secret secret

---

SECRET

HIS D O C U M E N T IS T H E P R O P E R T Y

"JF H E R B R I T A N N I C

MAJESTY'S GOVERNMENT

C(8l)26th

COPY NO

lonclusions

C A B I N E T

CONCLUSIONS

of a M e e t i n g of the

h e l d a t 10 D o w n i n g S t r e e t THURSDAY

2 JULY

a t 1C. 00

P R The

Cabinet

on

1981



am

E S E N T

Rt Hon Margaret Thatcher M P

Prime Minister

The

B h e Rt H o n W i l l i a m W h i t e l a w M P ecretary of S t a t e f o r the H o m e he R t H o n L o r d

The

Carrington

Rt Hon Sir Geoffrey Howe Q C M P Exchequer

Affairs

he Rt H o n S i r K e i t h J o s e p h ecretary of S t a t e f o r

The

M P

Rt Hon Francis P y m M P

C h a n c e l l o r of the D u c h y of L a n c a s t e r a n d

Industry

Paymaster

he Rt H o n L o r d

The

Soames

ord P r e s i d e n t o f t h e he Rt H o n J o h n N o t t ecretary of S t a t e f o r h

Hailsham

C h a n c e l l o r of the

ecretary of S t a t e f o r F o r e i g n a n d ommonwealth

Rt Hon L o r d

Lord Chancellor

Department

Rt Hon James

Prior

S e c r e t a r y of State f o r

Council

The

M P

Lord

Defence

The

e Rt H o n P e t e r W a l k e r M P

inister o f A g r i c u l t u r e , F i s h e r i e s

General

R t H o n S i r Ian G i l m o u r Privy

Rt Hon Michael Heseltine

M P

S e c r e t a r y of State f o r the E n v i r o n m e n t

and F o o d

The

ecretary of S t a t e f o r

S e c r e t a r y of State f o r

e

M P

Seal

he Rt H o n G e o r g e Y o u n g e r M P

h

M P

Employment

Scotland

The

Rt H o n H u m p h r e y A t k i n s M P

Rt Hon Nicholas

Edwards M P Wales

Rt Hon Patrick Jenkin M P

S e c r e t a r y o f S t a t e fos? S o c i a l

ecretary of S t a t e f o r N o r t h e r n I r e l a n d

i

SECRET

Services

SECRET

he I t H o n J o h n B i f f e n cretary of S t a t e f o r e Rt H o n M a r k

T h e Rt Hon David Howell

M P

S e c r e t a r y of State f o r

Trade

Carlisle QC M P

cretary of S t a t e f o r

M P

Energy

The Rt Hon Norman Fowler

Education and S c i e n c e

S e c r e t a r y of State f o r

The Rt Hon Leon Brittan Q C Chief Secretary,

ALSO

M P

Transport

M P

Treasury

PRESENT

The Rt Hon Michael Jopling Secretary,

Parliamentary

M P Treasury

SECRETARIAT Sir

Robert

Mr

M D M F r a n k l i n (Items 2 and

Armstrong 3)

M r R L W a d e - G e r y (Items 2 and

3)

Mr

W N H y d e ( I t e m 1)

Mr

L J H a r r i s ( I t e m 1)

C O N T

E N T S

Subject

em PARLIAMENTARY Finance FOREIGN

Page 1

AFFAIRS

1

Bill

AFFAIRS

Republic

of

Ireland

1

I s r a el

1

Italy

1

Afghanistan

2

B eliz e / Guat emala

2

Defence

2

Policy

ii

SECRET

SECRET

Subject

COMMUNITY

AFFAIRS

Page



European Council

3

Sheepmeat

4

Steel

4

iii

SECRET

CONFIDENTIAL

ILIAMENTARY

1.

T^IKS

H o u s e of C o m m o n s d u r i n g the following

dance

T h e C a b i n e t w e r e i n f o r m e d of the b u s i n e s s to

T H E

C H A N C E L L O R

be taken i n

OF T H E EXCHEQUER

i n f o r m e d the C a b i n e t of

c e r t a i n tax c h a n g e s w h i c h h e i n t e n d e d to a n n o u n c e that The Took

Cabfnet

afternoon.

-

note.

IEIGN

2.

TAIRS

the c l o s e n e s s of the r e s u l t i n the I r i s h g e n e r a l

T H EFOREIGN

the

the

week.

AND C O M M O N W E A L T H

SECRETARY election

s a i d that

s u g g e s t e d that

new G o v e r n m e n t now f o r m e d by the f o r m e r O p p o s i t i o n l e a d e r ,

bublic

Dr

FitzGerald,

Ireland

former

m i g h t not l a s t l o n g .

Taoiseach,

extreme

M r Haughey,

T h e r e was

a d a n g e r that

might adopt i n opposition a

a t t i t u d e to the p r o b l e m of N o r t h e r n I r e l a n d ,

be r e s t r a i n e d b y the p o s s i b i l i t y of r e t u r n i n g to o f f i c e therefore

of n e e d i n g

the

more

although he

might

at a n e a r l y d a t e a n d

to b e a b l e i n t h a t e v e n t to r e s u m e

a working

r e l a t i o n s h i p with the B r i t i s h G o v e r n m e n t .

lei

THE

FOREIGN

AND C O M M O N W E A L T H SECRETARY

r e s u l t of the g e n e r a l nous

election

G o v e r n m e n t h e a d e d by the

existing

lerence;

was

[81) 25th

the v i c t o r by a n a r r o w m a r g i n ,

[elusions,

scope for a l t e r i n g the

lute 2

he m i g h t at l e a s t h a v e i m p r o v e d its

T H E

regrettable.

FOREIGN

|erence:

M r Begin.

M r Peres,

close

another This

had emerged

as

he w o u l d p r o b a b l y net have h a d m u c h

s u b s t a n c e of I s r a e l i p o l i c y t o w a r d s the A r a b s :

but

tone.

AND C O M M O N W E A L T H

SECRETARY

under Signor Spadolini,

durable than its p r e d e c e s s o r s , favourable first

Prime Minister,

If t h e O p p o s i t i o n l e a d e r ,

Italian G o v e r n m e n t , '10US

s a i d that the

in Israel looked like producing

was

s a i d that the

u n l i k e l y to p r o v e

new more

but S i g n o r S p a d o l i n i h i m s e l f h a d m a d e

impression.

112th [fusions, |We2

CONFIDENTIAL

a

CONFIDENTIAL

^anistan

T H E FOREIGN

AND C O M M O N W E A L T H

SECRETARY

s a i d that he

would

b e g o i n g to M o s c o w o n 5 J u l y to d i s c u s s w i t h t h e S o v i e t G o v e r n m e n t rious rence: 1) 24th ilusions, fce 2

the

E - i t i s h - i n s p i r e d i n i t i a t i v e on A f g h a n i s t a n w h i c h h a d now b e e n put f o r w a r d by

the ten m e m b e r

indications

countries

on the

situation in Afghanistan,

s e r v e d by continuing for the p r e s e n t

initiative had a reasonable became

chance

c l e a r that s u c c e s s was

affairs

Present be

B u t o n e i m p o r t a n t a i m o f t h e i n i t i a t i v e h a d b e e n to

international attention

of

European Community.

s u g g e s t e d that the S o v i e t r e s p o n s e w a s u n l i k e l y to

favourable. b e s t be

of the

on the b a s i s that

of s u c c e e d i n g .

unattainable,

refocus

anc this a i m the

If i t i n d u e

i esponsibility

c o u l d t h e n b e u n a m b i g u o u s l y l a i d at the S o v i e t

would

course

f o r that

state

Government's

door.

e/ emala

T H E FOREIGN Minister

A N D C O M M O N W E A L T H

of State,

SECRETARY

F o r e i g n and C o m m o n w e a l t h Office,

said that

the

M r Ridley,

would

b e g o i n g to N e w Y o r k o n 6 J u l y w h e r e h e w o u l d m e e t P r e m i e r P r i c e o f ious

B e l i z e a n d with h i m n e g o t i a t e with the G u a t e m a l a n F o r e i g n M i n i s t e r ,

rence:

Ing C a s t i l l o ,

II) 21st

Anglo-Guatemalan Treaty concerning Belize.

with the a i m of r e a c h i n g final a g r e e m e n t

:lusions,

arise

ite 2

h o l d i n g a B e l i c e a n r e f e r e n d u m o n the T r e a t y ,

thereafter,

on the

A difficult

because F r e m i e r P r i c e had committed himself

party lines and might be lost.

Britain

p r o b l e m about p r o v i d i n g for B e l i z e a n

would s h o r t l y be c i r c u l a t i n g a p a p e r on the m i l i t a r y implications for Britain,

|nce ;

y

In t h e

and O v e r s e a P o l i c y

course

subject,

to t h e U n i t e d S t a t e s .

fence;

of the c o n t i n u i n g

II) 24th

a more

fusions, ite 4

also

serious

but

there

security.

i n c l u d i n g its

He

possible

f o r the i n f o r m a t i o n of h i s c o l l e a g u e s

of i n t e r n a t i o n a l r e a c t i o n s

to

about d e f e n c e p o l i c y on 25 J u n e ,

noted that the S e c r e t a r y of State f o r D e f e n c e 'ious

or

would

the it

was

had paid a successful

T h e A d m i n i s t r a t i o n had clearly been

visit

appreciative

high l e v e l of B r i t i s h m i l i t a r y spending a n d r e l i e v e d cutback in defence plans

significant and satisfactory

that the

was

not c o n t e m p l a t e d .

subject h a d net b e e n

It

The Took

meeting

of the

Cabinet note.

CONFIDENTIAL

European Council.

that

was

raised

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 b y a n y of his c o l l e a g u e s on o c c a s i o n of the r e c e n t

on

Committee.

of a b r i e f d i s c u s s i o n

Government's announcements

might

to

w h i c h w o u l d be fought

In s u c h c i r c u m s t a n c e s

r e m a i n c o m m i t t e d to b r i n g i n g B e l i z e to e a r l y i n d e p e n d e n c e would be an obvious

the D e f e n c e

proposed

situation

with the

CONFIDENTIAL

JM'JNITY fAlRS

3.

T H EPRIME

icil

r e p o r t e d on the m e e t i n g

C o u n c i l i n L u x e m b o u r g on 29-30 June. R e p u b l i c a n d the

^pean

MINISTER

new P r i m e

P r e s i d e n t of the F r e n c h

M i n i s t e r s of Italy a n d

attending f o r the f i r s t t i m e .

Belgium

T h e d i s c u s s i o n on the

had produced long interventions m u c h debate.

T h e new

of t h e E u r o p e a n were

economic

situation

f r o m m o s t of tne H e a d s of S t a t e

without

T h e F r e n c h P r e s i d e n t h a d s p o k e n of the n e e d f o r a

new

s c c i a l o r d e r i n E u r o p e without m a k i n g c l e a r what he h a d i n m i n d other than a reduction in working h o u r s .

T h e economic

measures

taken by the new F r e n c h G o v e r n m e n t would i n c r e a s e F r a n c e but s t i l l l e a v e it a s a l o w e r than i n the U n i t e d K i n g d o m . economic

policies

his

Minister.

T h e r e had been considerable

no

except f r o m the D a n i s h P r i m e

the F e d e r a l G e r m a n

Prime Minister.

in

p r o p o r t i o n of G r o s s N a t i o n a l P r o d u c t

T h e F r e n c h President had secured

support for

between herself,

already

the budget deficit

agreement

on economic

C h a n c e l l o r and the new

policy

Italian

T h e F r e n c h P r e s i d e n t h a d m a d e it c l e a r that

the

F r e n c h G o v e r n m e n t w o u l d not be r e a d y to d i s c u s s the r e s t r u c t u r i n g of the C o m m u n i t y budget before S e p t e m b e r . be used

co e s t a b l i s h t h e

Commission's

report,

necessary

T h e intervening period would

b a c k g r o u n d i n f o r m a t i o n to

which was i n v e r y general t e r m s .

the

It c o n t a i n e d

g o o d d e a l a b o u t t h e C o m m o n A g r i c u l t u r a l P o l i c y a n d t h e n e e d to other

Community policies

itself,

as

well as

about the

s t r u c t u r e of the

budget

b u t t o o k n o a c c o u n t of t h e d i s p r o p o r t i o n a t e n e t c o n t r i b u t i o n p a i d b y

the F e d e r a l R e p u b l i c of G e r m a n y . c l e a r t h a t h e w i s h e d to s e e F e d e r a l R e p u b l i c as

T h e F e d e r a l Chancellor had made

on that of the U n i t e d K i n g d o m .

T h e P r i m e M i n i s t e r s a i d that the E u r o p e a n C o u n c i l m e e t i n g President.

had also

with the F r e n c h

T h i s had been a friendly and useful discussion,

had not dealt with any i s s u e i n substance or detail.

though they

She had f o r m e d

i m p r e s s i o n that i n h i s o w n w a y h e w o u l d p r o b a b l y be n o e a s i e r to with than his p r e d e c e s s o r : subsequent

he could be stubborn,

attitude towards

European Council.

as had been

S h e h a d t o l d h i m t h a t t h e b e s t w a y to g e t

to s e t t l e o u t s t a n d i n g d i f f e r e n c e s

had also become predecessor

the

deal

revealed

the d r a f t i n g of the c o m m u n i q u e of

over

the

relations

b e t w e e n B r i t a i n a n d t h e n e w F r e n c h A d m i n i s t r a t i o n o f f to a g o o d was

it

l i m i t s p l a c e d on the net c o n t r i b u t i o n of the

well as

given her the opportunity for a b i l a t e r a l meeting

by his

a

modify

start

sheepmeat and fisheries.

It

c l e a r that h e h a d a d i f f e r e n t a p p r o a c h f r o m that of

on the M i d d l e E a s t .

H e d i d n o t s u b s c r i b e to

his

the

C o m m u n i t y ' s d e c l a r a t i o n a d o p t e d at the E u r o p e a n C o u n c i l i n V e n i c e , although he a c k n o w l e d g e d

that it c o u l d not n o w be o v e r t u r n e d .

He

f a v o u r e d a ^ t e p - b y - s t e p a p p r o a c h m o r e a k i n to t h a t o f t h e C a m p agreement.

On defence matters,

o n t h e n u c l e a r d e t e r r e n t a n d the n e e d to m a i n t a i n d e f e n c e

T H E clear

David

he had taken a f i r m and positive

FOREIGN AND C O M M O N W E A L T H

SECRETARY

line

expenditure.

s a i d it was

not

w h a t the F r e n c h P r e s i d e n t o b j e c t e d to i n the V e n i c e d e c l a r a t i o n ,

s i n c e he h a d s a i d that he a p p r o v e d the p r i n c i p l e s w h i c h it c o n t a i n e d . s e e m e d l i k e l y that h i s p u r p o s e was

to d i s t a n c e

3

CONFIDENTIAL

h i m s e l f f r o m the

It

position

CONFIDENTIAL

t a k e n up

by his p r e d e c e s s o r .

T h e r e a p p e a r e d to be s o m e d i f f e r e n c e

o p i n i o n on this i s s u e b e t w e e n the F r e n c h P r e s i d e n t Monsieur Cheysson,

the F r e n c h F o r e i g n M i n i s t e r ,

would be well aware

of the d i f f i c u l t i e s

European Council.

G i v e n the i m p o r t a n c e of F r e n c h

i n t e r e s t s i n the A r a b w o r l d , attitudes was

jepm eat levious @rence: (81) 25th delusions, Re 3

THE

not to b e

MINISTER

The Arab

countiies

c r e a t e d by the F r e n c h at

s o m e c h a n g e i n the n e w

President's

FISHERIES A N D FOOD

said

s i n c e the F r e n c h G o v e r n m e n t h a d c h a l l e n g e d the C o m m i s s i o n ' s meeting

the

commercial

excluded.

OF AGRICULTURE,

settle the outstanding

of

and

p r o b l e m on the S h e e p m e a t R e g u l a t i o n ,

a

right

T h e F r e n c h a n d I r i s h h a d r e f u s e d to a g r e e to

proposals

which were acceptable

C o m m i s s i o n had subsequently

to a l l other m e m b e r

discussed

the m a t t e r

to

special

of the C o u n c i l of M i n i s t e r s ( A g r i c u l t u r e ) h a d b e e n h e l d

30 J u n e .

that,

on

compromise

states.

again,

The

but

still

s e e m e d l i k e l y to be u n d u l y s e n s i t i v e to F r e n c h i n t e r e s t s i n s p i t e of a strong

stand t a k e n b y the two 3 r i t i s h C o m m i f s i o n e r s .

pressure

on the P r e s i d e n t

of the C o m m i s s i o n ,

Further

f o l l o w i n g what the

Prime

M i n i s t e r a n d 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 h a d s a i d to h i m o n 26 J u n e , reserve

would

be n e c e s s a r y .

In t h e m e a n t i m e ,

the U n i t e d K i n g d o m

had b e e n lifted on c e r t a i n a g r i c u l t u r a l regulations

d u e to

come

into o p e r a t i o n on 1 J u l y but m a i n t a i n e d on o t h e r s (notably on wine and c e r e a l s ) w h i c h w e r e of p a r t i c u l a r i n t e r e s t to F r a n c e . T H E S E C R E T A R Y had nous rence;

O F S T A T E F O RINDUSTRY

b e e n r e a c h e d on the r e g u l a t i o n

of

s u b s i d i e s w i t h i n the C o m m u n i t y was

s a i d the a g r e e m e n t

steel production,

a f r a g i l e one.

prices

It w o u l d

which

and

be

n e c e s s a r y to w a t c h d e v e l o p m e n t s v e r y c a r e f u l l y i n o r d e r to p r e v e n t

l l ) 22nd

favourable

^elusions,

C o m m i s s i o n a l l o w i n g a d d i t i o n a l q u o t a s to c e r t a i n m e m b e r

effect on steel p r i c e s

being u n d e r m i n e d through

the

the states.

te 3

T H E

FOREIGN

w o r t h y that,

AND C O M M O N W E A L T H SECRETARY

at a recent meeting

said it was

of the N a t i o n a l E c o n o m i c

Council,

several

occasion

of the B r i t i s h P r e s i d e n c y

trade union leaders

note­

Development

h a d s t r e s s e d the n e e d to u s e

of the E u r o p e a n C o m m u n i t y a s

the an

o p p o r t u n i t y to p u t a c r o s s to B r i t i s h p u b l i c o p i n i o n the i m p o r t a n c e of C o m m u n i t y in safeguarding

jobs and providing a favourable climate

investment. The Took Cabinet

Cabinet

-

note.

Office

2 J u l y 1981 4

CONFIDENTIAL

the for