ‘narrow band’, in which they would be permitted to keep within a maximum margin of fluctuation of 2.25 percent. When this margin was reached, there would be ‘automatic intervention with no limit as to amount’.38 Member states with floating currencies could opt for a six percent margin, the so-called ‘broad band’.
In the communiqué, the political objective was made very clear. The EMS would give ‘fresh impetus to the process of European Union’.39 After the Council, the heads of government and the president of the Commission issued a joint statement, emphasising its importance ‘for the future of the building of Europe’.40
Despite the euphoria, Britain’s refusal to join the ERM had rankled with Giscard. His revenge was to demand that France be given the same share of a planned increase to the Regional Fund as Britain.41 This effectively blocked any increase whatever, leaving Britain again uncompensated for the disparity of CAP funding. Furthermore Britain’s budget contribution was due to rise by nine percent, threatening within five years to make her the Community’s largest net contributor.
Of these events, Jenkins later recalled, ‘It still seems to me impossible to explain what had come over Giscard.’42 Were he familiar with the historical record he would have known that, as a French president, Giscard was acting entirely in character. After this ‘dismal anti-climax’ of a European Council, Jenkins observed, ‘the affairs of Europe retreated behind an opaque screen in a way I have never known them do before or since’. The key to what he was describing lay entirely in the conduct of the French government.43 Yet to Professor George, Britain was the ‘awkward partner’.
The ‘bloody British question’
The problem of Britain’s disproportionate contribution to the Community budget was now of serious concern to the Labour government. Known as the BBQ (British Budgetary Question), Jenkins and many others took to calling it the ‘Bloody British Question’.44 It was now poisoning relations between Britain and the Community more than any other issue.
By the end of 1976, even while transitional arrangements still applied, Britain was already the third largest net contributor to the budget – after Germany and Belgium. Soon she would be the second largest contributor, and within a few years, it was calculated, she would be the largest of all, paying subsidies to French farmers while the French blocked increases to regional funds. And now her politicians had the temerity to complain.
Complain they did. At a speech at the Lord Mayor’s banquet in the Guildhall in London, on 13 November 1978, Callaghan made it clear Britain as the largest net contributor, with per capita income ranking only seventh out of nine, was unacceptable.45 David Owen, who had taken over as Foreign Secretary after Crosland’s untimely death, told the House of Commons next day that even the current situation could not ‘be good for the Community, any more than it is for the United Kingdom’.46
Predictably, Britain’s complaints got short shrift. For sure, she had not been party to the original budgetary negotiations. But had she not accepted the arrangements as part of the acquis communautaire? Had there not been renegotiations? Yet now the British were saying, ‘no, we still do not like the rules; you must change them to suit us yet again’. The French simply blamed Britain for importing food from the Commonwealth, on which levies had to be paid. They could buy Irish, French or Danish produce. Not to do so was wilfully anti-Communitarian, and if they wished to reduce their contributions, all they had to do was to exercise Community preference.47 So it was all Britain’s fault. She was, after all, the ‘awkward partner’.
‘I want my money back!’
March 1979 saw an event which was to transform the politics of Britain and Europe. After the disastrous ‘winter of discontent’, when Britain had been paralysed by an avalanche of industrial disputes, the Callaghan government was defeated on a vote of confidence in the Commons by just one vote. The general election brought the Conservatives a clear majority of 44 seats. On 4 May 1979, Thatcher walked into 10 Downing Street, where she was to remain for 11 years. Shortly after she took office, the first direct elections for the European Parliament were held. During the campaign, Thatcher emphasised her ‘vision’ of the Community, in her words, ‘as a force for freedom’.
‘We believe in a free Europe, not a standardised Europe. Diminish that variety within the member states, and you impoverish the whole Community… We insist that the institutions of the European Community are managed so that they increase the liberty of the individual throughout the continent. These institutions must not be permitted to dwindle into bureaucracy. Whenever they fail to enlarge freedom the institutions should be criticised and the balance restored.’48
Yet a smaller percentage of the electorate turned out to vote than anywhere else in the Community and the results simply mirrored the voting pattern of the general election, giving the Conservatives 60 of 78 seats. The Conservatives’ apparent enthusiasm for ‘Europe’ was seen as ‘positive’ by many pro-Marketeers. Very quickly, however, Thatcher was thrust into the maelstrom of EEC politics, attending her first European Council on 21 to 22 June 1979. France hosted the talks, choosing Strasbourg as their venue in recognition of the new importance of the European Parliament. Already, there were signs that one issue above all was going to dominate the early days of Thatcher’s relationship with the EEC: the budget.
From the first, as Thatcher wrote in her memoirs, ‘my policy was to seek to limit the damage and distortions caused by the CAP and to bring financial realities to bear on Community spending’. She had already told Chancellor Schmidt that she would be seeking ‘large reductions’ and was hoping he would pass the message on to Giscard, who was chairing the Council.49 Her short term objectives were to have the budget question raised at the Council and to gain acceptance of the need for action, with a firm assurance that, at the next Council meeting in Dublin, the Commission would bring forward proposals to deal with the problem.50 But, as an indication of what was to come, she observed:
‘I knew that Chancellor Schmidt was keen that we should commit sterling to the ERM; but I already had my doubts about the wisdom of this course, which were subsequently reinforced. In any case, my announcement of our intentions as regards the “ecu” swap did not receive much visible welcome from the others: like other such concessions to the ésprit communautaire, it appears simply to be pocketed and then forgotten.’ 51
Her disillusionment, however, was quickly reinforced. She knew the budget issue had to be raised on the first day, because the final Council communiqué was always drafted overnight by officials, for discussion on the second and last day. During lunch, she had gained a ‘strong impression’ from Giscard that he would deal with the budget early on. But, when the meeting resumed, it became clear that Giscard was intent on following the set agenda. By the end of the formal session, almost everything had been discussed, except the one thing Thatcher wanted to talk about. She describes in her memoirs what happened next:
‘President Giscard proposed that as time was getting on and we needed to get ready for dinner, the matter of the budget should be discussed the following day. Did the Prime Minister of the United Kingdom agree? And so at my very first European Council I had to say “no”.’ 52
However, the lateness of the hour worked in her favour, proximity to dinner concentrating minds. She won agreement that the Commission would be instructed to prepare a proposal for the next Council. Nevertheless, even Jenkins conceded that Thatcher had been ‘very oddly treated’.53
The Dublin Council was not due until late November and, in the interim, Thatcher was determined to let the member states know she was serious about the budget. On 18 October, delivering in Luxembourg the Winston Churchill Memorial Lecture, she warned:
‘I must be absolutely clear about this. Britain cannot accept the present situation on the Budget. It is demonstrably unjust. It is politically indefensible: I cannot play Sister Bountiful to the Community while my own electorate are being asked to forego improvements in the fields of health, education, welfare and the rest.’ 54
In meetings with Schmidt and Giscard, she brought the topic up again. They ‘knew that I meant business’, she wrote. In Dublin Castle, after a friendly lunch at the Irish President’s official residence, Thatcher set out the British case, emphasising her commitment to the Community and her wish to avoid a crisis. But there was no meeting of minds.
‘Some, for example the Dutch prime minister, Mr Andries Van Agt, were reasonable, but most were not. I had the strong feeling that they had decided to test whether I was able and willing to stand up to them. It was quite shameless: they were determined to keep as much of our money as they could.’ 55
By the time the Council broke up, Britain had been offered a £350 million rebate, leaving her net contribution at £650 million. This was simply not enough. Thatcher was not going to accept it. She agreed that there should be another Council to discuss it, but was not over-optimistic that resolution would be reached. Even Hugo Young had to concede, of the others, that:
‘…in response to her unsubtle demands for a fair deal, they were rude and derisive, and determined not to meet her anywhere near halfway. Roy Jenkins, a witness, writes that Schmidt feigned sleep during one of her harangues. At another point, Giscard had his motorcade drawn up at the door, engines revving, to signal that he would delay no longer. “I will not allow such a contemptible spectacle to occur again,” he said as he departed.’ 56
Young did, however, note that Thatcher had ‘broken all the rules’: ‘the smootheries of conventional diplomacy, the spirit of give-and-take on which the whole European edifice depended, were plainly values she could never be relied on to observe’.57 But Thatcher was finding that ‘give-and-take’, in European terms, meant, ‘you give, we take’. She could at least take some comfort from Le Figaro, which commented:
‘To accuse Mrs Thatcher of wishing to torpedo Europe because she defends the interests of her country is to question her underlying intentions in the same way that people used to question those of de Gaulle in regard to French interests.’58
So the battle continued into 1980. To begin with, Francesco Cossiga, the prime minister of Italy, which had now assumed the rotating presidency, seemed to be working for a solution, under pressure from Thatcher. On 25 February, Schmidt was back in London for talks, which again centred on the budget question, but with Schmidt repeating his wish to see sterling within the ERM. By the next Council, on 27 to 28 April, its venue moved to Luxembourg, Cossiga, after breakfasting with Giscard in Paris, believed that the French were willing to offer a solution: a ceiling on Britain’s net contributions for a period of years, subject to a review at the end of that time. Thatcher was suspicious. On closer examination ‘it became clear that what the French really wanted were decisions on their most politically sensitive topics – farm prices in the CAP, lamb and fishing rights – before dealing with the budget’. 59
It gradually emerged that, as so often before, the French proposals were less helpful than at first appeared. After the agriculture ministers had given the French more or less all that they wanted, the quid pro quo was merely a modest rebate on Britain’s net contribution, for one year only.60 Thatcher had already made it abundantly clear that she wanted a permanent solution, although she did not dismiss the French response as an insult, although by any reckoning it was. She did nevertheless reject the ‘offer’, prompting Jenkins to call the meeting a ‘fiasco’.61
Thatcher still expected a solution, not least because both the French and Germans wanted higher agricultural prices and the British could veto them. If she did, the Community would run out of money by 1982. The French response was to consider abolishing the ‘Luxembourg Compromise’, to prevent Thatcher using it against them. Introduced by de Gaulle to protect France’s ‘vital interests’, when there was a possibility that Britain would use it, the French wanted it abolished. By now it was clear there was going to be no quick solution and the complexity of what became a prolonged battle is illustrated by the fact that no historical account of it has ever managed to encompass all its twists and turns.62
Young’s version of the next step in the battle is that, after Thatcher had made such a mess of Dublin, it took clever negotiation by the Foreign Office to come up with a reasonable solution, whereby Britain would be given a reduction for two years, with the possibility of this being extended to a third.63
Thatcher’s version is that her tactics at Dublin and Luxembourg had their desired effect, producing a willingness to solve the budget issue before the next European Council, scheduled for Venice in June.64 She sent her Foreign Secretary Lord Carrington, with his colleague Ian Gilmour, both ‘convinced Europeans’, to Brussels on Thursday, 29 May, for a special meeting with other foreign ministers. After a marathon 18-hour session, they reached what they considered an acceptable agreement, but Thatcher would not immediately accept it. Only after Gilmour contacted various Sunday newspapers, leaking to them the outcome of the Brussels talks but with heavy spin that it represented a ‘Thatcherite triumph’, did she agree ‘through gritted teeth’ to the outcome. In a Cabinet reshuffle soon afterwards Gilmour was dropped.
For continuity it is as well to stay with the story of the rebate battle, because the compromise agreed by the Carrington/Gilmour duo was far from the final solution. The issue would continue to fester on through 1982 and into 1983, until it again became the central bone of contention at a European Council meeting in Stuttgart on 17 to 19 June 1983. By then there had been significant changes at the top table. Following her victory in the Falklands War in 1982, and the beginnings of economic recovery after Britain’s deep recession of 1981, Thatcher led the Conservatives to a landslide election victory on 15 June. Giscard and Schmidt, the two dominant figures of the Franco-German alliance, had now been replaced by Mitterrand and Kohl. From Dublin, where Thatcher had been the tyro, she was now the senior figure.
At Stuttgart, Chancellor Kohl was anxious to make a success of his first Council in the chair, but for Thatcher there was only one issue: the need ‘to make as much progress as possible towards a long-term solution to the budget question’. This, she had decided, meant full-scale reform of the Community’s finances65:
‘…the Community was on the edge of bankruptcy: the exhaustion of its “own resources” was only months away and it was possible to increase them only by agreement of all the member states to raise the one percent VAT “ceiling”… The requirement of unanimity gave me a strong hand and they knew that I was not the person to underplay it.’ 66
Thatcher thought the Community could easily have lived within the discipline imposed by the one percent VAT ceiling, if only it would cut out waste, inefficiency and corruption. But she judged that the will was lacking ‘and that profligacy and that particular degree of irresponsibility which is bred by unaccountable bureaucracy’ would continue for as long as difficult decisions could be postponed.67 In the event, the Council did postpone a decision on financial reform, agreeing only to further negotiations, the results of which would be presented to the Council in Athens at the end of the year.
When the Council met in Athens in December 1983, under the Greek presidency, Thatcher was well prepared. But, from the start, things went badly awry. At the first session, Mitterrand seemed unprepared and Kohl seemed unwilling or unable to make much effective contribution.68 Neither was the Greek prime minister, Papandreou, helpful.
Thus, on the first day, nothing was achieved, and it was to get worse. On the Monday morning, to Thatcher’s astonishment, Mitterrand announced that his position on the budget had completely changed. He was no longer prepared to support Britain’s fight for a long-term budget settlement. Instead, he would sanction only another ad hoc payment.69 Thatcher retaliated by refusing to agree an increase in the Community’s ‘own resources’ unless CAP spending was contained and its overall proportion of the budget reduced. She then demanded that member state contributions should be ‘fair and in-line with their ability to pay’. ‘The argument continued,’ Thatcher wrote, ‘but I was clearly getting nowhere.’ 70
No communiqué was issued at the end of another Council generally regarded as ‘a fiasco’. 71 Much has been made of Thatcher’s supposed ‘anti-European’ stance during this period, but at the time, she was to recall, she genuinely believed that, once the budget contribution had been sorted out and a framework of financial order had been set in place, Britain would be able to play a strong positive role in the Community. She considered herself a ‘European idealist’, imbued with a vision of a free-enterprise Europe des patries.72
Even Professor George concedes that this ‘fiasco’ was due almost entirely to Mitterrand. His intervention, George writes, ‘was either a terrible error, or an indication of more Machiavellian thinking’. One explanation was that Mitterrand was stalling, so that discussions could be carried over into the French presidency, allowing the French government to claim the credit for reaching an agreement.73 Thatcher’s Foreign Secretary since the 1983 election had been Geoffrey Howe, a fervent ‘Europeanist’ since boy-hood, and despite witnessing the Athens debacle, he was later to write that everything was now ‘up to France, which took over the presidency of the Community (sic) for the first half of 1984’.74 The French, he observed,
‘…were ideal negotiating partners for this closing stage of the battle. For they, better than most, could recognise the strength of our determination in defence of national interest. Moreover, they had the intellectual agility to identify, and argue with skill, the points where negotiation could oblige us to temper the strength of our case. We were aiming together to find an answer which the French Presidency could then sell to the other partners and table for acceptance at the Brussels meeting of the European Council on 19th to 20th March 1984, en route for the Fontainebleau Summit [sic] in June.’ 75
Despite Howe’s glowing testimony to their skills, these ‘intellectually agile’ French failed to table any proposals for the Brussels Council and were not even properly prepared for it. Thatcher was. She had already discussed the issue with Mitterrand, at meetings in January in Paris, and in March at Chequers. In February she talked it over with Kohl at Number 10. She was thus confident that the Brussels Council, at last, would deliver a lasting solution to the ‘BBQ’.76
When the meeting began, on 19 March, Mitterrand at least started proceedings with a discussion of the budget. Then officials were sent away to work on a text relating to the budget while Mitterrand turned to the issue of the Community ‘own resource’. His real agenda now became clear. He wanted to increase contributions from VAT receipts to 1.6 percent, thus increasing CAP funds, from which France would benefit most. The Irish, now the Community’s largest net beneficiary per head of population, thanks to the size of their farming sector, wanted an even larger increase.77
For once, Thatcher and Kohl had something in common. Both set 1.4 percent as their limit, making even that dependent on satisfactorily resolving the Community spending plan. That was as far as they got and, to Thatcher’s frustration, the session the next day began with ‘a gush of Euro-idealism’. Kohl and Mitterrand became ‘quite lyrical on the subject of getting rid of frontier controls’, followed by Mitterrand’s urging that Europe should not be left behind by the USA in the space race.78 When, at last, the heads of government got down to business, ‘the high-mindedness quickly disappeared’. The Irish prime minister, having failed to win a special exemption from proposed milk quota limits aimed at trimming the Community’s vast milk surplus, invoked the Luxembourg Compromise and walked out. Only after a long adjournment to discuss the text of the Council communiqué did business resume.
What happened then left Thatcher dumbstruck. Despite their earlier agreement, the Italians and Greeks stood out against giving Thatcher her permanent reduction. Mitterrand seemed to side with them. When she protested that she had been fighting for five years for a fair and lasting settlement, Kohl, possibly by previous agreement with Mitterrand, offered her ‘a 1,000 million ecu rebate for five years’. Even Howe called this proposal ‘half-baked’.79 But, almost immediately, France and the rest agreed with Germany. Naturally Thatcher rejected the ‘offer’. The Council broke up without issuing a communiqué, and ‘to rub salt into the wound’, as Thatcher later described it, France and Italy blocked payment of Britain’s 1983 refund.
Back in Britain, Thatcher decided she would stop British payments to the Community, if she had the backing of her MPs. But, she wrote, ‘there was a hard core of Euro-enthusiasts… who instinctively supported the Community in any dispute with Britain’. Reluctantly, she abandoned the ‘nuclear option’.80
Clearly though, the arguments had to end. The next European Council, to be held at Fontainebleau on 25 to 26 June 1984, and chaired by Mitterrand on his home ground, had to be ‘le grand showdown’. But again, Thatcher was forced to cool her heels. After the obligatory opening lunch, Mitterrand asked her to sum up the results of a recent economic summit in London. Others then joined in to give their views. Two hours passed. Only then did Mitterrand turn to the budget and, no sooner had Thatcher given her views on a formula, he ‘remitted’ the matter to the foreign ministers for discussion later that evening, and moved on to other business.81
During the dinner that evening, at the prestigious Hôtellerie du Bas-Bréau, the heads of government were puzzled to see the foreign ministers assembling on the terrace over their coffee. Initially they assumed their colleagues had completed their work, only to find that they were regaling each other with stories of their foreign travels. Mitterrand did not conceal his displeasure, and chased them back inside to continue discussing the budget.
Throughout the whole budget saga, there had been a central sticking point. Britain had insisted on basing their calculations on the total sum she sent to the Community, which included money collected from tariffs and levies as well as the contribution from VAT. The French, however, still refused to accept customs charges as national contributions, arguing that they constituted the Community’s ‘own resource’. Doggedly, therefore, they would not allow these sums to be included. Then, at Fontainebleau, the French produced a paper on their views as to how the calculation should be made. Once again, only VAT payments were included. During the foreign ministers’ discussion, all this was again given an airing and Thatcher wearily conceded the point, so long as a formula was arrived at based on a percentage of VAT payments to give Britain the permanent rebate she wanted.
All that now had to be agreed was the percentage. Thatcher had in mind 70 percent, but Howe came back with the news that between 50 and 60 percent would be offered, with a ‘sweetener’ that would bring the rebate up to 1000 million ecus for the first two years. ‘How Geoffrey,’ Thatcher wrote, ‘who had been splendidly staunch in the negotiations so far, had allowed the foreign ministers to reach such a conclusion I could not understand.’82
To cut a wearisome story short, Thatcher held out for her 70 percent, Mitterrand stuck at 60 and Kohl said he would accept 65. Then Thatcher went for two-thirds, a round 66 percent. Mitterrand caved in. Faced with an unmoving Thatcher, he told her, ‘Of course, Madame Prime Minister, you must have it.’ An agreement had been reached.83 Immediately, however, Kohl announced that, since German money had made the settlement possible, he wanted to pay his farmers extra money from Federal funds. Although this was against the rules, no one had the stomach to oppose him.84
Even this was far from the end of the story. Tied up in the small print was the establishment of a ‘correction mechanism’ for dealing with the continuing budgetary imbalances. Its complexity was such that, according to Hugo Young, it was ‘outside the comprehension of every normal European citizen’.85 Even the Commission itself was to admit that it ‘inhibited transparency in the financial relationships between the Member States and the Community budget’.86
In 1988 at the Brussels European Council, further revisions were made to the funding system where what became known as the ‘Own Resources Decision’ was made. This laid down that VAT would henceforth play a reduced role in funding the Community, and introduced a new, fourth form of ‘own resource’ whereby each member state would make an additional payment representing a proportion of its Gross National Product (GNP). This, in turn, created new distortions and required a new mechanism to calculate Britain’s rebate. So complicated was the calculation that, according to the Commission’s own reckoning, it produced the somewhat surprising result that the United Kingdom appears to participate in the financing of its own rebate [our emphasis].87
While the Commission suggested that this ‘self-financing’ involved only ‘very small amounts’, the cumulative effects of the Fontainebleau agreement and the Brussels ‘adjustment’ were to be substantial. They created a situation whereby, whenever the UK applied for CAP funds over and above a threshold level agreed in 1984, the Commission, through its ‘correction mechanism’, was (and is) able to ‘claw back’ a substantial proportion of the funds paid. By 2003 this equated to 71 percent.
Because this meant that, in applying for certain funds from Brussels, the Treasury would end up paying for most of them itself, the UK government decided that, having won her rebate, Britain should take maximum advantage from it. Therefore, wherever possible, the UK would refuse to apply for such funds, even though other member states were doing so. This further meant that other countries were able to draw on considerably more money for their farmers from Brussels than was available to British farmers, whose ability to match the prices of their EEC competitors was thus significantly reduced.
Fifteen years later this disparity in subsidy levels would help to bring about one of the most severe crises ever faced by British agriculture. Thatcher’s ‘victory’ would turn out to be a very mixed blessing.
1 Henderson, Nicholas (1987), Channels And Tunnels (London, Weidenfeld and Nicolson), p. 143.
2 Owen, David (1992), Time To Declare (London, Penguin Books), pp. 245–246.
3 Thatcher, Margaret (1992), The Downing Street Years (London, Harper Collins), p. 79.
4 The Spectator, ‘Unanswered Questions at Wilson’s Summit’, 26 July 1975, cited in George, Stephen (1990), An Awkward Partner – Britain In The European Community (Oxford, Oxford University Press) (third ed.), p. 108.
5 George, op. cit., p. 108.
6 New Statesman, ‘The Odd Man Out of Europe’, 24 October 1975.
7 George, op. cit., p. 103.
8 Ibid., p. 104.
9 Ibid., p. 118. George cites Jean-Louis Burban. (1977), ‘La Dialectique des élections européenes’, Revue française de science politique, 27, pp. 377–406.
10 Ibid., p. 118.
11 Ibid., p. 121.
12 Owen, op. cit., pp. 245–246.
13 Ibid., p. 246.
14 Ibid.
15 Ibid.
16 George, op. cit., p. 123.
17 Ibid., pp. 123–124.
18 Benn, op. cit., p. 417.
19 In the 1990s Conservative Party policy on further enlargement would be making exactly the same points.
20 Commission of the European Communities. Report of the Study Group ‘Economic and Monetary Union 1980’ (EMU – 63), Brussels, March 1975, p. 1.
21 Ibid., p. 4.
22 Ibid., pp. 5–6.
23 Ibid., p. 33.
24 Bulletin of the European Communities, S/1-1976.
25 Ibid., p. 26.
26 Ibid., p. 21.
27 Ibid., p. 45.
28 Ibid., p. 27.
29 Wilson, op. cit., p. 238. One British MP who welcomed the Tindemans report, however, was Douglas Hurd, then Conservative spokesman for European affairs. He particularly praised the proposal for a single ‘European foreign policy’, emphasising that foreign ministers ‘should accept an obligation to reach a common view’ (Hansard, 17 June 1976, col. 870). However, it did not seem that Hurd grasped the logic of what he was saying, since he went on to observe that this did not mean ‘removing the veto by some constitutional piece of surgery. It means creating the habit of agreement.’ This was not what the integrationists had in mind. They wanted subordination, not co-operation.
30 Jenkins, Roy, European Diary, cited in: Jenkins, op. cit., p. 446. Another ‘Europeanist’, Lord Carrington, was similarly to recall that, when he became Foreign Secretary in 1979 under Mrs Thatcher: ‘I had no great knowledge of the other European statesmen with whom I would be dealing, no detailed knowledge of Europe or Community affairs. I had, however, conviction’ (Carrington, Lord (1988), Reflections On Things Past (London, Collins), pp. 314–315).
31 Jenkins, Roy, op. cit., p. 463.
32 Moravcsik, op. cit., p. 296.
33 Jenkins, op. cit., p. 475.
34 Moravscik, op. cit., p. 296.
35 Ludlow, Peter, cited in Moravcsik, op. cit., p. 279.
36 Jenkins, Roy, op. cit., p. 481.
37 Cited by Ludlow, in Moravcsik, op. cit., p. 301. It would later be pointed out by Bernard Connolly, a senior Commission economist and the first of the Commission ‘whistleblowers’, that all this was based on a deliberate deception. Although designed primarily to meet German needs, the EMS had been carefully dressed up to look more as if it served French interests. This explained the choice of word ECU (European Currency Unit) for the new unit of accounting, because it was reminiscent of the écu, a French coin from the time of the Valois. (Cf. Connolly, Bernard (1995), The Rotten Heart Of Europe – The Dirty War For Europe’s Money (London, Faber and Faber), p. 17.)
38 Bulletin of the European Communities, 12-1978, point 1.1.7.
39 Ibid., point 1.1.10.
40 Ibid., point 1.1.12.
41 Jenkins, op. cit., p. 485.
42 Ibid., p. 486.
43 Ibid., p. 488.
44 Ibid., p. 489.
45 The Times, 14 November, 1978. Cited in George, op. cit., p. 133.
46 Hansard, 14 November 1978, col. 214.
47 George, op. cit., p. 134.
48 Thatcher, op. cit., p. 61.
49 Ibid., p. 62.
50 Ibid., p. 63.
51 Ibid.
52 Ibid., p. 64.
53 Jenkins, op. cit., p. 494.
54 Thatcher, op. cit., p. 79.
55 Ibid., p. 81. By now Thatcher was becoming known for the phrase ‘We want our money back!’, and was even sometimes heard to call it ‘my money’, according to the UK’s Commissioner Christopher Tugendhat. (Young, Hugo (1990), One Of Us (London, Pan Books), p. 187.)
56 Young, op. cit., p. 314.
57 Ibid.
58 Thatcher, op. cit., p. 82.
59 Ibid., p. 84.
60 Ibid.
61 Jenkins, op. cit., p. 504.
62 See, for instance, Young, op. cit., pp. 311–325. He scarcely mentions the Luxembourg Council, skipping directly from Dublin to the foreign ministers meeting which took place the month following (see below).
63 Young, op. cit., p. 317.
64 Thatcher, op. cit., p. 85.
65 Young, op. cit., pp. 312–313.
66 Ibid., p. 313.
67 Ibid.
68 Thatcher, op. cit., p. 337.
69 George, op. cit., p. 153.
70 Thatcher, op. cit., p. 338.
71 Ibid.
72 Thatcher, op. cit., p. 536.
73 George, op. cit., p. 153.
74 Howe, op. cit., p. 398.
75 Ibid., p. 399.
76 Thatcher, op. cit., p. 538.
77 Ibid.
78 Ibid., p. 539.
79 Howe, op. cit., p. 400.
80 Thatcher, op. cit., p. 539.
81 Ibid., p. 542.
82 Ibid., p. 543.
83 Ibid., p. 544.
84 Ibid.
85 Young, op. cit., p. 323.
86 Commission of the European Communities (1998), Bulletin EU 10-1998 – Agenda 2000. Financing of the European Union (1998), Luxembourg.
87 Commission of the European Communities. Financing the European Union. Commission report on the operation of the own resources system (1998), Luxembourg. In 1992, summarising the formula for calculating the UK rebate, a Treasury minister Sir John Cope explained that it was necessary to
‘(a) Calculate the difference between: (i) on the one hand, the UK’s percentage share of member states’ total VAT-based contributions to Community resources as if pre-1988 “uncapped VAT” arrangements were still in place, and (ii) on the other hand, the UK’s percentage share of total “allocated expenditure” – i.e. the total share of intra-Community budget expenditure, excluding aid;
(b) Apply the percentage difference obtained (the “VAT expenditure share gap”) to total allocated expenditure;
(c) Multiply the result by 66 percent;
(d) Deduct the benefit for the UK arising from the new own-resources structure agreed in 1988 (calculated by multiplying (1) the percentage difference between the UK’s share of uncapped VAT and its share of capped VAT and fourth resources payments by (2) member states’ overall capped VAT and fourth resources payments).’
(Sunday Telegraph, 4 October 1992.)