Downing Street Years - Margaret Thatcher [50]
As a result we did not get around to talking about the budget at all at our first session. Indeed, only after dinner, and the usual foreign affairs tour de table, did I obtain agreement that the official group should resume effective negotiation that evening. The French were the main stumbling block: the proposals their officials presented were much less helpful to us than President Giscard’s had seemed to be. In the meantime, the Agriculture ministers of the other governments of the Community had agreed on a package of proposals which would have raised farm prices, increasing again the proportion of the Community budget devoted to agriculture (quite contrary to the proposals put forward in Dublin) and giving the French a sheep meat regime which was more or less all that they wanted. Against this — for us — distinctly unfavourable background, we received eventually the offer of a limit on our net contribution of about £325 million, applying only to the year 1980. Under a subsequent proposal our net contribution would have been limited to about £550 million for 1981 as well.
My reaction was that this was too little. But above all I was not prepared to have a settlement that only lasted for two years. Helmut Schmidt, Roy Jenkins (President of the Commission) and almost everyone else urged me to settle. But I was not willing to return the following year to face precisely the same problem and the attitude that went with it. So I rejected the offer. The draft communiqué, moreover, was unacceptable to us since it continued to insist on the old dogma that ‘own resources are intended to provide the finance for Community policies; they are not contributions from member states.’ Nor did it make reference to the assurances we had been given on our accession to the Community that action would be taken ‘should an unacceptable situation arise’.
Many reacted to my decision in luxemburg with disbelief: in some circles the very last thing expected of a British prime minister was that he or she should quite so unashamedly defend British interests. But there was, I noted, a contrast between the reaction in some of the press which was extremely hostile and the reaction in the House of Commons and the country, which was thoroughly supportive.
In fact, we were a good deal closer to a settlement than was widely recognized. Great progress had already been made in winning agreement to substantial reductions in our contribution. What remained was to secure these reductions for the first two years with a reliable undertaking for the third. We had a number of powerful levers by which we could apply pressure to this end. The French were increasingly desperate to achieve their aims in the Agriculture Council. There was even talk of overriding the British veto by abrogating the so-called Luxemburg compromise of 1966, established to accommodate de Gaulle. (This was an understanding rather than a formal agreement with the force of law, which enabled any one country to block a majority decision when its vital national interests were at stake.) In fact, precisely this did happen at the Agriculture Council in May 1982 — and this during the Falklands War. However, at this particular time it would have been a dangerous move, particularly since the French had already been found in breach of Community law over lamb imports. The Germans, too, were keen to see higher agricultural prices. Most important of all, the Community would, we thought, probably reach the limit of its financial resources in 1982. Its persistent overspending was catching up with it, and greater