secret secret

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SECRET

S D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T :(80) 25th >nclusions

C 5 P Y NO

65

CABINET C O N C L U S I O N S o f a M e e t i n g of the C a b i n e t h e l d at 10 D o w n i n g S t r e e t o n T H U R S D A Y 26 J U N E 1980 at 1 1 . 0 0 a m PRESENT The Rt Hon M a r g a r e t Thatcher M P Prime Minister le R t Hon W i l l i a m Whitelaw M P c r e t a r y of State f o r the H o m e D e p a r t m e n t

The R t H o n S i r Geoffrey Howe Q C M P C h a n c e l l o r o f the E x c h e q u e r

le R t H n S i r K e i t h J o s e p h M P cretaryfof State f o r Industry

The R t Hon F r a n c i s P y m M P S e c r e t a r y o f State f o r Defence

ie Rt Hon L o r d Soames >rd P r e s i d e n t of the C o u n c i l

The R t H o n J a m e s P r i o r M P S e c r e t a r y o f State f o r E m p l o y m e n t

le Rt Hon S i r Ian G i l m o u r M P ie >rd P r i v y Seal

The R t Hon P e t e r Walker M P M i n i s t e r o f A g r i c u l t u r e , F i s h e r i e s and F o o d

le Rt Hon M i c h a e l H e s e l t i n e M P c r e t a r y of State f o r the E n v i r o n m e n t

The R t H o n George Younger M P S e c r e t a r y of S t a t e f o r S c o t l a n d

ie Rt Hon N i c h o l a s E d w a r d s M P c r e t a r y of State f o r W a l e s

The R t Hon Humphrey Atkins M P S e c r e t a r y o f State f o r N o r t h e r n I r e l a n d

ie R t Hon P a t r i c k J e n k i n M P c r e t a r y of State f o r S o c i a l S e r v i c e s

T h e R t H o n N o r m a n St J o h n - S t e v a s M P C h a n c e l l o r of the D u c h y o f L a n c a s t e r

ie R t Hon John Nott M P c r e t a r y of State f o r T r a d e

The R t H o n D a v i d H o w e l l M P S e c r e t a r y of State f o r E n e r g y

ie Rt Hon M a r k C a r l i s l e Q C M P c r e t a r y B f State f o r E d u c a t i o n and S c i e n c e

The R t H n John Biffen M P Chief Secretary, Treasury

e

1

T h e R t H o n Angus M a u d e M P Paymaster General

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THE FOLLOWING WERE ALSO PRESENT le R t H o n N o r m a n F o w l e r M P Lnister o l Transport

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The R t Hon M i c h a e l J o p l i n g M P Parliamentary Secretary, Treasury SECRETARIAT

Sir Mr Mr Mr

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Robert A r m s t r o n g M D M Franklin P J Harrop . R M Hastie-Smith

M r W N Hyde M r W NC WOe n Nb Ta nE- SNm iTt hS

Item 1.

Subject

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(Item 1) (Item 4) Page

PARLIAMENTARY AFFAIRS B r i t i s h Steel C o r p o r a t i o n :

2.

(Items 2 and 3) (Item 1) (Items 2 - 4 )

Finance

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I FOREIGN AFFAIRS The W e s t e r n A l l i a n c e

2

Afghanistan

2

India

3

Cambodia

3

New H e b r i d e s

3

3.

I COMMUNITY AFFAIRS

3

4.

I NORTHERN IRELAND

4

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1. T h e C a b i n e t w e r e i n f o r m e d o f the b u s i n e s s t o b e t a k e n i n t h e H o u s e o f C o m m o n s d u r i n g the f o l l o w i n g w e e k .

ish Steel JO ration: nces

T H E S E C R E T A R Y O F S T A T E F O R I N D U S T R Y s a i d t h a t h e w o u l d be m a k i n g a s t a t e m e n t i n the H o u s e o f C o m m o n s t h a t a f t e r n o o n a b o u t the s e r i o u s f i n a n c i a l p o s i t i o n o f the B r i t i s h S t e e l C o r p o r a t i o n ( B S C ) a n d the G o v e r n m e n t ' s r e a c t i o n t o i t . T h e Corporation had told h i m o n 6 J u n e that t h e y e s t i m a t e d t h a t t h e i r c a s h r e q u i r e m e n t f o r 1 9 8 0 - 8 1 w o u l d be s o m e £ 4 0 0 m i l l i o n a b o v e t h e a g r e e d e x t e r n a l f i n a n c i n g l i m i t of £450 m i l l i o n . They were i n a financial situation i nwhich a p r i v a t e - s e c t o r company could not l e g a l l y c a r r y o n t r a d i n g , but w o u l d h a v e to go i n t o l i q u i d a t i o n . T h e C o r p o r a t i o n ' s p r o b l e m s a r o s e f r o m a l o n g p e r i o d o f i n e f f e c t i v e m a n a g e m e n t a s w e l l a s f r o m the c u r r e n t r e c e s s i o n a n d the e f f e c t s o f the l o n g s t r i k e . H e w o u l d t e l l t h e H o u s e that the G o v e r n m e n t w e r e n o t s a t i s f i e d t h a t B S C h a d t a k e n s u f f i c i e n t l y v i g o r o u s c o r r e c t i v e a c t i o n , t h a t t h e y l o o k e d to the n e w c h a i r m a n , M r M a c G r e g o r , to p r o d u c e n e w p r o p o s a l s , a n d t h a t t h e y w e r e not p r e p a r e d t o f i x a n e w e x t e r n a l f i n a n c i n g l i m i t u n t i l t h e y w e r e s a t i s f i e d that B S C w e r e t a k i n g the n e c e s s a r y m e a s u r e s . M e a n w h i l e , the G o v e r n m e n t w o u l d , i n the l s s t r e s o r t , h a v e t o s t a n d behind B S C i n m e e t i n g t h e i r o b l i g a t i o n s so that the C o r p o r a t i o n c o u l d continue t r a d i n g . T h e i m p l i c a t i o n s o f the s i t u a t i o n h e w o u l d b e d e s c r i b i n g to the H o u s e w e r e v e r y s e r i o u s , a n d i n c l u d e d the l i k e l i h o o d n o t o n l y o f a d d i t i o n a l c a l l s o n the t a x p a y e r , b u t a l s o o f f u r t h e r redundancies i n a r e a s of h i g h u n e m p l o y m e n t . The Cabinet Took note.

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3 Western iance svious Cer&n««: (80) 2 4 t h nclusions, tiute 2

lamstan evious ference: 1(80) 2 3 r d nclusions, nute 2

2. T H E P R I M E ' M I N I S T E R said that the Seven-Power Summit Meeting in Venice on 2 2 and 2 3 June had broken new ground, by comparison with previous meetings i n the series, i n that the Heads of State and Government had discussed the international political situation, with particular reference to Afghanistan, as well as economic matters. The declaration on Afghanistan had been a useful demonstration of unity and cohesion in the West. The economic discussion had been dominated by the effects of the recent o i l p r i c e increases. The B r i t i s h Government's economic policies had been endorsed. There was general agreement that the reduction i n inflation was the top p r i o r i t y , though there was increasing concern about the prospects of recession, particularly in the United States and Canada. There had also been a good discussion about the implications of the oil p r i c e increases for the developing countries, and for relations with other countries with them. The increase in their o i l bills as a result of the recent price increases was greater than the total of official development aid to them. Recycling was not the whole of the answer to the problem: some of the poorest countries had reached the l i m i t of indebtedness, and needed to be assisted with grants rather than loans. The meeting had stressed the need for the oil exporting countries to share the burden of aid to developing countries with the industrialised countries. The Oil exporting countries had to be convinced that i t was not in their interests to weaken the economies of the industrialised countries and ruin some of the developing countries. The changing situation made the concept of the North/South Dialogue out of date. What was now needed was a three-sided dialogue involving the industrialised countries, the o i l exporting countries and the developing countries. The main work for the next Summit would be a review of aid policies and procedures in the light of these developments. A significant feature of the meeting had been the close understanding between President G i s c a r d and Chancellor Schmidt which had also been evident at the meeting of the European Council ten days e a r l i e r . There was general agreement that the communique issued at the end of the meeting was too long and that the fact that it had been largely prepared in advance unnecessarily circumscribed discussion. A s they had now developed, these Summit meetings generated excessive expectations, and if expectations were not fulfilled the meeting tended to be regarded by the P r e s s as a disappointment. F o r next year it was to be hoped that there could be a return to a much freer discussion, with many fewer people in attendance, both from Governments and from the media, with an agenda agreed i n advance but with only a short communique prepared i n the light of the discussion, or even no formal communique at a l l .

T H E L O R D P R I V Y S E A L said the Soviet announcement of the withdrawal of troops from Afghanistan was made during the Venice Summit Meeting. L e s s than 10,000 troops appeared to be involved, and some might already have returned. The significance of the event should be largely d i s counted. It appeared that P r e s s reports of the extent of resistance i n Afghanistan were exaggerated, though there was no doubt that the Russians were in considerable trouble. Representatives of the Afghan resistance were in contact with representatives of the Islamic Conference.

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nous irence: 79) 12th dusions, ate 2

lbodia yious jrence: 79) 24th elusions, iite 3

Hebridies vious jrence: 80) 24th elusions, ute 2

T H E L O R D P R I V Y S E A L s a i d that the d e a t h o f the P r i m e M i n i s t e r ' s s o n Sanjay G a n d h i w a s a g r e a t b l o w to h i s m o t h e r , i n p o l i t i c a l ap w e l l as p e r s o n a l t e r m s . H e h a d b e e n r e p u t e d l y m o r e f a v o u r a b l e to the i n t e r e s t s o f the W e s t a n d o f p r i v a t e e n t e r p r i s e t h a n h i s m o t h e r .

T H E L O R D P R I V Y S E A L s a i d that the V i e t n a m e s e h a d i n v a d e d T h a i l a n d f o r 24 h o u r s , t a k i n g the T h a i a r m y b y s u r p r i s e and k i l l i n g a n u m b e r of C a m h o d i a n r e f u g e e s . The i n v a s i o n had been denounced by the C h i n e s e and b y a n u m b e r o f o t h e r c o u n t r i e s i n the r e g i o n .

T H E L O R D P R I V Y S E A L s a i d that f o l l o w i n g m e e t i n g s b e t w e e n the F o r e i g n a n d C o m m o n w e a l t h S e c r e t a r y a n d the F r e n c h F o r e i g n M i n i s t e r , M . F r a n c o i s - P o n c e t , a p a c k a g e o f m e a s u r e s h a d b e e n w o r k e d out w i t h the F r e n c h . T h e s u c c e s s o f t h i s p a c k a g e depended o n the B r i t i s h b e i n g a b l e to p e r s u a d e F r L i n i to p l a y h i s p a r t a n d o n the F r e n c h b e i n g a b l e to p e r s u a d e M r S t e v e n s i n Santo t o do t h e s a m e . It w a s s t i l l hoped to a c h i e v e the i n d e p e n d e n c e date o f 30 J u l y f o r the N e w H e b r i d e s . The Cabinet Took note.

vIMUNITY TAIRS V10U8 erence: 80) 24th elusions, .ute 3

3. T H E L O R D P R I V Y S E A L r e p o r t e d that M . T h o r n w a s now the o f f i c i a l c a n d i d a t e o f the B e n e l u x c o u n t r i e s f o r the P r e s i d e n c y o f the Commission. T h e a p p o i n t m e n t w o u l d be f u r t h e r d i s c u s s e d i n f o r m a l l y a m o n g the F o r e i g n M i n i s t e r s a t t e n d i n g the N o r t h A t l a n t i c C o u n c i l meeting i n A n k a r a . T h e r e w o u l d be s o m e e m b a r r a s s m e n t i f the q u e s t i o n w a s n o t r e s o l v e d b e f o r e L u x e m b o u r g a s s u m e d the P r e s i d e n c y of the C o u n c i l o f M i n i s t e r s o n 1 J u l y . T h e r e w a s s t i l l s o m e hope t h a t the I t a l i a n s m i g h t p u t f o r w a r d S i g n o r P a n d o l f i a s a c a n d i d a t e . T H E M I N I S T E R O F T R A N S P O R T s a i d t h a t the C o u n c i l o f M i n i s t e r s ( T r a n s p o r t ) o n 24 J u n e h a d b e e n a b l e t o m a k e p r o g r e s s o n a c o m m o n d r i v i n g l i c e n c e , s u b j e c t i n o u r c a s e to t h e a p p r o v a l o f the H o u s e o f Commons. The question of greatei competition among E u r o p e a n a i r l i n e s h a d a l s o b e e n r a i s e d , and a s t u d y h a d b e e n a g r e e d u p o n , b u t o t h e r c o u n t r i e s w o u l d be l i k e l y to o p p o s e l o w e r a i r f a r e s i n o r d e r to protect Government revenue. The Cabinet Took note.

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CONFIDENTIAL ilTHERN LAND vious rence; 80) 12th 1 elusions, mte 4

4. T h e C a b i n e t c o n s i d e r e d a m e m o r a n d u m b y the S e c r e t a r y o f State f o r N o r t h e r n I r e l a n d ( C ( 8 0 ) 31) to w h i c h w a s a t t a c h e d a d r a f t d o c u m e n t f o r p u b l i c a t i o n s e t t i n g o u t the G o v e r n m e n t ' s p r o p o s a l s f o r f u r t h e r d i s c u s s i o n r e g a r d i n g the f u t u r e g o v e r n m e n t o f N o r t h e r n I r e l a n d . T H E S E C R E T A R Y O F S T A T E F O R N O R T H E R N I R E L A N D said that h i s m e m o r a n d u m a n d the p r o p o s a l s a t t a c h e d t o i t f l o w e d f r o m the p o l i c i e s w h i c h the G o v e r n m e n t h a d b e e n f o l l o w i n g s i n c e t h e y h a d c o m e i n t o o f f i c e , and the d i s c u s s i o n s w h i c h h a d t a k e n p l a c e d u r i n g t h e Constitutional Conference. The draft paper f o r publication had a l r e a d y been d i s c u s s e d i n c o m m i t t e e and a n u m b e r of a m e n d m e n t s h a d been made to i t . T h e p a p e r d e l i b e r a t e l y d e a l t w i t h the p r o b l e m s a t c o n s i d e r a b l e length, because he attached i m p o r t a n c e both i n N o r t h e r n I r e l a n d and o u t s i d e to h a v i n g a w e l l a r g u e d c a s e o n the r e c o r d . It w a s s t i l l n o t p o s s i b l e to s a y p u b l i c l y p r e c i s e l y w h a t the G o v e r n m e n t w a n t e d o r i n t e n d e d to d o . A l t h o u g h s u b s t a n t i a l a r e a s o f a g r e e m e n t h a d b e e n identified, some m a j o r i s s u e s r e q u i r e d f u r t h e r d i s c u s s i o n and negotiation. T h e d r a f t p r o p o s a l s n a r r o w e d the f i e l d d o w n to two p o s s i b l e a p p r o a c h e s to the e s t a b l i s h m e n t o f a n A s s e m b l y a n d a n E x e c u t i v e i n N o r t h e r n I r e l a n d . T h e r e c o u l d b e n o c e r t a i n t y that the p r o p o s a l s would succeed. T h e y w o u l d c e r t a i n l y a t t r a c t c r i t i c i s m f r o m the m a i n N o r t h e r n I r i s h p o l i t i c a l p a r t i e s , none.of whose a s p i r a t i o n s would be e n t i r e l y m e t b y t h e m ; but t h e r e w a s a p o s s i b i l i t y ( i f no m o r e t h a n that) that these p a r t i e s w o u l d a c q u i e s c e i n w h a t w a s p r o p o s e d . It w a s d e s i r a b l e t o p u b l i s h the d o c u m e n t s o o n e v e n t h o u g h J u l y a n d A u g u s t w e r e bad m o n t h s f o r r a t i o n a l p o l i t i c a l d i s c u s s i o n i n N o r t h e r n I r e l a n d . If the d o c u m e n t w a s p u b l i s h e d a t the b e g i n n i n g o f J u l y , i n t e n s i v e d i s c u s s i o n s and n e g o t i a t i o n s w i t h the N o r t h e r n I r i s h p o l i t i c a l p a r t i e s c o u l d t h e n take p l a c e p r i v a t e l y , so t h a t the p o s i t i o n c o u l d be r e v i e w e d b y the end of September and r e f l e c t e d i n The Q u e e n ' s Speech. In d i s c u s s i o n m e r e w a s g e n e r a l a g r e e m e n t t h a t the d r a f t p r o p o s a l s r e p r e * ented the b e s t t h a t c o u l d be m a d e of a v e r y d i f f i c u l t t a s k but that t h e r e c o u l d b e no c e r t a i n t y that the p r o p o s a l s w o u l d b e a c c e p t e d . The following points were m a d e : a. In N o r t h e r n I r e l a n d the p o l i t i c a l s c e n e c h a n g e d r a p i d l y . What had seemed a n a p p r o p r i a t e p o l i t i c a l course of a c t i o n when the G o v e r n m e n t t o o k o f f i c e w a s no l o n g e r r e l e v a n t t o p r e s e n t circumstances. It w a s p o s s i b l e t h a t , e v e n i f the p r e s e n t p r o p o s a l s w e r e not a c c e p t e d , the p u b l i s h e d d o c u m e n t s e t t i n g t h e m out w o u l d p r o v i d e a b a s i s f o r f u r t h e r d i s c u s s i o n w h i c h m i g h t l e a d u l t i m a t e l y to s o m e d i f f e r e n t s u c c e s s f u l p o l i t i c a l c o n c l u s i o n , b. T h e p u b l i c a t i o n o f the p r o p o s a l s w o u l d u n d o u b t e d l y g i v e r i s e to the s u g g e s t i o n that s i m i l a r c o n s i d e r a t i o n s s h o u l d a p p l y to S c o t l a n d . B u t the t e x t o f the p a p e r h a d b e e n c a r e f u l l y c o n s i d e r e d f r o m this point of v i e w , i t was w i d e l y r e c o g n i s e d i n S c o t l a n d that the s i t u a t i o n i n N o r t h e r n I r e l a n d w a s d i f f e r e n t to t h e i r o w n a n d the r i s k w a s c o n t a i n a b l e .

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c. A l t h o u g h the r e p r e s e n t a t i o n of N o r t h e r n I r e l a n d at W e s t m i n s t e r w o u l d c e r t a i n l y need to be c o n s i d e r e d i f and w h e n a l e g i s l a t i v e a s s e m b l y was e s t a b l i s h e d i n B e l f a s t , i t w o u l d be better not to d e a l w i t h t h i s i s s u e a t t h i s stage s i n c e i t w o u l d c e r t a i n l y c r e a t e d i f f i c u l t i e s at W e s t m i n s t e r . If the p r o p o s a l s w e r e to f a i l , i t w o u l d b e i m p o r t a n t f o r t h e m to be seen to f a i l because of the r e f u s a l of the N o r t h I r i s h p o l i t i c a l p a r t i e s to m a k e the n e c e s s a r y c o m p r o m i s e s . The representation issue m i g h t be u s e d to o b s c u r e t h i s p o i n t . d. T h e u n d e r l y i n g f a c t o r w h i c h w o u l d d i c t a t e the s u c c e s s o r f a i l u r e of the p r o p o s a l s w a s the extent to w h i c h the U n i o n i s t s could be p e r s u a d e d that the m i n o r i t y c o m m u n i t y s h o u l d be a l l o w e d to e x e r c i s e s o m e r e s t r a i n t o v e r the p o w e r of the E x e c u t i v e , and the e x t ent t o w h i c h the m i n o r i t y c o u l d be b r o u g h t to a c c e p t that those r e s t r a i n i n g p o w e r s p r o v i d e d t h e m w i t h sufficient safeguards. It w o u l d be i m p o r t a n t t o e m p h a s i s e the fact that the S e c r e t a r y of State f o r N o r t h e r n I r e l a n d w o u l d r e t a i n o v e r r i d i n g p o w e r s i n the event o f a deadlock* e. A n i m p o r t a n t f a c t o r i n the p o s s i b l e a c c e p t a n c e of the p r o p o s a l s would be the attitude t o w a r d s t h e m of D r P a i s l e y and h i s w i l l i n g n e s s and a b i l i t y to a s s u m e a g r e a t e r d e g r e e o f l e a d e r s h i p a m o n g the U n i o n i s t s . H i s p o p u l a r s u p p o r t a p p e a r e d at p r e s e n t to be i n c r e a s i n g a t the expense m£ the l e a d e r s h i p of the O f f i c i a l U n i o n i s t P a r t y . T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , s a i d that w h i l e the C a b i n e t r e c o g n i s e d the p o s s i b i l i t y of f a i l u r e , they a g r e e d that the p r o p o s a l s should be p u b l i s h e d o n 2 J u l y , without a n y r e f e r e n c e to Northern Irish representation at Westminster. A l t h o u g h there m i g h t be a d v a n t a g e s i n announcing the p u b l i c a t i o n of the d o c u m e n t i n N o r t h e r n I r e l a n d , i t was p r o b a b l e that the S e c r e t a r y of State f o r N o r t h e r n I r e l a n d would be under v e r y h e a v y p r e s s u r e to m a k e a P a r l i a m e n t a r y statement o n the date o f p u b l i c a t i o n . T h e p r o p o s a l s c o u l d be debated o n 10 J u l y at the same t i m e a s the R e n e w a l of E m e r g e n c y P o w e r s . The Cabinet Invited the S e c r e t a r y of State f o r N o r t h e r n I r e l a n d (i) to a r r a n g e f o r the p u b l i c a t i o n of h i s d r a f t p r o p o s a l s o n 2 J u l y , without a n y r e f e r e n c e to Northern I r i s h P a r l i a m e n t a r y representation at We s t m i n s t e r ; (ii) to give f u r t h e r c o n s i d e r a t i o n i n c o n s u l t a t i o n w i t h the C h a n c e l l o r of the D u c h y o f L a n c a s t e r t o the need f o r a P a r l i a m e n t a r y s t a t e m e n t o n the date of publication. C a b i n e t Office 26 June 1980

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