policy – occurred, and began the alienation of the Conservative right in Parliament and of many Tory supporters outside it. The failure of these U-turns to deliver success divided the Party still further and had other consequences. It created an inflationary boom which caused property prices to soar and encouraged a great deal of dubious financial speculation, tarnishing capitalism, and, in spite of all the disclaimers, the Conservative Party with it. I shall return to the economic developments which led to all this shortly. But it is important not to underrate the impact on the Party of two non-economic issues – Europe and immigration.
I was wholeheartedly in favour of British entry into the EEC, and General de Gaulle’s departure from the Elysée Palace in April 1969 had transformed the prospects. His successor, Georges Pompidou, was keen to have Britain in; and no one on our side of the Channel was keener than the new Prime Minister, Ted Heath. Many people across the political spectrum opposed it. These included some of the most effective parliamentarians such as Michael Foot, Peter Shore and Enoch Powell. But the worlds of business, the media and fashionable opinion generally were strongly in favour.
Talks formally opened in Brussels at the end of October 1970, with Geoffrey Rippon reporting back to Ted and a Cabinet Committee and, on occasion, to the rest of us in full Cabinet. There was no doubt that the financial cost of entry would be high. It was estimated that the best we could hope for would be a gross British contribution of 17 per cent of total EEC expenditure, with a five-year transition, and three years of so-called ‘correctives’ after that (to hold it at 17 per cent). To defuse the inevitable criticism, Geoffrey Rippon also hoped to negotiate a special review provision which we could invoke at any time if the burden of our net contributions to the budget threatened to become intolerable; but he seemed to attach little significance to it, and assumed that we could reopen the question whether there was a formal review mechanism or not.
At the time Ted resolved discussion about the costs of entry by saying that no one was arguing that the burden would be so intolerable that we should break off negotiations. But this whole question of finance should have been considered more carefully. It came to dominate Britain’s relations with the EEC for more than a decade, and it did not prove so easy to reopen. Though the Community made a declaration during the entry negotiations that ‘should an unacceptable situation arise within the present Community or an enlarged Community, the very survival of the Community would demand that the Institutions find equitable solutions’, the net British contribution quickly grew. The Labour Government of 1974–79 made no progress in reducing it. It was left to me to do so later.
Cabinet discussed the matter again in early May 1971, by which time the talks were reported to be ‘deadlocked’. There were difficulties outstanding on preferential arrangements for New Zealand products (butter and lamb) and Commonwealth sugar, and shadow-boxing by the French about the role of sterling as an international currency. But the budget was still the real problem. We had an idea what deal might be on offer: promises to cut the cost of the Common Agricultural Policy and the creation of a Regional Development Fund from which Britain would benefit disproportionately. It was still not the settlement we would have wanted – promises are not bankable – but at the time none of us foresaw how large the burden would turn out to be. Ted ended the discussion by telling us that he was planning a summit with President Pompidou in Paris to cut through the argument.
Ted spent two days talking to the French President. In view of all the past difficulties with the French, the summit was seen as a veritable triumph for him. Negotiations were completed rapidly afterwards – other than for the Common Fisheries Policy, which took years to resolve – and the terms approved by Cabinet the following month. Parliamentary approval could not be assumed, for both parties were deeply split and Labour had reversed its former support for British entry. In the end, the Government decided that there would be a free vote on the Conservative side on the principle of entry. This embarrassed Labour, especially when sixty-nine Labour MPs ignored their own party whip and voted in favour, giving a majority of 112 for entry. But when it came to the terms rather than the principle of entry, the argument was far from won. The Second Reading of the European Communities Bill in February 1972 was only passed by 309 to 301.
The dog that barely barked at the time was the issue of sovereignty – both national and parliamentary – which, as the years have gone by, has assumed ever greater importance. There was some discussion of the question in Cabinet in July 1971, but only in the context of the general presentation of the case for entry in the White Paper. The resulting passages of the document – paragraphs 29–32 – can now be read in the light of events, and stand out as an extraordinary example of artful confusion to conceal fundamental issues. In particular, two sentences are masterpieces:
There is no question of any erosion of essential national sovereignty; what is proposed is a sharing and an enlargement of individual national sovereignties in the general interest.
And:
The common law will remain the basis of our legal system, and our Courts will continue to operate as they do at present.
I can claim to have had no special insight into these matters at the time. It then seemed to me, as it did to my colleagues, that the arguments about sovereignty advanced by Enoch Powell and others were theoretical points used as rhetorical devices.
In the debate on Clause 2 of the Bill, Geoffrey Howe, as Solicitor-General, gave what appeared to be satisfactory assurances on the matter in answer to criticisms from Derek Walker-Smith, saying that ‘at the end of the day if repeal [of the European Communities Act], lock, stock and barrel, was proposed, the ultimate sovereignty of Parliament must remain intact’. Asking himself the question: ‘What will happen if there is a future Act of Parliament which inadvertently, to a greater or lesser extent, may be in conflict with Community law?’ Geoffrey said: ‘The courts would … try in accordance with the traditional approach to interpret Statute in accordance with our international obligations.’ But what if they could not be reconciled? He went on, elliptically:
One cannot do more than that to reconcile the inescapable and enduring sovereignty of Parliament at the end of the road with the proposition that we should give effect to our treaty obligations to provide for the precedence of Community law … If through inadvertence any such conflict arose, that would be a matter for consideration by the Government and Parliament of the day …*
It was not, however, this question which was to make the Common Market such a difficult issue for the Government. The main political error was to overplay the advantages due to come from membership. As regards the Government itself, this tendency led ministers to adopt and excuse unsound policies. In order to ‘equip’ British industry to meet the challenges of Europe, subsidies and intervention were said to be necessary – reasoning endorsed in the 1972 budget speech. Still worse, loose monetary and fiscal policies were justified on the grounds that high levels of economic growth – of the order of 5 per cent or so – were now sustainable within the new European market of some 300 million people. It was also suggested that competition from Europe would compel the trade unions to act more responsibly. As regards the general public, expectations of the benefits of membership rose – and then were sharply dashed as economic conditions deteriorated and industrial disruption worsened.
The success of the negotiations for British entry and their ratification by Parliament seemed to have a psychological effect on Ted Heath. His enthusiasm for Europe had already developed into a passion. As the years went by it was to become an obsession – one increasingly shared by the great and the good. The argument became less and less about what was best for Britain and more and more about the importance of being good Europeans.
January and February 1972 saw three events which tried the Government’s resolve and found it wanting – the miners’ strike, the financial problems of Upper Clyde Shipbuilders (UCS) and the unemployment total reaching one million. It is always a shock when unemployment reaches a new high figure, especially one as dramatic as a million. But the rise of unemployment in 1971 was in fact the consequence of Roy Jenkins’s tight fiscal and monetary policies of 1969–70. Since monetary policy had already been significantly eased in 1971, largely as a result of financial decontrol, we could have sat tight and waited for it to work through