Lords Sitting of 22 June 1984

Preamble
The House met at eleven of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Norwich.

Sealink: Sale Discussions
Lord Carmichael of Kelvingrove: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether any decision has been made concerning the future of Sealink.
Lord Lucas of Chilworth: My Lords, the British Railways Board are currently discussing the sale of Sealink with a number of potential purchasers and hope formally to invite bids soon.
Lord Carmichael of Kelvingrove: My Lords, I thank the Minister for that Answer. Is he aware that there is a feeling of great uncertainty and concern among employees of British Rail as to their future? There is obviously concern about their own jobs. They are concerned that if Sealink is sold there should be a guarantee that it will be sold as a single package and that after it has been sold, even as a single package, it will not be broken up. Can the Minister assure the House that the existing services will be more or less protected? Finally, can he give any indication as to how the container traffic is improving—because that was one of the sticking points—particularly in respect of the Holyhead—Dún Laoghaire service?
Lord Lucas of Chilworth: My Lords, so far as the noble Lord's first two supplementary questions are concerned, I gave his noble friend answers to precisely those two questions on 3rd April, and those answers remain exactly the same. So far as the container traffic is concerned, that is progressing well.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that the questions just put to him from the Opposition Benches suggest that when the sale goes forward there should be all kinds of conditions? If there are, that will affect the price. If, as a result of all kinds of conditions being imposed, the price is much lower than that which the Opposition considers to be right, than the Government will be attacked for selling Sealink below its real value. There have been such attacks on so many other occasions. Sealink ought to be put on sale on merit and without a lot of unnecessary conditions surrounding its sale, which would be bound to affect the price.
Lord Lucas of Chilworth: My Lords, I agree with my noble friend that British Rail are Offering Sealink for sale as an entity, as a complete company.

Juries (Disqualification) Bill
11.8 a.m.
Report received
Clause 1 [Disqualification for jury service of persons who have served or had imposed on them certain sentences]:
Lord Mishcon Lord Mishcon had given notice of his intention to move Amendment No. 1:
Page 1, line 15, leave out from ("detention") to end of line 17.
The noble Lord said: My Lords, I should like to commence any remarks on this amendment by expressing appreciation to what I believe we call "the usual channels" for having arranged for the Report stage to be taken at a time when several of your Lordships have managed to be present. I say that because the Committee stage was taken during the dinner interval and we merely had sufficient numbers of your Lordships present to fill one jury box—which was rather an astonishing situation when dealing with a Bill concerned with a juror's disqualification.
The background to the Report stage of this Bill is that to which I referred at Committee stage, and perhaps I may also mention the proceedings in another place. I do not say this to give the noble and learned Lord an opportunity again to reprimand me, as he did on a previous occasion, in his usual gentle and jovial tones. In another place this Bill had no Second Reading debate and the only stage at which there was a debate was in Committee, which lasted less than one and a half hours. I repeat that this is in no way meant as a criticism of another place for it is not our practice to criticise in that way. I merely refer to it as being a responsibility upon this House when dealing with an important constitutional Bill—of sufficient importance, incidentally, to be included in the Government's party manifesto—to give the proper consideration which your Lordships always give to a Bill before it becomes an enactment.
My noble friends on these Benches are certainly in favour of the principle of the Bill. We were merely looking to see—as I believe many noble Lords in all parts of the House were—whether the Bill itself does do justice to various classes of people who are covered by it. We have no doubt whatsoever that those who have been sentenced to a term of imprisonment—and we even have no doubt where there is a suspended sentence—should, because of experiences over recent years especially, be disqualified, certainly for a period of time, from jury service. There is no difference there at all.
Therefore, we looked at those who were not subjected to any kind of prison sentence. This being a Private Member's Bill, it is obviously a matter for each individual Member of your Lordships' House to be free from any kind of party allegiance on these matters, and I make that clear. But my noble friend and I and, I believe, the noble Lord, Lord Wigoder, and his noble friends, felt that it was wrong to include in this disqualification those who were subject to community service orders. We advanced those reasons in Committee.
I should have said, perfectly frankly, that there can be different views on this matter held with perfect sincerity and that the balance is a very fine one indeed. It is because of that, and because I do not believe that your. Lordships ought to find—I say this in all humility—the same fineness of balance when we come to the next amendment on the subject of probation, that what I propose to do, and I hope that your Lordships will regard this with some favour, is not to bother your Lordships with any arguments on community service orders this morning. I shall withdraw this amendment and concentrate on the aspect that worries many of us; that is, Amendment No. 2, which deals with those who are subject to probation orders. Therefore, I ask leave of your Lordships to withdraw this amendment.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I think that the correct form is for me to ask if the amendment is not moved. That is the point I make now.
[Amendment No. 1 not moved.]
11.15 a.m.
Lord Mishcon Lord Mishcon moved Amendment No. 2:
Page 1, line 18, leave out from ("who") to ("has").
The noble Lord said: My Lords, we now deal with the question whether those who are subject to probation orders should be disqualified from jury service. This amendment immediately admits that those who are subject to probation orders should not be qualified for—indeed, should be disqualified from—jury service during the period of their probation. So we are merely dealing with those subjected to probation orders who have finished their period of probation.
I first quote a statistic. It is the latest that I could cull and relates to 1981. It is a Home Office statistic. Of those who are subject to probation orders, 40 per cent. are under the age of 21, and 50 per cent. are under the age of 29. Therefore, we are dealing substantially with young people who have been subjected to a probation order. The second point which I want to make immediately is that your Lordships, in your experience, will know that there are several occasions when a judge, on coming across an accused and convicted person who has served prison sentences in the past, will, in his mercy, on those occasions when he thinks it suitable, tell the convicted person that he will give him a chance and put him on probation. I do not think we need worry about that sort of case because obviously if there have been prison sentences in the past that will in any event disqualify such a person from serving on a jury for a very substantial period of time under the provisions of this Bill and, indeed, the provisions of the previous Act.
Therefore, we are dealing with the normal type of person who is subject to a probation order. Those of us with experience in the courts—some of your Lordships are members of benches of magistrates and among your Lordships are those who have had experience of these matters—know that often the courts have cases to deal with where there are social problems, personal problems, employment problems, unemployment
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problems, and that the court decides that even in the most trivial of cases the proper thing to do in order to assist the person before them is to put that person on probation. There is a substantial number of such cases. Is it right that in that sort of case, outside the probation period itself, someone should be disqualified from jury service?
In dealing with this matter on a previous occasion the noble and learned Lord—I repeat, with his customary joviality—laughed and said he had always found it a great relief to find that because of his status in various directions he was exempt from jury service. He thought that, instead of anyone complaining about being disqualified, they might greet it with some amount of joy. If the noble and learned Lord looks at it in that way it must be an opinion to respect. Equally, I think one would respect an opinion which says that it may well be that something that is cast upon the citizen is quite irksome (it may be that several people find it irksome to vote in an election) but if that citizen is told that for some reason—not an honourable one, such as being a member of the Bar or being a member of my side of the legal profession—he is disqualified from that duty, immediately there is some sort of slur upon him. His immediate reaction, however he may have regarded that duty, is one of being disadvantaged. It is in that respect that I plead for this amendment.
I know that the noble Lord, Lord Wigoder, advanced a different point of view at the Committee stage, and it is for him to express why he feels that those who have had a probation order made against them but are outside the period of service should not be disqualified under this Bill.
I hope that your Lordships will regard this as a most serious matter. It is not one that was canvassed to any extent at all in another place, and certainly in no substantial way was it dealt with. It is therefore a burden—your Lordships may think a privilege—of your Lordships to deal very carefully with this amendment and this matter now that we are considering it at the Report stage of this Bill. I beg to move.
Lord Wigoder: My Lords, may I start by differing at once from the noble Lord, Lord Mishcon, in one observation that he made when he said that on a previous occasion I had spoken on behalf of my noble friends? I did not. There is no question of there being any party point of view on this Bill at all. It is not a Government Bill; it is not a Conservative Bill. I know so far as my own noble friends are concerned that they are entirely free—of course they are—to go into the Lobbies, in I hope a very short time, taking their own view of this point and basing it on their own judgment.
I support this Bill. It is a sensible Bill. It plugs a gap in the law. If I may, I congratulate the noble Lord, Lord Renton, on introducing it and monitoring it as he has done in your Lordships' House. It is a sensible Bill because all of us, I think, without arguing the point would agree that real criminals ought not to serve on juries. That I think is a self-evident proposition. The problem arises when one tries to define what is a real criminal.
One might do it, I suppose, by dealing with the nature of the offence. One might set out a series of offences—murder, rape, or whatever it might be—and

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say that anyone who commits any of those is a real criminal and is disqualified. There are practical difficulties about approaching this problem that way. One might do it in the way that I tried to do it, with the noble Lord, Lord Hams, alongside me, a year or so ago by saying that anybody who committed within a particular period of time two indictable offences could be said to be a real criminal. That was, I think, sensible, but not practicable in administrative terms.
Therefore the other approach has been taken in this Bill, and it is, I think, an intelligent approach. It is the approach, on which the existing Act is based, of saying, "As you cannot define a real criminal in any satisfactory way, let us deal with it from the point of view of penalty. Let us look at the punishment that has been imposed, and let us say, "Well, because of that punishment, it really follows as a matter of common sense that in all probability the person concerned is the sort of person who ought to be disqualified from sitting on a jury".
For that very good reason, the existing law having proved inadequate, there have been additions proposed by this Bill (which I entirely welcome) to the category of penalty which indicates that a person ought to be disqualified, such as suspended sentences which were not in existence when the original Act was introduced. They are now included—quite right. Sentences of less than three months' imprisonment or any custodial sentence are now included—quite right. I do not think that anybody could seriously argue that, where a suspended sentence or a custodial sentence, even a short custodial sentence, has in fact been imposed, the defendant is not a person who comes within the category of being a criminal who ought not to be allowed to serve on juries. Community service orders are perhaps slightly more arguable, but, having regard to the fact that the courts have indicated that community service orders ought to passed only as an alternative to a prison sentence, it did not appear to the noble Lord, Lord Mishcon, and myself appropriate to pursue that any further with your Lordships. So that category is now included; and those three categories I think make this a very useful little Bill.
We then come to the fourth category, where the Bill suddenly goes off at a tangent, and says, "and furthermore, anybody who has been put on probation". If I may say so, that really has nothing to do with the proposition upon which this Bill is based. When people are put on probation, as when people are fined or granted an absolute or a conditional discharge, that is no indication at all of the type of offence that they are likely to have committed, the gravity of the offence, or whether the person involved is the sort of person who should not he allowed to sit on a jury. The noble Lord, Lord Mishcon, has dealt with what was referred to last time as the old lag's chance, where sometimes criminals, serious criminals, are given a chance and put on probation. But, as he has pointed out, that need not trouble us, because that sort of person would be disqualified anyway under the various other provisions of the legislation.
One therefore has to ask the question: who are these people who are being put on probation? The figures are clearly somewhat misleading. Quite who has the misleading figures I am not entirely sure. The noble
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Lord, Lord Renton, gave us at Committee stage the statistic that in 1982, 17 per cent. of probation orders were for burglaries and another 58 per cent. were for theft or fraudulent handling. I am sure that those figures come from some appropriate table. The only table that I could find when I looked into the matter, which was in the criminal statistics for 1982, and was table 7.14 at page 184, gave rather different figures. That table shows that of the indictable offences for which people were put on probation, only 7 per cent. were for burglary (and not 17 per cent.) and only 8 per cent. were for theft and handling (and not 58 per cent.). As they are almost all indictable offences—burglary, theft and handling—that would mean in fact that, if one took all offences, and included summary offences as well, the proportions would be even lower.
As I say, I am not sure which of us has misread a perhaps rather complicated table, and I am perhaps not very sure indeed that it matters unduly. Many of your Lordships, I know, will have had experience of sitting in courts and will know the sort of offender who is placed on probation. It may be for a trivial offence; it may be for a rather more serious offence. The essence of a probation order is that the court is not paying attention to the actual offence that is being committed so much as paying attention to the circumstances of the offender and the probation officer's report saying that it is desirable that a defendant should be helped. It is as simple as that. That is why I say that this Bill goes off at a tangent.
Probation orders do not indicate the gravity of the offence. Indeed, it may very well involve a much less serious offence and a much less serious criminal than in the case of a person who is being given an absolute or a conditional discharge or a fine; and nobody suggests that this Bill should be extended so as to cover everybody who is convicted of any criminal offence in any court whatsoever.
In those circumstances, as I say, I support this Bill, but I think that it has the one weakness that in including probation orders it is not being true to itself and it is taking a course there which I think will lose it public support. If we are extending the boundaries of disqualification, it is important to make sure that we carry public opinion with us. In those circumstances I hope that your Lordships will individually come to a view and will decide to take an appropriate course when a Division is called.
11.30 a.m.
Lord Campbell of Alloway: My Lords, the views expressed by the noble Lord, Lord Wigoder, and of course the noble Lord, Lord Mishcon, always command the utmost respect. However, I am unable to support this amendment. It is true, as the noble Lord, Lord Wigoder, says, that disposal affords no certain yardstick to the gravity of the offence, especially as regards probation where the range of gravity of the offences for which it is imposed is so wide. The range extends from the most serious offence—so serious that it would be common ground that in the circumstances the disqualification should run—to the relatively slight offence committed by the man who is given the chance, to whom the noble Lord, Lord Mishcon, referred.

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But on a workable, practical plane how else can one judge gravity? The Bill is not perfect—few Bills are—but respectfully I join issue with the noble Lord, Lord Wigoder, when he says that the Bill goes off at a tangent on the question of probation. I agree that it rides off on a slightly different course because of the very nature of probation. However, the basic principle holds, because it provides a reasonable and requisite safeguard, which may be tilted in favour of the general safeguard rather than in favour of individual considerations, such as the slur of disadvantage to which the noble Lord, Lord Mishcon, referred. Surely that is just what is required. Surely it plugs the gap to which the noble Lord, Lord Wigoder, referred. If it were tilted the other way, in favour of considerations that are individual and against the general safeguard, it would not serve the interests of due administration, and much of the evil with which it is designed to deal would remain.
Lord Edmund-Davies: My Lords, a mere two or three years ago Parliament had occasion to consider Schedule 1 to the Juries Act 1974, an Act which emanated from the admirable report of a greatly loved member of your Lordships' House, and a close friend of mine, Lord Morris of Borth-y-Gest. I confess I have not read the debate which was conducted in both Houses of Parliament two years ago. But one of two things happened: either it then occurred to nobody to include, under the disqualifications, those who had been placed upon probation; or secondly they considered and rejected it.
The peaks and the valleys of criminality continue to present a most depressing picture, and must alert everyone to a necessity for close scrutiny of the penalogical provisions of this country. Having had a long time in the law and a good deal to do with the criminal side of the law, I must say that I do not detect any great difference between the picture presented in 1982, when Parliament last considered this matter of disqualification, and the present day. I recall that the foundation of the present system of probation is derived from the Criminal Justice Act 1948.
Since there was what, most respectfully I venture to describe as a certain amount of loose talk at the Committee stage about the attitude of the courts towards cases where they were minded to make a probation order, I wish, most respectfully, to remind the noble Lords and noble Baronesses that the two requirements for consideration under the 1948 Act remain untouched today; namely, that one has regard, first, to the nature of the offence, and, secondly, to the antecedents of the offender. I believe that it is only in the rarest of cases that a person with a bad criminal record is placed on probation. If a person has a bad criminal record, as the noble Lord, Lord Mishcon, has said, he probably comes under earlier provisions of the Act as it stands at the moment and under the proposed amendment. It is only in the rarest cases that a person who has anything like a tendency towards habitual infringements of the criminal law is placed on probation. So in the vast number of cases those who are placed on probation are people who have had a comparatively good record hitherto. In order to be placed on probation their antecedents, and the nature of the offence then under consideration and giving rise
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to the criminal proceedings, must be other than of a deeply criminal character.
So I have to say that while I am very alive to the necessity, as I have already said, of scrutinising from time to time what are our penalogical provisions, I am not satisfied that there has been any material change in the position of criminal offences between 1982, when your Lordships' House and the other place scrutinised Schedule 1 to the Juries Act 1974, and today. Accordingly, I identify myself with those who have criticised the second paragraph, the last paragraph here.
Lord Morris: My Lords, I think the misunderstanding on this particular point has arisen from the Short Title of the Bill itself, with the inclusion of the word "Disqualification", as though the Bill is taking something away. I most sincerely believe that to serve on a jury should never be considered as either a right or a privilege. It is nothing other than a very onerous duty.
I have listened with very great care to the arguments of the noble and learned Lord on the Cross-Benches. I certainly felt far more in tune with that approach than I did with the approach of the noble Lord, Lord Mishcon, who came out with this astonishing phrase, which I think lays the ghost of this particular matter, when he referred to a normal type of person who has served a probation order. Surely a normal type of person who has served a probation order would not be considered by the people in this country as being a right and proper person to serve on a jury among 12 good men and true. I think that this amendment should be resisted.
Lord Renton: My Lords, I think we should be grateful, as the noble Lord, Lord Mishcon, said on the last amendment, to the usual channels because they have enabled us to have this most interesting debate. May I say how much one appreciates the interest and the value of the contributions made by all those noble Lords who have spoken? I wonder whether I may first of all deal with the point just made by the noble and learned Lord, Lord Edmund-Davies. Before doing so, may I say that it is such a great advantage to the House when a Lord of Appeal in Ordinary retires, because he then gains the freedom which he was not fully able to exercise previously in taking part in our debates.
However I have the misfortune to disagree with the noble and learned Lord when he says that there is no difference between 1974 and now—
Lord Edmund-Davies: 1982.
Lord Renton: I am sorry. I misheard the noble Lord—between 1982 and now. There is, indeed, a difference, alas! There has been a difference in each year since 1974, and continuing through 1982 and 1983, in that there is more crime in this country. The administration of criminal justice has been under greater strain and there has been more jury nobbling. Jury nobbling is made much easier when jurors themselves have a past criminal record.
I must make it clear, as the promoter in this House of this Bill, that I am unable to advise your Lordships to accept this amendment tabled by the noble Lord

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which would have the effect of enabling those—and indeed requiring those—who have been on probation to sit on juries within five years of the making of the probation order after the order has expired or been discharged. I must correct several impressions that have been given by the noble Lords, Lord Mishcon and Lord Wigoder, greatly though one respects their views. The first impression is that a large proportion of probation orders are given to first offenders. Of probation orders given in 1982, 10 per cent. were to those who had a previous record that was unknown, while of the 90 per cent. given to those whose record was known, only 23 per cent. had no previous convictions, 16 per cent. had been previously on probation and 24 per cent. had been in custody. Therefore, the balance between 23 per cent. and 90 per cent. had been previously convicted and had had the fates that I mentioned.
Then the noble Lord, Lord Mishcon, said that probation orders apply to a great extent to young offenders. Of course, a great many of the young offenders placed on probation would be too young to sit on juries, anyway. That is common ground between us. They will not sit on juries. However, if we compare those aged from 17 to 20 years inclusive and those aged over 21 we find that the percentage of first offenders between those two age groups is about the same. The figures that I gave just now relating to those placed on probation who had no previous convictions, who had previously been placed in custody and who had previously been on probation are about the same for those under 21 as for those of the age of 21 and over.
Probation, I suggest to your Lordships, contrary to what has been mentioned, does not signify a trivial offence. If the offence is trivial, there are other ways of dealing with the offender short of probation. One way is in the hands of the police. They can just give a caution, and that is sometimes done. It used to be said that the boy who was found stealing apples was given a good cuff over the head by a police officer; but that of course causes trouble if it is done these days. However, a caution is sometimes appropriate in those circumstances. The court can award a discharge, absolute or conditional, for a trivial offence. Or, coming a little closer to probation, the court can bind the offender over for a period to be of good behaviour. So, for the trivial offences, there are matters short of probation. I suggest to your Lordships—many of you have at least as much experience as I have, and I have a lot of experience of these things—that probation is not lightly given by the courts.
I must refer to the figures quoted by the noble Lord, Lord Wigoder. The noble Lord stated that the figures I quoted at Committee stage were not correct. I have just had them verified. They are in fact correct and I will give them to the House.
Lord Wigoder: My Lords, I was careful not to say that the figures were not correct. I could only say that his figures differed very remarkably from mine. It may be that the tables were drawn up on a totally different basis. I would certainly not accuse the noble Lord of being incorrect.
Lord Renton: Of course, my Lords, it is not unknown for different statisticians within the government service to give different answers to the same problem. All that I can say is this. I have got my figures from those collated from probation officers all over the country and handed to me by the Home Office. I shall repeat them. In 1982, 17 per cent. of those placed on probation had been convicted of burglary; 7 per cent. of violence of one kind and another; and no fewer than 52 per cent. for theft or handling stolen goods. It is very pertinent and rather interesting to refer to a study made by the Home Office in 1979, and I would have thought that the experience gained then is possibly an indication of what still happens and may happen in the future. The study in 1979 of those convicted in 1971 showed that 63 per cent. of them of all ages were reconvicted within six years. Sixty-three per cent.! That is surely a figure that is most material to the arguments used in support of the amendment, including the argument used by the noble and learned Lord.
One must also bear in mind that probation is—and, on the direction of the Court of Appeal, the courts have a duty to consider it—sometimes awarded to those who have been in prison many times, sometimes to old lags. It does not happen often. I did it myself on one or two occasions in pursuance of the direction of the Court of Appeal, and experimentally. But it does happen. Another figure is that 54 per cent. of first offenders—they were of course a minority—aged 17 to 20 who were placed on probation had been reconvicted within six years of the probation order.
Of course, statistics never tell the whole story. We are here having to consider a principle. Whatever the statistics may show, I suggest to your Lordships that we should not lose sight of the principle. I think that we must conclude that probationers are more likely than not to offend again between the end of probation and the period of five years that is envisaged by the Bill following the probation order, and that it would be a serious risk to the system and a serious risk to the administration of justice if we allowed those who have been placed on probation to sit as jurors. We owe a duty to the public to see not only that justice is done but that justice appears to be done. If the public see people sitting on juries who have been convicted in recent years and placed on probation they will lose confidence to a greater extent than have some of them in the system of justice.
I wish to conclude by referring to a point that I do not feel carries conviction made by the noble Lord, Lord Mishcon, when he said—and I am paraphrasing his words—that it is wrong to deprive someone of a civil right, the right to sit on a jury, a right of which he may not be conscious, but if you tell him that he has lost it he would be indignant. What is being said is,
"Where ignorance is bliss, 'tis folly to be wise".
But I think that many of those who have been convicted are much wiser than the noble Lord assumes. Then he says, "Oh, but it's a slur not to be allowed to sit on juries; whatever the public may think about it, it's a slur on the individual". I can only say that it is a slur which he has brought about himself by his criminal behaviour.
Baroness Macleod of Borve: My Lords, I should like to intervene very briefly. I agree with what the noble Lord, Lord Renton, has said about the confidence of the public—and not only of the public, but of the defendant. It is very important that he should know that he is being tried by a jury of people who are otherwise blameless, or anyway have not been caught. As everybody knows, statistics can be made to prove any case that anybody cares to make; therefore, I am not going into that. But I do say that anybody who has been before any court of law and has been put on probation has already been found guilty of an offence. For that reason, I think that they should not sit on a jury.
11.52 a.m.
Lord Elwyn-Jones: My Lords, I will willingly give way to the noble and learned Lord the Lord Chancellor, but as I am going to agree with the amendment perhaps he ought to hear me first—
The Lord Chancellor: Yes, my Lords.
Lord Elwyn-Jones:—because I venture to suspect that he may not support the amendment. In those circumstances, if the noble and learned Lord will forgive me, I will not detain the House for long.
My own reactions are in favour of the amendment and in support of the views expressed by the noble and learned Lord, Lord Edmund-Davies, and the others who have supported the amendment. I have sat at the feet of the noble and learned Lord on many occasions—and I am very happy to do so again today—both when he was recorder and in other circumstances and conditions. One of the matters that I think we should remember from the beginning, particularly in the light of the observations of the noble Lord, Lord Renton, is that the existing disqualification of persons sentenced to imprisonment remains unaffected; the "old lag" syndrome is well and truly covered by that disqualification. We need not worry unduly about that.
The point of significance that was made by the noble and learned Lord, Lord Edmund-Davies, was that this matter of jury service was examined with great care and in great detail in 1982, under the chairmanship of the late Lord Morris of Borth-y-Gest. I remember the discussions we had upon that. At that time there was no suggestion that probation should be a disqualification. It is said that there has been more crime since 1982. That is true, but, then, there have been more severe penalties available and imposed since that time to cope with that particular situation.
The imposing of a probation order is very often done, for instance, even as an alternative to absolute discharge, because the judge may take the view that the offender in the particular case needs the support of the probation service. What I find regrettable in this debate is how little help is available to your Lordships from bodies like the Probation Officers' Association and other bodies which might have been able to assist us in our consideration of this matter. One of the difficulties on a Private Member's Bill is that the Private Member cannot call in aid the kind of support, with information, that I think the House needs on an important measure of this kind.
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It is easy to scoff at the consequences of a probation order disqualifying the person concerned from future service. When notices come out ordering him to do jury service—perhaps he is a young offender—it may come as quite a surprise to him, if not as a shock, to learn that he is something of a second-class citizen. The scoffing is no answer to this. It does impose upon him a limited status. Most people would be delighted; I think that is quite true. But whether or not that is so, whether that is too righteous a view of the mentality of those who might be affected, I do not know.
One could contrast the way in which those subject to probation orders are identified for special treatment in this respect with the imposing of enormous fines on crooks, on fraudsmen, who may have cheated the revenue, the public purse, of hundreds of thousands of pounds. They are not going to be disqualified from jury service. What a strange distinction and differentiation there is here. They ought to be far more deserving of the reproach of the community involved in what is proposed here in regard to probationers—far more deserving of being excluded from the serious responsibility of making a decision of guilt or innocence on an accused person.
Without traversing the ground again, I respectfully invite the House to consider, with anxious care, the experience—I make no apology for this, although it will embarrass him—of noble and learned Lords who, like the noble and learned Lord, Lord Edmund-Davies, have been through the whole range of responsibility in this field, including recordership, over years and years. I invite the House to the view that what is proposed by the inclusion of probation service is a backward step. I do not think it will increase respect for jury service; on the contrary, I think it will be diminished if this amendment is not carried.
Lord Edmund-Davies: My Lords, despite my appreciation of the graceful—
Baroness Trumpington: My Lords, order!
Noble Lords: By leave of the House.
Baroness Trumpington: Yes, my Lords.
Lord Edmund-Davies: My Lords, if I may have leave, I should like to point out an error which the noble and learned Lord made in the course of his contribution. It is a purely factual error, which I am sure he would regret immediately Hansard appeared. But I do not press it. He did give a wrong date; that was all. May I have leave to correct it for the record?
The Lord Chancellor: My Lords, I did venture to say on Second Reading that I thought the noble Lord, Lord Mishcon, and the noble and learned Lord, Lord Elwyn-Jones, were probably making too big a meal of this. We have now had three courses to that meal—on Second Reading, Committee, and now Report. We also had a fourth course, in the shape of an hors d'œuvre, in the short speech in which the noble Lord, Lord Mishcon, did not move his first amendment.
But I must begin by adverting to the hors d'œuvre first. He did venture to say, for the second time, despite my protest, that the Commons had debated this Bill

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too little. He mentioned the Second Reading, or absence of it. He mentioned the Committee stage, which was an hour and a half, but he omitted to say that there was a debate between about 9.30 in the morning and about 2.40 in the afternoon on Third Reading, ending in a Division in which two members of his party stood as tellers and nobody voted with them. So whatever else happens here, we have debated this for a shorter time in three courses than the Commons did in one.
Lord Wigoder: My Lords, I know that the noble and learned Lord will not wish in any way to give a false impression to the House. The debate in another place which he is talking about consisted almost entirely of a long filibuster (did it not?) by two Members there.
The Lord Chancellor: My Lords, I was only dealing with the point which the noble Lord, Lord Mishcon, omitted to state; and he did omit to state it. I do not think we ought to debate what happened in another place—I said so on Second Reading—but it does seem to me that my point was a valid one, as far as it can be.
There were originally two amendments. I ventured to say on Second Reading—and I say again now—that the origin of all political error is based on either false premises or false analogy. This one suffers from both faults. Perhaps I may interpose for a moment the point which was made by the noble and learned Lord, Lord Edmund-Davies. He was of course in honour bound, as he did, to correct the noble and learned Lord, Lord Elwyn-Jones, about the date of the Morris Report, which formed an integral part of the argument of the noble and learned Lord, Lord Elwyn-Jones, in support of the noble and learned Lord, Lord Edmund-Davies. But I would venture with respect to say that the point made by the noble and learned Lord, Lord Edmund-Davies, was also a false one.
The present law is based on, I think it is, Schedule 1 to the Juries Act 1974. That was a consolidation Act and therefore could not contain an amendment to the law. There was an amending Act, as I think the noble and learned Lord said, in 1982; but that was an amendment to the consolidation Act which changed the consolidation Act only to the extent of taking account of youth custody, and therefore it is totally irrelevant for the purpose which the noble and learned Lord was seeking to put forward. It was not carefully considered by Parliament at that time. A consolidation Act was amended in order to take account of a subsequent change in the law. So the point is a bad one.
Having said that—and said it I hope without unkindness—I come back to the purpose for which this Bill was intended. To complete the point that I was making a moment ago, perhaps I ought to have said that from the very next year, 1983, there have been repeated attempts in Parliament to effect the very purpose of this Bill. One such attempt was in another place by the Member for the New Forest, Mr. McNair-Wilson, and one was by the noble Lord, Lord Wigoder. Both of them sought to amend the law in this very respect and they only failed basically because, although they were trying to do the very thing which this Bill is trying to do, they tried to do it by a route which proved, for practical purposes only, to be
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unworkable, although in fact in some ways their attempts were more logical because they based the new disqualification on conviction and not on disposal.
I go back to the purpose of the Bill. The purpose of the Bill, universally endorsed now on all sides of the House, is to ensure that in trials on indictment we do not have criminals on the jury—and here I am virtually quoting from the noble Lord, Lord Wigoder. The right, both of the prosecution and of the defence—and here I am virtually quoting from my noble friend Lady Macleod of Borve—is to have on the jury 12 lawful men and women, 12 legales homines. It is widely conceded, and it was admitted on Second Reading, that all too often we do not achieve that purpose of having 12 lawful men and women on the jury. This imposes a potential injustice both on the prosecution and on the defence, because it is not necessarily to the advantage of the defendant to have corrupt members on a jury. Therefore, we have sought on three occasions, of which this is the third, to put the matter right.
The two amendments—one of which has not been moved—suggested by the noble Lord, Lord Mishcon, would have had the effect of putting back on the jury candidates who had been sentenced either to community service or to probation. Community service has now disappeared. But I must remind the House—devoting myself solely to probation for the purposes of my argument—that my noble friend Lord Renton was perfectly right. The fact is that those placed on probation more often than not have previous convictions of serious crime and stand a 6: 4 chance on, of committing another offence within the period of five years, which is the period with which we are concerned for the purposes of disqualification. So the effect of the amendment which now remains after the noble Lord failed to move his first amendment, is that we are dealing with a class of person who more often than not has previous convictions and who more often than not will be convicted again within a period of five years, which is the only relevant period we are considering. Quite frankly, this is not acceptable to me. As I have said, the chances are both that they have previous convictions and that they will offend again.
So far as concerns a comparison between the amendments, I can only say that that relating to probation is rather worse than that relating to community service. Community service is usually limited at the most to 100 hours; but probation may last for three years. I really do not think that it is suitable—quite apart from all the other arguments which have been adduced against this amendment—that, when a person is still under the supervision of the state by reason of the fact that he is on probation and therefore not a totally free agent, he should serve in a judicial capacity. It seems to me that that is the true point to which we ought to have addressed ourselves. But the fallacy of which noble Lords who support this amendment are guilty—and I except from this the noble Lord, Lord Wigoder, to whose argument I shall come in a moment—is the fallacy of false analogy.
The question of disposal was only introduced into this series of Bills—of which this is the third and I hope successful attempt to legislate—because of practical difficulties in the way of the other and more logical

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system which was based on the nature of the offence or the number of convictions. Therefore, the question of sentencing policy, but for one other argument which I will adduce in a moment, is totally irrelevant to our considerations in this debate; it is an argument based on a totally false analogy.
The noble Lord, Lord Mishcon, whose heart on this occasion has slightly tended to rule his head, told us during the Committee stage on 7th June at column 832 of Hansard—but he virtually said the same this morning and on Second Reading—with almost sobs in his voice:
"One finds terribly often that we have rights, and we are not terribly proud of them, and nor do we value them, until somebody tries to take a right away from us".
Wiping away for a moment the tears from my eyes at the pitiful picture of the young offender doing 100 years' community service in an old persons' home, or rather 100 hours' community service in an old persons' home—
Lord Mishcon: My Lords, I hope that the noble and learned Lord will forgive me, but he must not continue to exaggerate!
The Lord Chancellor: My Lords, I apologise for the slip of the tongue. But I have the picture of this poor boy doing 100 hours' community service in an old persons' home or serving three years on probation, sobbing away to himself and saying, "Not only that, but I am a second class citizen. They have even taken away my right to serve on a jury in the Crown Court at Snaresbrook". This is cloud cuckoo land. Surely the noble Lord, Lord Wigoder, was right in Committee when he swept that argument aside and blew it sky high by saying at column 836:
"I doubt if it is helpful to talk about the rights of people to serve on juries, because, frankly, 90 per cent. of the community would disclaim the opportunity if they had the chance of doing so. What it is I think is a duty … It is an arduous duty. It is time-consuming. Particularly with women jurors it may impose a considerable strain on their family life … Very often it gives rise to real financial hardship".
The noble Lord, Lord Wigoder, in Committee brought in his powerful guns in support of the noble Lord, Lord Mishcon, on a totally different and in fact demonstrably inconsistent line of country. On Committee, at any rate, the line of country that he pursued was that he was very concerned with the potential pool of jurors. He said that it would narrow the pool of potential jurors. I was particularly grateful to the noble Lord, Lord Wigoder, for blowing sky-high the fundamental assumption of the noble Lord, Lord Mishcon, and for his solicitude for the potential pool of jurors. But, as the Minister responsible for summoning jurors, I have to tell him that, difficult as it is to find willing volunteers, the press-gang is not yet quite so hard put to it that we have to find pressed men who are more likely than not to commit a criminal offence in the future, who more likely than not have committed more than one in the past, and who have certainly committed at least one in order to have been given a probation order.
There is one other point, and I do not stress it quite as strongly as those on which I have been expanding a little. We try to persuade judges not to impose
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custodial sentences, except in the last resort, even for an indictable offence and even when the record is bad. In many such cases, in particular those of juveniles, community service or probation is a wholly desirable alternative. But can we be absolutely certain that the same would be true if the judge had to say to himself, "If I do not send him to prison for this offence, even for a couple of days, the next thing will be that I shall find him at Newington Causeway glowering at me out of the jury box."? For those reasons I can only advise the House to reject this amendment.
Lord Mishcon: My Lords, on a Friday afternoon your Lordships have been treated not to a meal but to a feast of robust advocacy. I honestly believe that if the noble and learned Lord were to revert to his previous much admired status of counsel and prosecuted in a case in which the jury consisted of 12 old lags, they would convict the accused and add a rider that they thought he ought to have an extremely guilty conscience.
I always find—and I know that the noble and learned Lord will forgive me when I say this—that the more robust he is in his advocacy, the greater is his realisation that he has a rather weak case to defend; but, my word, he will defend it! Therefore, allegations of false analogies and false premises are hurled about, and inconsistencies are found between the noble Lord, Lord Wigoder, and myself. But it has been great fun, and we have all enjoyed it.
Having said that, I should like to speak for only a few moments before your Lordships express a view. Obviously, I am now treating this subject seriously. The noble and learned Lord said that this House was making a meal of something. I do not object in the very slightest to your Lordships making a meal of this when—and I must repeat this—in another place it was merely a snack. It really is essential that your Lordships heed the very authoritative opinion, delivered with his usual quietness and moderation, of the noble and learned Lord, Lord Edmund-Davies. Your Lordships heard then from not only the experience of one of our great judges, but also the judgment of one of our great judges.
The issue is a simple one. We are disqualifying from jury service various elements. We have agreed on all of them except one. There is not the slightest doubt that, in regard to that one element of those who are subjected to a probation order your Lordships are dealing not with the old lag example—which, as the noble Lord again emphasised, was in any event covered by the present legislation, because he is an old lag and he would have been sentenced to terms of imprisonment and therefore would be disqualified in any event—but essentially with young people who, for one reason or other (and there are many) have been put on probation.
The noble and learned Lord the Lord Chancellor referred to probation periods as long as three years. It does not matter how long is the probation period because this amendment provides that certainly during the period of probation the disqualification appears and should be effected. If I were to go on talking until lunchtime, I would not only interfere with your Lordships' pleasure on a Friday afternoon, but I

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might dissipate your Lordships' patience and tolerance of the arguments that have been advanced. I think that all those arguments are now before the House and, without a sob in my voice, I ask your Lordships to divide.
12.16 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 27; Not-Contents, 80.

DIVISION NO. 1

CONTENTS

Ardwick, L. [Teller.]

John-Mackie, L.

Bernstein, L.

Leatherland, L.

Boston of Faversham, L.

Maybray-King, L.

Brockway, L.

Mishcon, L.

Caradon, L.

Mulley, L.

Carmichael of Kelvingrove, L.

Oram, L.

Parry, L.

Collison, L.

Ponsonby of Shulbrede, L.

Edmund-Davies, L.

Shackleton, L.

Elwyn-Jones, L.

Stoddart of Swindon, L.

Gaitskell, B.

Stone, L.

Graham of Edmonton, L.

Taylor of Blackburn, L.

Halsbury, E.

White, B.

Jenkins of Putney, L.

Wigoder, L. [Teller.]

NOT-CONTENTS

Airey of Abingdon, B.

Killearn, L.

Alexander of Tunis, E.

King of Wartnaby, L.

Amherst, E.

Kinloss, Ly.

Annan, L.

Lane-Fox, B.

Attlee, E.

Lawrence, L.

Avon, E.

Lloyd of Kilgerran, L.

Belhaven and Stenton, L.

Long, V.

Bessborough, E.

Lucas of Chilworth, L.

Boothby, L.

Macleod of Borve, B.

Caccia, L.

Mancroft, L.

Caithness, E.

Masham of Ilton, B.

Campbell of Alloway, L.[Teller.]

Merrivale, L.

Meston, L.

Campbell of Croy, L.

Molson, L.

Cockfield, L.

Morris, L. [Teller.]

Coleraine, L.

Mowbray and Stourton, L.

Cork and Orrery, E.

Cottesloe, L.

Moyne, L.

Cowley, E.

Nathan, L.

Denham, L.

Northchurch, B.

Diamond, L.

Portland, D.

Eccles, V.

Reay, L.

Effingham, E.

Renton, L.

Ellenborough, L.

Richardson, L.

Elton, L.

Roberthall, L.

Fletcher, L.

Sainsbury, L.

Fraser of Kilmorack, L.

St. Aldwyn, E.

Gainford, L.

St. Davids, V.

Glanusk, L.

Sempill, Ly.

Glenarthur, L.

Skelmersdale, L.

Granville of Eye, L.

Spens, L.

Greenway, L.

Strabolgi, L.

Hailsham of Saint Marylebone, L.

Strathcona and Mount Royal, L.

Hampton, L.

Swansea, L.

Hanworth, V.

Swinton, E.

Harris of Greenwich, L.

Terrington, L.

Henley, L.

Trefgarne, L.

Holderness, L.

Trumpington, B.

Home of the Hirsel, L.

Vickers, B.

Hornsby-Smith, B.

Whitelaw, V.

Ironside, L.

Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendment No. 3 not moved.]

Ordnance Factories and Military Services Bill
12.24 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, I rise to move that this Bill be now read a second time.
The purpose of the Bill is to enable the Royal Ordnance Factories, which are at present an integral part of the Ministry of Defence, to become an independent commercial organisation established as a Companies Act company, initially wholly owned by the Government. Under its terms the Secretary of State for Defence can transfer Government assets—largely those which are at present in the ROF Trading Fund—to the company, taking complementary action to extinguish the trading fund. The non-industrial and industrial staff currently paid by the fund or who are engaged in work closely connected with its operations, will transfer with the assets to become company employees.
Since the Second World War the Royal Ordnance Factories organisation has moved progressively towards more commercial disciplines and accountability. The ROF Trading Fund was the first such fund to be established under the Government Trading Fund Act 1973. It was set up in 1974 and the ROFs have operated since then with considerable success—winning the Queen's Award for exports in 1976, 1978 and again this year. Yes, the ROFs have done well, but the Government believe that under our proposals they could do even better. They are at present obliged to operate within the constraints of the Civil Service, and this inhibits the ability of management to conduct their trading activities in a fully effective way. The next logical step is to complete the transition begun by the Trading Fund and to make the organisation a fully fledged commercial one which will be better able to build on the strengths that already exist.
Our proposals follow studies made by my noble friend Lord Strathcona when Minister of State in the Ministry of Defence, and one made earlier, by the Mallabar Committee in 1971, as the result of which the present ROF Trading Fund was established. The Mallabar Committee, looking at the issues more than a decade ago, did not believe that hiving off the ROFs would be feasible because of the close links between the ROFs and MOD as suppliers of munitions. It remains the case that the majority of ROF business is done with MOD, but in recent years the ROFs have dramatically increased their overseas sales. In these outside markets, particularly, the constraints imposed by the current organisational structure are operating against the best commercial practice. MOD can continue to secure its requirements with a privatised organisation, but privatisation will also open up the field to the ROFs to expand in other directions. This would not be possible if it remained part of Government.
The Government also attach very considerable importance to securing an increase in competition,

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with all the benefits that that will secure for us in the way of products and their pricing. As the Statement on the Defence Estimates 1984, which we have recently debated, explains, it is central to our strategy to promote more extensive and effective competition in the supply of defence equipment. Competition is vital for the achievement of the best value for money, the most efficient use of industrial resources and the stimulation of innovation and new ideas.
The Government accordingly made clear in the previous Parliament, and again during the general election last June, our intention to change the status of the Royal Ordnance Factories, thereby enabling the subsequent introduction of private capital.
We plan accordingly to incorporate the ROFs as a public limited company with the structure of a holding company with four wholly-owned subsidiary companies acting as operating divisions. To the four subsidiary companies—which will cover small arms, ammunition, weapons and fighting vehicles, and explosives—will be assigned the 11 factories and the two agency factories presently in the ROF Trading Fund. To the explosives company will also go parts of the Propellants, Explosives and Rocket Motor Establishment (PERME) which are an integral part of the Ministry at present, and also the agency factory managed by IMI at Sumerfield.
Thus, the manufacturing operation which the ROFs essentially were while managed as a Trading Fund will be transformed into one which will have its own research and development capacity, based upon the PERME capability; and the ROFs will then be on all fours with their major competitors in the defence industry. While the company is building up its R and D capability from this base, it will be able to sub-contract, back to MOD, R and D work on land systems. The ROFs already have—as a result of a transfer of responsibilities from the Defence Sales Organisation in April of last year—their own sales and marketing organisation. The Government are determined to establish an ROF Company which—as a free-standing enterprise—is capable of carrying through new products from concept to production.
It is our intention that the directors of the company should be fully responsible for the management of the enterprise and that the Government should not interfere in the business operation. But while the company is under Government control the relationship between the Government as shareholder and the chairman of the board will be determined by a memorandum of understanding which we would hope to publish. This MOU, on the basis of the annual submission to the department of the company's corporate plan and the regular provision of company accounts and other information, will enable the Secretary of State to discuss the company's forward plans with its board in relation both to his responsibilities to Parliament and to our desire that, in the wholly-owned phase and beyond, the ROFs should maintain, and increase, their profitability. In addition, we shall be taking powers in the articles of association of the company to ensure that the company, once privatised, should not fall under foreign control.
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The Government—that is the Ministry of Defence—have of course a particular interest in the ROFs as the major customer for their products. The continuity of supply to the services of a wide range of equipment, and particularly that, perhaps, such as ammunition, where the ROFs are a major supplier, is vital. It is equally vital that the ROFs should go on meeting the necessary quality audit and safety standards. My honourable friend the Minister of State for Defence Procurement has made clear in another place that what has been known as the preferred source policy—under which the ROFs had first claim, non-competitively, for the production of various MOD needs—would cease on vesting day. In the future we shall secure our requirements from the company in the way we secure them from all other defence suppliers: by competition where we can, and with arrangements agreed in a specific contract. We have no reason to suppose that our needs cannot be met totally satisfactorily in this way.
The Bill is concerned with the incorporation of the ROFs as Companies Act companies and with the transfer of public assets to them. For an initial period these companies will continue to be owned by the Crown. But I should say a few words about our proposals to introduce private capital thereafter. We are at an early point in the process of turning an integral part of a Government department into a fully-fledged independent commercial operation, and the Bill is only a first step. It will enable us to create a framework for the ROFs which will allow for the introduction of private capital into the venture. The first step is to set up the companies and to transfer to them the property and assets which will constitute their trading capital. Thereafter they will be trading on a commercial basis.
We cannot decide now the exact means, whether by flotation of shares in the whole organisation, by direct sale of parts or of subsidiary companies, or by entering into joint ventures. My right honourable friend the Secretary of State has, however, made it clear that the Government's preferred course, if feasible, would be a Stock Exchange flotation of shares in the whole enterprise. We see no reason why such a flotation should be long delayed.
Crucial to the success of the ROFs in the past, and crucial in the future, is, or course, the workforce. It is the dedication of this workforce—their skill and expertise, their energy and enthusiasm—which have enabled the British Army, and the services as a whole, to rely with such confidence, both in peace and in war, on a timely and effective supply of munitions.
The individuals who make up that workforce—in many cases carrying on a family tradition—are rightly proud of their record of service to the Crown, and of the essential contribution they have made to the commercial success of particular factories and of the ROF enterprise as a whole. That contribution will continue to be crucial in the future. The Government believe that it is appropriate for the manufacturing operation which they perform to be outside government, rather than inside it, and also that the prospects for future employment in the ROFs are healthier if the public service constraints are removed from the enterprise. But that does not mean that we do

573
not understand the regrets and anxieties that employees have about the loss of their Civil Service status which the changes will unavoidably involve. Indeed, the unions expressed their anxieties to me very clearly when I visited the Royal Small Arms Factory at Enfield recently. My ministerial colleagues in the Ministry of Defence, led by my right honourable friend the Secretary of State, have therefore devoted very particular attention to all the practical aspects of the transfer of personnel; and there have been intensive discussions with the trades unions, which continue, on all the issues arising.
The personnel provisions are contained in Clause 4 and Schedule 2 to the Bill. Employees of the trading fund and in the other concerns which are being transferred to the company will go across under the terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981, which means that they will do so on terms and conditions of employment which will mirror very closely those they enjoy at present. There will be no change as a result of transfer in such things as employees' pay, leave or in retirement policy. In addition, the current rights of trades unions, whether Civil Service or otherwise, to negotiate on behalf of their members will be transferred unchanged.
Superannuation arrangements are specifically excluded from the regulations, and staff who are transferred from the Civil Service cannot remain in the PCSPS. A new company scheme is therefore being devised which will provide for transferees comparable benefits to those of the Civil Service scheme, including the continuation of index-linking. There will be a separate scheme for new entrants to the company after vesting day. The proposed schemes will be governed by trust deeds. Transferring employees may elect either to leave their accrued pensions entitlement in the principal Civil Service scheme or to transfer those entitlements to the new company scheme. In respect of those who elect to transfer, the Government will make transfer payments into the company scheme to enable that scheme to pay those accrued pensions when the time comes. I appreciate that the unions are not yet fully satisfied that the company scheme will in all circumstances match the Civil Service scheme. But discussions continue and will, I hope, result finally in an outcome acceptable to all parties. It is the Government's intention that there should be no detriment in this respect.
One other crucial personnel issue is that of redundancy compensation. On this, I would emphasise that compensation levels for transferring employees will match those currently provided for in the Civil Service pension scheme. On this issue, too, we are in continuing discussion with the unions.
Turning to the other provisions in the Bill, I would point out that what we are discussing is essentially an enabling measure. Clause 1 enables the Secretary of State to make schemes transferring to a company or companies set up for this purpose under the Companies Act property, rights and liabilities which are at present being used for, or attributable to, the operation of the ROFs. The Secretary of State will receive in return for the assets transferred to the company securities in the form of shares and debentures of an equivalent value.
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Clauses 2 and 3 supplement the provisions of Clause 1 by defining the ambit of the property, rights and liabilities that may be transferred initially, and by laying down some general rules regarding the operation of schemes and the publication of their contents. In this last connection, your Lordships will observe that the Secretary of State is bound to lay schemes before Parliament within one month of their being made. That is in Clause 3(9). Clause 4 brings in Schedule 2, which contains the provisions relating to the transfer of employment which I have already mentioned.
These four clauses are the heart of the Bill. Clauses 5 to 10 deal with incidentals.
Clause 11, with Schedule 3, deals with the important matter of ROF security and gives effect to the Government's intention that the factories and establishments being transferred to the new company should continue to be guarded by MOD police, with their existing powers and responsibilities, until we are satisfied that it would be safe, from the point of view of the physical security of the weapons and other material held on the various sites, to withdraw them.
There are other minor and consequential provisions in Clauses 12 to 14 and 16 to 17. Clause 15 deals with International Military Services Limited, and has an entirely separate purpose from that of the rest of the Bill. International Military Services Limited is already constituted as a private limited company under the Companies Acts, and has the same legal status as any private sector company. The purpose of the clause is to provide statutory authority for the contingent financial liability incurred by the Secretary of State for Defence when he assumed ministerial responsibility for the company and became sole owner of its shares. At the time a ministerial undertaking was given that legislation giving authority for the exercise of the continuing functions of the Secretary of State in respect of the company would be introduced as soon as an opportunity occurred. The clause, as I have said, is concerned with a contingent liability. There has been no recourse to public funds so far. The recent trading performance of IMS has been impressive, with substantially increased turnover and reserves.
Before leaving the detail of the Bill, it may be appropriate for me to tell your Lordships that I have it in mind, in the light of very recent consideration, to bring forward an amendment at Committee stage. This will be in the form of an additional clause to the Bill, the effect of which would be to dis-apply to the ROFs after vesting day the provisions of the Building Restrictions (War-Time Contraventions) Act 1946. I will, of course, explain the background more fully when we come to Committee.
The Bill is a short one and is indeed a limited enabling measure. But the change of status for the Royal Ordance factories which it will make possible is an important step forward in their evolution. It will give them full freedom to control their own commercial future. This will be best for the company, it will provide the best long-term guarantee of employment for the workforce, and it will suit the Ministry best as a customer. I therefore commend the

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Bill to your Lordships, and I beg to move that it should now be read a second time.
Moved, That the Bill be now read a second time.—(Lord Trefgarne.]
12.43 p.m.
Lord Graham of Edmonton: My Lords, however the Minister describes the Bill, it is part of a programme to "flog off' the assets of the nation. The Government have never hidden from the public their distaste of the public sector. Regardless of the needs of the nation, and whether or not that segment of the public sector is profitable, but especially if it is profitable and has a record which will appeal to the City and to investors, it is a prime target for privatisation. The crime of which the Royal Ordnance factories stand condemned in the eyes of this Government—a Government which know the cost of everything and the value of nothing—is that they have served the nation well, that they are successful and profitable, and that there is a market for their shares. There must be something sick in the mind of a Government when they jeopardise the security of a nation in the pursuit of such dogma.
The Minister in another place could not have been more clear—nor indeed the Minister in this debate—as to the purpose and intent of the Bill. At the Second Reading in another place the Minister said:
"The purpose of the Bill is to enable the Royal Ordnance factories, which are at present an integral part of the Ministry of Defence, to become an independent commercial organisation established under the Companies Acts".—[official Report, Commons, 16,1/84; col. 26.]
I would remind the House that that same step was the first taken when the Government privatised the National Freight Corporation, Amersham International, British Shipbuilders in 1983 and the iron and steel companies in 1982. The Minister has said—and these words have been repeated by the Minister here today:
"The Bill is only a first step. The next step is to set up the companies and to transfer to them the properties and assets which will constitute the trading capital".
But as to how the privatisation of those public assets will be achieved, nothing yet is clear.
Ministers have been very coy as to how the public purse will benefit from privatisation, if at all. At a meeting with the trades unions involved on March 6th, the Secretary of State said:
"If there is a gain for the public purse, that would be purely coincidental".
The mind boggles! Here is a situation where the national interest is being best served by a policy of, "Leave well alone". But, no! In December it was announced that the sale of the 11 factories may raise £300 million but that the MOD would be paying about £250 million into the new pension fund.
Noble Lords should note that on that basis there is a once-and-for-all gain of a paltry £50 million—less than last year's profits—for the sale of a crucial national asset. And who is likely to buy these factories? Why, of course, their competitors, including some foreign companies. Privatisation will reduce, and not increase, competition. Is that what this competition-mad Government really want? Many of my former
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constituents work at the Royal Small Arms Factory at Enfield. I am glad to know of the visit to Enfield by the Minister. A loyal, skilled workforce has given to the nation a perpetual stream of high-quality defence weapons. I remind your Lordships' House of their world-famous Lee-Enfield rifle.
At Enfield, as in other factories, they have been stunned by these proposals. They just cannot believe that this Government can be so stupid. They feel betrayed. They are fearful for their future. They tell me that if what is in store for them is the reward for good service, what is the price of failure? Let us remind ourselves in this debate of the record of the Royal Ordnance factories over the past ten years, since the trading fund set up following the Mallabar Report—a trading profit of some £270 million in those ten years; £68 million last year; a forecast £50 million this year. Furthermore, as the Minister has said, three times in those ten years have the ROFs received The Queen's Award for Export. My noble friend Lord Stoddart will pay even closer attention to the profit record of the ROFs over the past ten years.
The current project of the factories include the Challenger tank, Swingfire, Rapier, Sea Dart. Sea Skua, Sea Wolf, Sea Eagle, Sidewinder, JP233, SP70, Stingray and Spearfish torpedoes—plus, plus, et cetera. The factories and their predecessors have served the nation well for 400 years: through the Napoleonic wars, through two world wars and through the Falklands conflict, and now, in time of peace, with the development of the most up-to-date equipment to meet an increasingly sophisticated threat. They are experts. The world appreciates this, but in our view this Government by this action, do not. As the Minister knows—and as was stressed time and again by the Minister's friends in another place before, alas!, they voted for this Bill—the record of service to the national interest by the Royal Ordnance factories, their employees and the management (and I repeat, "and the management") has been not only good but outstanding.
Universally across the whole spectrum of affected parties—and I include the taxpayer—there has been incredulity that such a devoted record should be rewarded by a kick in the teeth. It is no use the Minister dressing up the proposals with the cloak of smooth parliamentary jargon—"fully fledged independent companies", "legal and organisational framework", "trading on a commercial basis", "a flotation of shares". Such smooth talk fails to turn this shabby, disreputable Bill into anything other than what it is: a Bill designed ultimately, but not initially, to "flog off" another part of the nation's assets to the highest bidder.
Yes, my Lords, we shall be told that there are safeguards for the national interest and special terms to attract employee and management participation: but Ministers have been quite unable to refute the charge that the present inviolate and absolute adhesion of all that is encompassed within our ordnance factories absolutely to the national interest will remain so under any new management. In another place Mrs. Ann Winterton, the Member of Parliament for Congleton, as reported in col. 69 on 16th January last, said:

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"Privatisation will not increase competition for the ROFs but may well do exactly the opposite with parts of the existing set-up being sold to the private sector and possibly bought by those competing in the same sphere".
Mrs. Winterton went on to say:
"How do we know—I share the anxieties of many honourable Members who have expressed concern in the debate—who will buy into the companies or into whose hands they may fall? It will be extremely difficult to control the destination of privately produced bullets, shells and rockets."
Sir Ian Gilmour, at column 43 of the Official Report for the same day, said:
While listening to my honourable Friend the Minister's interesting speech, I thought that at one time he was speaking as though he were buying the Royal Ordnance Factories, rather than selling them … The facts are against the Bill and few people who have had anything to do with the ROFs would support it."
We do not need to search very far for a central reason why this Government are acting as they are over a once public and publically-owned service. In the grand total of public and civil servants there stands a total of approximately 20,000 ROF employees. Not for the first time in the past five years have we seen civil servants disappear. It is simple, you privatise. Hospitals? You contract out, Schools? You contract out, Parks? You contract out. Housing? You contract out. Even if the work miraculously continues, those who continue to perform the function are no longer on the public payroll but on that of the private contractor.
Every departmental head, as the Minister knows, has been given by the Cabinet a target to aim at—not to aim at; to achieve, or else. Regardless of national imperatives, the over-riding consideration is to reduce the size of the Civil Service. Even when it endangers the security of the realm, as in this instance, it must be done. In my view, it is a squalid exercise but not out of keeping with this Government's view of national priorities. The very base on which our national defence has rested—a firm partnership between our ordnance factories and what I call the defence industries—is undergoing a revolution as a result of this Bill, and no-one, including the Minister, can tell the House to where ultimately that will lead.
At no stage has Parliament, the taxpayer and employees and their families been given a convincing reason for this Bill. Jargon words have been used and yet no-one has told us why the Bill is necessary—why it is necessary to sell off profitable and productive factories. Not a word about manifesto commitments here. The Government justify their rate capping and the abolition of democratic institutions on the grounds that they had a mandate. Where is the mandate for this? Sir Ian Gilmour had it about right when he said at column 43 of the debate:
"Presumably it was not included because the Government did not quite know what they intended to do about the matter".
Here we have factories which have provided the armed forces with weapons and ammunition of the highest quality at a reasonable price for a very long time, made by a dedicated and loyal workforce.
Who will benefit from this exercise? Not the country, not our defences; but the taxpayer, not the employees. We all know who will benefit—those who manage money; those who lend money; those who advise on the use of money; those who write prospectuses; those who sell shares; those who buy shares; those who deal in the sale of arms. The honourable
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Member for Kingston upon Hull, North, Mr. Kevin McNamara, told the other place on 21st May (at column 767 of Hansard) that,
"seven firms of primary underwriters and financial advisers, three firms of legal advisers and six firms of stockbrokers",
received no less than £22,694,000 when other public assets were sold to private companies and individuals. All those people and their ilk will be grateful to this Government for giving them the chance to pick up a slice of the action. The Government know who will benefit and why.
In Committee the Minister will expect us to subject his plans to a severe scrutiny as far as pensions and redundancy terms for employees are concerned. The unions representing their members tell us that, despite the most categoric assurances given over the period, they still remain apprehensive—even distrustful—of the value of ministerial statements. After five months of debate in another place there is still no agreement on pensions, no agreement on pensions rights, on categories of pensions, on comparability of pensions, on index linking of pensions, redundancy terms, or compensation for the loss of Civil Service status.
I agree that the Minister today has made some helpful noises. References have been made to "no detriment" for these matters in the future. We will—with no disrespect to Ministers—consider it essential to have these matters written into the face of the Bill or signified to us that the employees are satisfied that their interests are fully secured.
The House will be aware that the Government were wise enough to draw back from their original plan with regard to the security of ordnance factories of moving them somewhat substantially out of the hands of the Ministry of Defence police and putting them into the hands of private security firms—in my view, just about the daftest proposal in this Bill. But the Minister will know that there are many unanswered questions in the minds of the Defence Police Federation. For instance—and I appreciate that it may not be possible to give direct answers at this stage—will the Minister confirm his statement that any in-house security organisation will be organised and trained by joint agreement between the MDP and the new private ordnance factory company management, and that this arrangement will be of long standing? Will the Minister reaffirm his intention to retain the MoD police at those ordnance factories where the incidence of national defence potential and national security needs are paramount to national safety? Can the Minister describe the formula to be used in ascertaining which ordnance factories shall have the requirement for MDP and those which will require a lesser police and security force? Answers to those questions and many others, which my noble friend Lord Stoddart intends to raise, must be given to us, if not here then when we reach Committee.
The scene changes; the scenario remains the same; but the players with widely differing backgrounds can play a crucial part here in your Lordships' House over the next period. Here in your Lordship's House we have the benefit of a unique range of service to this country from devoted men and women unrivalled certainly to a far higher degree than in another place—valuable as the experience in another place

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undoubtedly is. The Benches in your Lordship's House accommodate those who know from their professional lives that our ordnance factories have met, are meeting, and are capable of continuing to meet every demand made of them by this or any future Government. Every rank, from Field Marshall to Captain; from Admiral of the Fleet to Lieutenant Commander; from Wing Commander to Squadron Commander; all of these have graced the Benches of your Lordships' House recently, and I very much hope will make their views felt on this Bill at the Committee stage.
We also have in this House Members of the Security Commission, those who have served as high civil servants in sensitive departments, members of the Diplomatic Corps and in the higher echelons of our trade union movement. I find it difficult to believe that, regardless of party or party whips, many of those with that kind of experience could stand idly by, let alone support, this senseless butchery of a once proud and valued public service. If they put their country before party, they will support our efforts at Committee stage to stop this Government committing a national blunder of monumental proportions.
In conclusion, we will in Committee seek to gain support for improvements aimed at removing from this Bill some of its terrible provisions, and to insert some safeguards vital for the welfare of ROF employees. Above all else, we will seek to ensure that the sovereignty of Parliament over the Executive, especially in the spheres of defence and security, is emphatically restored.
12.58 p.m.
Lord Diamond: My Lords, we on these Benches believe strongly in the mixed economy. We have a high regard for the achievements in the private sector and we have a high regard for the achievements in the public sector. We are perfectly prepared therefore to examine on its merits any proposed transfer from public to private or from private to public. That is what I propose to do, as shortly as may be possible, but I propose to have regard mainly to the principles of what the Bill deals with, not to the methods by which the Bill proposes to achieve those ends. As to the means, perhaps we could leave those to the Committee stage, but I must make it absolutely clear that there will be many amendments from these Benches at that stage in an endeavour to improve the Bill.
It is always extremely pleasant to be able to begin a speech by drawing attention to the common ground that exists between the two main parties and in all sections of Parliament on a particular measure. It is for that reason that I delight in refreshing your Lordships' memory of the common ground that exists with regard to the ordnance factories. I would much prefer to quote the comments of the Minister in this House, but of course I should have to rely on memory. Therefore, I am compelled to quote the comments of his right honourable colleague in another place.
As has already been mentioned, at col. 26 on 16th January the Minister of State for Defence Procurement made it clear at the start of his speech in another place that the present organisation—that is, of the
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ordnance factories—and its antecedents have served the country well for nearly 400 years. He went on to say that,
"the ROFs are staffed by a loyal and dedicated work force numbering just under 18,500. Their efforts have made the organisation a success not only in terms of the quality of its products, which are second to none in the world"—
a no doubt much deserved and very high tribute—
"but in its trading performance".
He finally reminded us that the trading fund was set up in 1974,
"and has operated since then with great success, winning the Queen's Award for Exports in 1976 and 1978".
The Minister has been good enough to advise us of a further award this year. The Minister of State in another place said:
"the ROFs have consistently returned a trading profit".
We also know that the ROFs are highly competitive and that 40 per cent. of their products are now exported. I would remind the House that the trading fund, which is a very important part of this organisation, was authorised by the Conservative Government in 1973 and implemented by the Labour Government in 1974. Again there is bipartisan support for the present system.
If I may summarise the common ground, we have, in the ROFs as at presently constituted, a proven, integrated organisation, a loyal dedicated workforce, products second to none in the world, high exports in competition with the world's private sector manufacturers and consistently good trading results. Any superficial observer might conclude, when all are agreed that, from every important standpoint, everything is fine, that one might leave well alone. But your Lordships will naturally want to know, however well it has been done, whether it could be done even better. We have the best evidence that is available, the Mallabar Report.
That inquiry reported—I am referring to col. 39 of Hansard of another place of 16th January—that it found that the degree of identification (that is, of the workforce) with the armed forces was apparent in all the factories and that this identification
"provided a strong motivation towards the manufacture of a high quality, reliable and safe product".
It also found that the factories were well managed and controlled. It went on to consider an alternative proposal:
"We were initially attracted to the idea of hiving the ROFs off from the MOD".
Your Lordships will remember that instead of the horrid word "privatisation" Parliament used to refer to "hiving off' to describe the process of transfer from the public sector to the private sector.
"We were initially attracted to the idea of hiving the ROFs off from the MOD, on the lines suggested by the Fulton Committee, but as we came to understand the nature of the ROFs' task—
a very important qualification because I am hoping that, as everybody comes to understand the nature of the ROFs' task, they will reach a similar conclusion—
"and the underlying reasons for the financial and organisational relationships between them and the MOD, we gradually came to accept that hiving off was not feasible for this Organisation. Indeed we were inclined to believe that had we been asked to advise on setting up an organisation …we would probably have recommended something very like the present arrangement".

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So we are still in the same position. All the arguments that one is able to find, or that I have found so far, lead to the same conclusion: that things that are well should be left well alone.
But if your Lordships, as I expect is the case, are not, and indeed should not be, satisfied without considering all possible gains and losses, let me go shortly through the remaining ones. First, there is competition. If this were to increase competition, there would be some argument but, alas! it is quite the other way, as we all know. The noble Lord the Minister referred to the possibility of foreign shareholders. The noble Lord did not say and could not say that he could prevent existing private sector competitors from buying heavily on the share market in shares in these companies. There is no method of doing so. The net result—I speak as one who spent 30 years in active work as financial director of a private sector munitions supply company—is that the private sector will be very interested indeed in acquiring these shares. The inevitable result is that competition will be reduced.
The next argument is the cash argument which can be dealt with very quickly and which has already been mentioned. That argument is neither here nor there, for there will be a cash receipt for the surrender of future profits amounting to about £300 million and a cash payment for the avoidance of future pension payments amounting to about £250 million. The net figure of £50 million, which might well be less if all the assets are not sold off profitably, will not weigh with any one of us and certainly will not weigh with the Chancellor. It would be an insult to him to suggest that it would.
Finally, I come to the most important question of all, which I have deliberately left to the end; that is, the vital question of maintaining secure facilities for supplying our forces with the means of defending our country. To that question there are clear answers available from the point of view of both the recipient—that is to say, the forces—and the supplier. No one is better equipped to look at it from the point of view of the forces than the man who was Secretary of State for Defence at the time of the Mallabar inquiry report. He said on 16th January, as reported in the Hansard of another place—but, of course, I do not quote his exact words—that the structure of the ROFs would be damaged by the proposed transfer. That is the view of the man who was the Minister most responsible at that time.
His reasons were given in his speech. He asked how, for example, where you had a private sector manufacturer, that manufacturer would judge priorities between orders for our forces and orders for the forces of other countries? Who, he asked, would accept those orders at present not tendered for by any private contractors because they are unprofitable, and carried out by the ROFs because they are compelled to do so? Who would tender in the future? Who, he asked, would be able to keep excess capacity for emergencies?
I can give him the answer. No private manufacturer could keep such resources available for emergency. No private manufacturer would be allowed by the Government's accountants to include in his costings
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the very great cost of providing such idle emergency capacity. If you need to build up in a great hurry in an emergency your supplies of armaments and munitions of one kind or another, you will not have your own resources available for that purpose, resources which you can control and, indeed, have done from time to time when an emergency has arisen. So I refer again to the need for manufacturers in both sectors; to deny the forces the special facilities of ROFs as at present constituted would be damaging and could indeed be dangerous. We are told by the Minister in the other place that during the Falklands war the ROFs served this country well. My Lords, I need say no more.
1.14 p.m.
Lord Strathcona and Mount Royal: My Lords, my noble friend Lady Vickers has asked me to change places with her, so I find myself in the happy position of following the noble Lord, Lord Diamond, who referred extensively to the Mallabar report of 1971. But I have to tell him, if he is not already aware, that the working party which I had the privilege of chairing, and which worked hard for six months, came to a somewhat different conclusion 10 years later, but perhaps the passage of time had something to do with that. On that working party there were three distinguished figures from industry and commerce.
The other point which I should like to make at the outset is that, speaking for myself, I did not approach the task of examining the role of the Royal Ordnance factories with a burning desire to privatise. Incidentally, I would rather not have used that word, because I deplore the word as the noble Lord, Lord Diamond, does. My interest and that of the working party—and they say so—was to look at the interests of the Royal Ordnance factories, and the people who work in them, and the national interest, and I hope to show that we made a convincing case for saying that there would be advantages in change.
If I have a criticism of where we are now, it is that it has taken so long. Possibly, the labour turnover and the lack of job security in the job of Minister of State for Defence may have something to do with the fact that the process has taken rather longer than one might have hoped. I shall try to stick to some of the principles and some of the reasons for which we recommended change.
Let me say also at the beginning that I fully recognise that nobody likes change. It is particularly true of the trade unions that they are conservative with a small "c", and there is nothing wrong with that. I also think it is true—and it has been said frequently—that any organisation which has confidence in itself ought to have the courage occasionally to go in for some self-examination, to try to discover whether it could do things better. It has also been said several times this afternoon already that the Royal Ordnance factories are successful. They have an excellent profit record since the trading fund was introduced. I may add that I have great admiration from personal knowledge of the managing director and many of the trade union officials who work in the Royal Ordnance factories. But I believe that this success has been achieved in spite of various constraints, to which I shall refer in a moment, and

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that those constraints would gradually show themselves to be more severe as we advanced into an increasingly competitive environment in the years ahead.
When we were working on this report, I told the members of the trade unions that I sincerely believed that the removal of those constraints would be in the best interests of the workforce and that is still my belief today. In passing, obviously, you cannot expect the trade unions, when they are Civil Service trade unions, to be very happy about contemplating the possibility that 18,000 members or potential members are going to be removed from the ambit of the Civil Service, but that is a purely organisational matter which can clearly be managed. But when we find the trade unions opposing this Bill, I slightly find myself thinking of the famous remark of Mandy Rice-Davies, who said:
"They would say that wouldn't they?"
But, again, I am not attempting in any way to belittle their contribution.
I was glad that the Minister again today attempted to reassure us on the question of the preservation of pension rights, which clearly is fundamental. Whatever we may think with the benefit of hindsight about index-linked pensions, the plain fact is that the workforce enjoyed that privilege and clearly, if you wish to make a change, it would be wrong for that to be detrimental to their future. It reminds one of the old Welsh adage, "If I was going there, I wouldn't start from here". The fact is that one is starting with index-linked pensions and I am glad that my noble friend once again asserted the Government's intention to ensure that there is no detriment: but I have no doubt that we shall have a further argument about that point in Committee.
The one area where the constraints of being in government are evident is in the financial sector. The trading fund is subject to Treasury control. They cannot buy and sell shares, and it is very difficult for Royal Ordnance factories to set up joint companies for major development projects, which any of us who work in the defence industry know is increasingly the way in which projects are handled today.
Furthermore, there are technical questions, such as the factories' lack of access to the Exchange Credits Guarantee Department and the fact that the factories' borrowings are aggregated for the public sector borrowing requirement. For me the difficulty was illustrated on an occasion I remember extremely well when the board of Royal Ordnance factories was meeting at one of the factories in Manchester. The sales director said, "Tomorrow, I am leaving for the Middle East to negotiate a contract in the order of 150 million. Can you please tell me what price I am to quote for this piece of equipment?". The board was not able to give the sales director an answer, and it took six months before Treasury agreement was forthcoming. That is a fairly difficult environment for a commercial organisation to work under.
As to the question of being within the Civil Service, I yield to no one in my admiration for the Civil Service as an administrative arm. Certainly, when one encounters it as a Minister one is amazed at the competence and helpfulness. But I believe that, as my
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noble friend Lord Trefgarne said, there are public service constraints which make the Civil Service structure quite unsuited for an industrial organisation such as the Royal Ordnance factories. Their very attitude and their moves are quite different.
Specifically, there is the bad situation where the criterion by which one judges the numbers required to operate a business is not the measure of how many people one can have, but the fact that the Government wish to reduce the size of the Civil Service. I believe this is something that is very widely accepted—but not by everybody. One has the absurd situation where, if Royal Ordnance factories were successful in obtaining a major contract which involved taking on more staff, it would appear to be a disaster because such action would be contrary to the Government's policy of reducing the number of civil servants. What a ridiculous state of affairs!
If one examines the question of communications and industrial relations, would any industrialist tolerate a situation where the industrial relations were not even the responsibility of the Ministry to whom he reports, but were the responsibility of another Ministry? The lines of communications are really grotesque for dealing with negotiations about pay and conditions in an industrial situation.
Finally, there were organisational problems. I was pleased to hear the Minister reminding us that these have been addressed and that they are on their way to being put right. One cannot contemplate an industrial organisation that does not have its own marketing department and which has a very limited research and development capability—certainly not if it is to be in the forefront of the defence business. I am sure that it was right to give the Royal Ordnance factories their own marketing department and for them to take over some of the research and development capability which existed elsewhere within the Ministry of Defence.
The lifeblood of any industrial organisation must be communications with its customers and its sensitivity to customers' requirements. If it does not have its own marketing organisation, its lines of communication will be tenuous and difficult. As my noble friend said, steps have been taken already to put that matter right. It has to be admitted that that in itself is not an argument for becoming a Companies Act company, though I believe that those requirements are most easily met within the ambit of a Companies Act company.
Another issue to which I should like to refer is the preferred source policy. I completely disagree with the conclusions of the noble Lord, Lord Diamond: in particular, those in respect of the question of excess capacity. What troubles me is that there can be hidden costs, which are borne by somebody. One of the advantages of separating the Royal Ordnance factories more rigidly from the Ministry of Defence is that there will be less danger of fudging and hiding costs of that kind. I have to disagree with the noble Lord on a purely practical issue. If one wants to maintain excess capacity—whether it be in the shipbuilding industry, the armaments industry, the aircraft industry, or any other industry—it is perfectly possible to do so. An industrialist would maintain excess capacity for you,

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but you would have to pay for it, and so you would have to identify the costs of what you were doing. That seems to me to be desirable in purely managerial terms.
I believe also that the elimination of the preferred source policy will lead to more competitive bidding for the Ministry of Defence. There is one practical illustration we should bear in mind when we are tempted to talk about how satisfactory is the present set-up. I do not think anyone would deny that the German battle tank industry is a fairly successful one, and that industry is not in government hands. I would even suggest that it is more successful than our main battle tank business.
I have tried to give some of the reasons why I believe that Royal Ordnance factories, which are already a successful organisation, give every indication that they will become an even more successful undertaking if they are removed from the constraints of being within government.
I believe that those constraints would become more severe with the passage of time and that opportunities would be opened up by moving the factories into the private sector, which is suggested as being the ultimate objective in this Bill.
There is nothing sacrosanct about the present grouping of Royal Ordnance factories. Again, in managerial terms, the notion of putting them into four operating units strikes me as being a sound one. I am sure that the arrangements proposed are not necessarily perfect and that there will be plenty of opportunity to suggest improvements. But what I would urge everyone—in particular the trade unions and also the Opposition, who were certainly speaking this morning with a trade union voice—to consider is this. Here one has what I believe is the opening up of a new opportunity for the workforce in the Royal Ordnance factories, for the business of the Royal Ordnance factories and, ultimately, for the good of the country. I urge them to accept that this can be turned to their benefit and to concentrate on getting any detailed alterations which they consider necessary; but. please, please, do try to understand that they are not being flogged off. A new door to opportunity is being opened to them, if only they will walk through it.
Lord Diamond: My Lords, I am grateful to the noble Lord for giving way. I did not interrupt him earlier because he did not interrupt me at all; I thank him for that courtesy. The whole House pays high regard to any noble Lord who has sat in his position and considered all these matters carefully. I regret that I have not yet read his report but, of course, will do so. May I ask him about that report? His speech so far has concentrated on the restrictions which will grow, on the difficulties which will be removed and on all sorts of things for the future. If he will forgive me for saying so, what he said amounts to little more than a declaration of faith. My question is: did he and his colleagues find evidence of the difficulties and restrictions stated in the report which have prevented the Royal Ordnance factories from doing as well as they might have done?
Lord Strathcona and Mount Royal: My Lords, the short answer to that is "yes". In a very general way I
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have attempted to summarise some of the constraints. They specifically mentioned a whole list of impediments that the Royal Ordnance factories were experiencing at that time, some of which, as I said, have already been improved. The working party report was quite clear that the Royal Ordnance factories did experience certain disadvantages as compared with their competitors in private industry and they listed them in some detail.
Lord Diamond: My Lords, are there any specific examples?
Lord Strathcona and Mount Royal: My Lords, I do not think there are examples of specific pieces of weaponry and specific competitors, but there are a couple of pages of the various constraints which they identify and I am sure illustrations would be readily forthcoming if the noble Lord was to talk to someone who is still in touch with the situation and has much greater knowledge of it than I have now.
1.33 p.m.
Lord Taylor of Blackburn: My Lords, I usually stick to my own subjects in this House but I venture to change my course on this subject because it is a matter on which I feel very strongly. I do so because I know a little about the Royal Ordnance factories, especially the factory in Blackburn and the work that it has done over many years.
As an educationist and one who has been able to visit the factory quite often to see the training carried out in it, especially of apprentices, I can state that it is second to none. The standard of training is first class. The results of that training have been extended throughout the factory and, because of that, it has been able to give first-class products to those people who use them. The same applies to the industrial relations within the factory. Again, it has been an example for other employers within Lancashire to follow. Apart from an odd day's dispute, I do not think that there has been more than that for many years, although I stand to be corrected. As far as I know there have been very few disputes within the factory.
The people employed there have been a regular force. Turnover has been negligible. That has been a good thing. Those who have left the service there and gone into other industry have taken with them great skill and great benefit to the industry they have joined, thereby helping the whole community and commerce. Again, the relationship between the Royal Ordnance factories and the educational establishments, the training schools, colleges and universities in Lancashire has been helped a great deal because of this two-way exchange.
I am not qualified to discuss or to speak about the financial aspects. I can only speak as one who has lived very close to this operation and seen how it has worked. I shall reserve my thoughts and comments until we get down to the next stage where I feel we can probably go more into detail.
I want to say how satisfied many of us are who have been associated with the Royal Ordnance factories. I am sure that from reading and listening to the comments made from all sides in the other place it is

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apparent that there is a good organisation. I admit that even a good organisation can be imroved, but even taking that into account it is far better to keep the factories as they are and reconsidering some of their practices.
1.36 p.m.
Baroness Vickers: My Lords, my reason for joining in this debate is that during the last war I was working in the Ministry of Supply and one of my jobs was to go round these factories, both day and night, to see the work, particularly among the women and young girls who were probably working in industry for the first time in their lives. They did a magnificent job. They were always keen and they worked hard, and although in some cases they had to be kept in for security reasons, they never grumbled. At one of them, the largest that I visited, it was fortunate for them that a GI camp came into the district so restrictions were lifted and they were able to have a better time.
In view of the fact that the Royal Ordnance factories have played such an excellent part for over 300 years, why has the Minister thought it necessary to take action now? I realise that there was a loss of profit in 1980–81 owing to cancellation of orders from Iran, but I understand that new markets have been opened and in 1982–83 sales in real terms were higher than in any previous year. Eleven ROF and two PERME establishments are to be sold. Are they to be sold en bloc? What will happen if purchasers do not want all of them? Will they be sold separately, or will some not be sold at all and have to remain in Government hands? What is to happen?
Will the employees be able to buy shares on the Stock Exchange, or however they are to be sold—under Clause 7—so that they can take part in the future of the organisations? It has been reported recently that, in real terms, profits have gone up and that there was a profit of £68 million for the last year. I understand that there are outstanding contracts with leading missile producers for rocket motors. There are good prospects for a more substantial mortar system and ammunition. I am informed that great efforts are being made to open new markets and there have been some notable successes recently. This was in the face of very severe international competition. Therefore, why is it now time to change these factories over to private enterprise?
How much is still owed to the National Loan Fund? Why, for example, if there are to be profits, should those profits not go to the Government and to the taxpayer instead of to the public market? Will the Government control overseas sales? I think that we are all rather nervous that a foreign firm might get in and take over one of the factories, as has been mentioned before. It has also been mentioned that pensions are being transferred. Will they be made completely safe before the Act comes into being?
The noble Lord who spoke first mentioned the Queen's awards. I think that the ROFs have done extemely well in winning those. I am against selling arms in any case, but that is not what we are discussing today. I thought that I should mention that as one of the reasons why I am speaking.
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Finally, I understand that the Secretary of State, with the consent of the Treasury, will be able to make certain changes. Why does he have to get the consent of the Treasury and not of Parliament? I very much hope that the noble Lord the Minister, when he comes to reply, will answer those few points.
1.41 p.m.
Lord Stoddart of Swindon: My Lords, I do not think that I have ever heard, or had experience of, a debate in which such praise has been heaped on an organisation that is later to be virtually decapitated. Today we have heard the noble Lord the Minister describe the ROFs as factories and organisations which have done well. He described the work force as loyal and devoted and said that we are rightly proud of their expertise and record. The noble Lord, Lord Diamond, quoted at length from the comments of Ministers in another place, where again the praise heaped on the ROFs, their record, and the work force was lavish indeed. We have heard from the noble Baroness, who has had great experience of them, how devoted and loyal the people working in them have been over a very long period of time. She rightly asked the question: why are we doing this now? That is the question which the House is entitled to ask, and which she has put so well. It is a question that we shall expect to be answered by the Minister when he winds up, and, indeed, during the later stages of this Bill.
In his opening remarks the noble Lord the Minister said that the Government will ensure that the ROFs do not fall under foreign control. How will they ensure that? Again, I think that this House, and Parliament as a whole, are entitled to a full and unequivocal answer to that question. The very defences of our nation are at stake. I hope that the noble Lord will answer that question today. If he does not, we shall certainly expect an answer at a later stage.
We have heard a great deal about the success of the ROFs, including their financial success. In his opening speech my noble friend Lord Graham not only joined in high praise of them, but detailed their finances and achievements in virtually every field of armaments. He also pointed to their financial success. I want to discuss that a little more. When I read the Defence Estimates, I saw on page 19 the details of the success of the ROFs. What do we find by looking at those accounts? First, total ROF sales have risen from £263·2 million in 1977–78 to £448·5 million in 1982–83, which is a rise of £185 million. We also find that sales in the United Kingdom have gone up by £133 million and sales to overseas customers have also gone up considerably.
If we look at the profit record over the eight years, we find, again, that the Government and the Treasury have benefited considerably from the profits that the ROFs have made. In total they have made £176·6 million over those eight years. That is no mean sum by any standards. Indeed, in the debate on the Defence Estimates on Monday of this week in another place, the Secretary of State announced that he was going to equip a fifth tank regiment. The cost of providing tanks for a new tank regiment is roughly £93 million. The ROF factories and the people working in them have given the Government sufficient profits over the past eight years to equip not one new tank regiment.

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but two regiments. That is a real measure of the success of the ROF factories over this period.
Have the ROFs done that by employing more and more people? The answer is, most certainly not. They have reduced the number employed from 23,200 in 1977–78 to 18,900 in 1982–83. Have they improved their value added? The answer is that they most certainly have. In 1977–78 the value added per employee amounted to £6,400 and in 1982–83 the value added per employee had increased to £13,300, which is an increase of £6,900. That is quite good going by whatever standards the Government wish to employ.
Have the ROFs met their financial objectives? The financial objective set for them for the period 1st April 1979 to 31st March 1984 was 5 per cent. per annum on average net assets employed. That objective was not only achieved over the eight years, but exceeded many times over. In 1975–76, for example, their return on net assets employed was 16.4 per cent. In 1976–77 it was 39.4 per cent. In 1982–83 it was 49·8 per cent.—10 times the financial objective set by Her Majesty's Government, and a Conservative Government at that. The average rate of return over the eight years has been 23·6 per cent. What a success story that is!
In the face of this brilliant success story, it is the height of absurdity to propose their privatisation. Common sense and the financial interests of the taxpayer are being sacrificed to blind and stupid Tory dogma, and indeed it is being done in spite against a publicly-owned industry and its employees. If the Government deny the charge that I make against them of putting dogma before the public interest, perhaps the noble Minister in his reply can tell us what benefit there is in this Bill for the public, for those employed in ROFs and for the proper defence of our country. How can it be that the forgoing of profits of £62 million per year, which is the present rate of profits, for a measly £50 million once-and-for-all net payment, which invested at 10 per cent. would bring to the Exchequer only £5 million per annum, benefits the public in general? How can it be? How can the Minister justify that kind of business proposition?
Henry VIII, in whose reign I believe the factories were first started, was a bit of a despard but by God! he had a good business head on his shoulders and if he was reigning at the moment then the noble Lord opposite, if he did not have his head chopped off on the block, would find himself in the Tower for daring to deprive his Majesty's Exchequer of this sum of money every year.
Of course the fact of the matter is that there is no financial benefit. It is plain that the public will lose £57 million per year and the Government's city friends will gain a corresponding amount. In this debate so far the Government have not had many friends. The noble Lord, Lord Strathcona, to whom we listen with great respect because of his experience and knowledge, inclined to support the Government. Nevertheless, even he had his doubts. No doubt that was because of the experience he gained when he examined the ROFs through his committee; but I think he will agree that one of the conclusions that was reached—and he made some passing remarks about Mandy Rice-Davies and
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the trade unions, and that they would say they did not want privatisation wouldn't they? But I remind him that his own committee agreed that any proposed change should be broadly acceptable to the ROF workforce.
The workforce do not accept this. They do not agree with this change. They think the change is bad for them and bad for the nation. So if the noble Lord follows the recommendation in his own report, then I believe he will be supporting the Opposition when this Bill comes to Committee.
What is more is that his own committee, in their first recommendation, which was labelled "a.", recommended that the present trading fund organisation should be improved "by removing some of the impediments which we identified". There were two other possibilities but that was the one that they put first. When the noble Lord reflects on this Bill, I hope that he will return to his own committee's report and accept that option "a." is the right one to have.
Lord Diamond: My Lords, is the noble Lord going to leave the question of the Strathcona Report? If so, before he does that may I ask him whether he is able to confirm, as was alleged in the debate in the other place, that the Strathcona Report included the following comments. The first was that it gave as its verdict that the organisation had demonstrated its management strengths. The second was that since the introduction of the new arrangements in purely financial terms the Royal ordnance factory organisation has also been very successful. The third one, was that benefits accrue to both sides from the present relationship between the Royal ordnance factories and the rest of the Ministry of Defence. Can the noble Lord say whether or not these quotations are correct, and whether therefore the speech we heard was a fair sample of the report?
Lord Stoddart of Swindon: My Lords, yes, I can confirm that what the noble Lord said is correct. Those items were indeed in the report. I am not prepared to comment further on the noble Lord, Lord Strathcona's speech, but I hope he will now re-read his own report before the Committee stage and I am quite sure he will be very helpful when we come to discuss the matter further on Committee.
I should now like to turn to the need for a public presence in armament manufacture. Government spokesmen in defence of this Bill say, "What is all the fuss about? ROFs constitute only 4 per cent. of the total arms industry in Britain." They have some sort of point; but the conclusions I draw are quite different from those of the Government. The figure of 4 per cent. is far too small and the public presence in arms supply ought to be far greater. The Bill before us today ought not to be a Bill designed to obliterate the public presence in the arms industry—because, my Lords, that is the eventual outcome of this Bill, make no mistake about it—it should be a Bill to extend the state presence in the arms industry, and I am sorry that the Bill is not designed to do that.
There are many reasons why there should be a large and significant state ownership and involvement in arms manufacture; but there are three outstanding

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reasons. First it is the paramount duty of government—and we on this side of the House believe that, just as much as the noble Lords opposite believe it—to ensure the defence of the realm. To do so they need to have a direct involvement in the sure supply, the quantity and quality of equipment. Such a duty should not and cannot be left entirely to private firms whose paramount need and duty is to maximise profits.
The second reason is because in time of war or emergency the Government will need to act quickly and decisively to increase arms and equipment supply and the more expertise and presence they have in the arms industry the better and more effective will be their influence. The third reason is that a significant state presence enables a test of price and efficiency to be made against private British arms manufacturers —and foreign ones for that matter—who are increasingly tending towards monopoly. That is why we need a significant presence in the arms industry. That is why this Bill is a bad one.
Before I finish, I want to say a few words about security. In his opening remarks I had hoped the noble Lord was going to say that for all time security for ROFs would remain with MoD police. He did not say that. What he said was that there was a possibility of privatisation. Many people are very concerned at that possibility. They are concerned that the security at Royal Ordnance factories would be put out to tender to individual security firms. In spite of the schedule added to the Bill at Report stage in another place, and which appears as Schedule III in this Bill, it remains a possibility that privatisation of security will be introduced at some future point in time.
There are very telling reasons why security at ordnance factories should not be handed over to private security firms. First of all, there will be an acknowledged lack of training available to private employees. Secondly, there will be a lack of powers and difficulties relating to the obtaining and the use of arms in certain circumstances. There will be the ease of infiltration of private security firms by potential terrorists. We have seen some examples of this recorded in our newspapers lately. There is an appalling record of some security firms. There is the possibility that individuals might not be properly vetted by private security firms. There is the possibility that relations between the police and private firms would not he as good and as effective as those hitherto prevailing between the police and MoD.
Finally, there is the inability of a private security firm to create a rapid deployment force to deal with any emergency at any particular base. I find it particularly surprising that Her Majesty's Government should tinker and meddle with security at ROFs, especially bearing in mind the superb record of the Ministry of Defence police over such a long period of time. They have kept ROF establishments safe with great efficiency and effectiveness and there is every reason why they should continue to do so on a permanent basis irrespective of the ownership status of ROFs.
Lord Strathcona and Mount Royal: My Lords, I resisted the provocation earlier. The noble Lord said
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that the ROFs account for 4 per cent. of the supply to the Ministry of Defence. What is his comment on the 96 per cent.? How is their security being managed? Is he suggesting that the Ministry of Defence police, an admirable body, should take over the security of the whole of the armaments industry of the country? Otherwise what is the difference between one armaments factory and another?
Lord Stoddart of Swindon: As a matter of fact, my Lords, I would feel much safer if they did, but I have no knowledge of their particular arrangements at present. What I do know is that, so far as these factories are concerned, they have been policed very efficiently. With the growing incidence of terrorism, I believe that the state should be very involved in the safety of establishments like this. Indeed, I was going on to say that I find it strange and worrying that the Prime Minister was a signatory to the London economic summit declaration on international terrorism at the same time as this Bill was before the House. What did the declaration say? The Heads of State at the London economic summit said that they were disturbed to note the ease with which terrorists move across international boundaries and gain access to weapons, explosives, training and finance. This is what the economic summit said, and our Prime Minister was a signatory to that particular passage in that particular communiqué. They recommended scrutiny by each country of gaps in its national legislation that might be exploited by terrorists. Yet here we have a Bill before us that proposes to hand over the policing of ROF establishments to private organisations. I hope that, in the light of the declaration of the economic summit, this will be reviewed.
Perhaps the Minister will answer some questions on security. Will the Minister make provision by amending the new schedule dealing with special constables in relation to Section 3 of the Special Constables Act 1923 to ensure that any such special constables nominated shall be members of the MOD police? Secondly, will the Minister comment on the type of training required by the in-house guards and whether there is an intention to train in the use of arms any in-house guards who may be nominated as special constables? If it is the intention to arm any such nominated special constables, who will be responsible for the control, issue and authority to use arms? Will the Minister consider recommending to the ordnance factories' management the possibility of contracting for Ministry of Defence police as is intended for private security firms? Is it the intention of the Government to allow in-house security guards or ordnance factory management to have some limited access to the police and national intelligence information required in anti-insurgent or political incidents? Will the Minister report on the reaction of chief officers of police in the districts where it was or is proposed to withdraw MOD police on vesting day?
Finally, I want to make it clear that, although, in accordance with the conventions of this House, we shall not seek to divide on Second Reading today, the Opposition nevertheless consider this Bill to be a bad and unnecessary one, produced out of sheer blind dogma. It is a Bill that will damage Britain's defences, will rob the taxpayer, will endanger the future of a

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profitable and successful publicly owned industry of 300 or 400 years' standing and will damage the future jobs and conditions of the work force and undermine their security and confidence. We shall seek at Committee stage to make substantial amendments to protect the rights of Parliament, to secure the future pay conditions and job security of the workforce and to prevent the break up and sale to private organisations of ROFs and PERME establishments. That is our view. I hope that the Minister will be able to answer the questions that have been asked during the debate. I give him notice of a good fight at Committee Stage.
2.6 p.m.
Lord Trefgarne: My Lords, during our debate today your Lordships have rightly referred to the long and distinguished history of the ROFs, the quality of their products, and the loyalty, integrity and dedication of the ROF work force. We are all on common ground in paying such a tribute to the ROFs' past. But the best practical tribute is to look to the future and to seek the best way forward. Defence procurement strategy is necessarily evolving as economic circumstances change. A review of the structure and role of this vital part of the defence industry is both timely and necessary if we are to get the best value for money in defence.
The proposals that enactment of this Bill would enable us to put into effect will remove the current constraints on the operations of the ROFs as part of the Ministry of Defence and will give them better and brighter prospects for expansion and improved efficiency in the private sector. The ROFs have a small but significant share of the defence procurement budget. We fully expect them to use that business as a launching pad for further expansion in both domestic and world markets. The Government recognise that this change of status has created some anxiety among the work force, particularly as they are moving from being civil servants to being employees of a commercial company. My ministerial colleagues have been at great pains during the proceedings on the Bill in another place to set the record straight about the future terms and conditions of employment of the work force.
The Government have taken very seriously their responsibilities towards these employees. We have taken all the steps we can to ensure that their terms of employment will be no worse than those they enjoy currently. Of course, there will be some changes in the details of their terms of employment, but these are not changes of substance, save for the fact that, as part of the manufacturing operation, as essentially they are at present, they will be working in a rather different environment for a commercial organisation.
As I said in my opening remarks, negotiations with the trade unions representing the employees of the ROFs have been in train for some time, and are continuing. For our part, we have approached these negotiations with an open mind and with the aim of securing agreement on the employment framework to be set up in the new company. I trust that these negotiations will help to reassure all employees that they have nothing to fear from our proposals, and much, in terms of long-term job prospects, to gain.
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No doubt many of the points that have been raised during the course of the debate this afternoon will be raised again during the Committee stage, and I shall be very willing to answer them then as fully as I can. I do not want to duck from answering them now, but perhaps it would be appropriate if I deal just with some of the more important ones that have been raised.
The noble Lord, Lord Graham, and one or two other noble Lords as well, referred to the possibility of receipts amounting to about £300 million, with possible costs of £250 million with regard to pensions. The pension costs are costs which in any event will have to be met in the long term. They are liabilities which already exist as far as the pension fund is concerned. Indeed, it is open to me to suggest that the cost to the Exchequer of making a payment now, particularly in respect of those who transfer to the new pension scheme, might well be less than some costs that might have to be met in the future, in the long term.
But as for the receipts, the Government have not yet made a decision on how we should put this company into the private sector. I referred to that in my opening remarks. It is not possible yet for me to say whether we shall achieve £300 million or more, but my personal expectation is that if we do proceed along the line of the flotation, as my right honourable friend is hoping, then the receipts may well be at least as much as that, and possibly more.
My noble friend Lord Strathcona referred particularly, from the depth of his own experience in this matter, to the constraints that he and his colleagues saw as applying to the ROFs during the time of the working party that he chaired. I would ask your Lordships to consider again the points that my noble friend made, and particularly to look again at the terms of his report on those points.
My noble friend Lady Vickers asked me about the debts outstanding to the National Loans Fund. At present there are no debts outstanding to the National Loans Fund, so the question of writing off any such debts does not arise. If we do proceed to a flotation arrangement such as I referred to in my opening remarks, there will most certainly be an employee share scheme arranged as part of that flotation. As I said in my opening remarks, although we are not yet in a position to make a final announcement about this we anticipate floating the company in that way when the time comes. They will be shares in the whole enterprise, not in individual factories. My noble friend was wondering about this.
My noble friend also referred to the question of overseas arms sales. Perhaps that is another matter, but I would remind my noble friend that we have a very stringent export licensing system, and the constraints that we impose upon our defence industry in that regard are very well known. I was asked also about the prospect of foreign control. The articles of association of the company, when privatised, will provide that the number of shares, or interests in shares, which can be held by foreigners shall not exceed 15 per cent. of the total issued share capital. The articles will, of course, have legal force under the Companies Acts. Your Lordships may recall that this was a matter of particular concern when the British

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Aerospace legislation was being enacted, and I think that these provisions will closely mirror those provisions.
The noble Lord, Lord Stoddart, asked me particularly about the security arrangements. In my opening speech I explained the policy underlying the introduction of the new Schedule 3 concerning security arrangements at ROF sites after incorporation of the new company, which we hope will be later this year. To reiterate our position: we have taken powers in the Bill to enable the MOD police to remain at ROF sites for as long as we consider necessary; but in parallel with this, the ROFs will be setting up their own company guard force to take on the responsibility of guarding ROF premises where this is considered appropriate.
A number of detailed questions were put to me about the organisation and training of the new company guard force. I am afraid it is still too early to give full answers to all of these questions. The Ministry of Defence will be liaising very closely with the ROFs on the question of recruiting and training such a guard force with the aim of creating a reliable and efficient system. The new company guard force will not be armed, but I believe that the deterrent value of the access of MOD police to firearms should not be overrated. Security arrangements will have to be cleared with local police authorities and contingency plans will be made for civil police support, where necessary, at each of the sites. As your Lordships know, there are arrangements for the civil police to draw arms should the situation so warrant, and contingency plans will include the possible need to call upon armed police.
As the new company guard force is built up, liaison arrangements with the existing MOD police guarding each site will be worked out. I should emphasise that MOD policemen will remain subject to the ultimate control of the Secretary of State for Defence and that command and control arrangements will reflect this chain of command.
I was asked, too, about the special constables under Clause 3. I can confirm that they will be MOD police. Incidentally, I can confirm that we have made clear that we are not going to use private security firms.
We have had today a wide-ranging and important debate. The Government's proposals for the future of the Royal Ordnance factories for which this Bill gives legislative authority, are positive and forward looking. The proper place for the ROFs as a manufacturing industry is not within the civil service, nor indeed as part of the public sector. Their move to commercial status, coupled with the Government's policy of encouraging competition within industry, will give them a healthy future and we believe will provide a stimulus to innovative enterprise in the defence industry.
I tried in my opening remarks to set in context the provisions which are in the Bill before your Lordships. I think that I should now return to that context, to the Government's determination to achieve greater competition in defence procurement whenever it is sensible and practicable to do so. The Royal Ordnance factories have a sound track record, but we and they
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want to see an improvement of that record. The record is a sound one indeed. Historical cost profits have totalled £250 million over the life of the trading fund of which £82 million has been paid in dividends and £165 million retained in the business. The dividend paid to the Treasury by the trading fund in the financial year 1982–83 was £25 million. Although the accounts for 1983–84 have not yet been finalised, the promise is that last year was another successful one for the ROFs. Total sales for the year are likely to be nearly £500 million, an improvement of 9 per cent. over the 1982–83 results, with profits forecast to be in the region of £60 million.
The increase in profits over recent years has been helped by a programme of cost reductions, the success of which is illustrated by the size of the total wage bill. This has remained virtually constant over the last two years despite higher production and despite an increase of about 17 per cent. in average earnings during the period. The value added per employee, as my noble friend Lord Ironside pointed out in our debate last week on the Statement on the Defence Estimates, doubled in the last three years.
It is our aim and purpose to help the ROFs once, as a Company Act company, they are freed from bureaucratic restraints, to improve on this record for the benefit of themselves, the Ministry of Defence and, therefore, the three services as a customer, and the country as a whole. The ROFs have a number of substantial customers in different parts of the world and a vigorous export market especially with traditional friends and allies in the Commonwealth and the Middle East. We are now looking beyond these markets most notably to North America, but they will also remain important suppliers to the British Government.
I would remind your Lordships of the major order announced earlier this week, referred to by at least one noble Lord, for another 60 Challenger tanks to equip an additional armoured regiment in BAOR. This large order is a signal of our desire to make major purchases from the ROFs in the future provided that the price and the product are right. It is by being enabled to operate in the market place and becoming fully effective that we can have the best assurance that this company will be successful and it should lead to a bright future for the new company.
Lord Diamond: My Lords, before the noble Lord sits down—and I am grateful to him for giving way—will he turn his mind to the main thrust of the debate? The main thrust of the debate was not whether the ROFs are doing very well indeed and have done very well indeed—and I am grateful to the noble Lord for saying in his winding up speech that they have done even better than he said in his earlier speech; the main thrust of the debate is: who is going to assure the forces of this country, if we are left with no public sector but only with a private sector, that they can get the supplies they need, first, in an emergency through spare capacity being available and, secondly, at any time when no private supplier will supply them because it is uncommercial to attempt to do so—whereas the ROFs are compelled to do so under the present arrangements for the MOD?
Lord Trefgarne: My Lords, it simply is not proven that for the Ministry of Defence or any other armed forces organisation to be able to get their supplies, those supplies have to come from some organisation in the public sector. As several noble Lords have already pointed out, I think that 96 per cent. of Ministry of Defence supplies already come from the private sector. Other armed forces around the world obtain 100 per cent. of their supplies from the private sector.
I do not believe that the ROFs need to be in the public sector to be able to continue the splendid work that they have done. On the contrary, I believe that by removing these constraints from them we shall enable them better to provide for the requirements of the Ministry of Defence, not least from an important base of overseas markets. For that reason, I commend this Bill to your Lordships.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Lebanon
2.21 p.m.
Lord Kennet Lord Kennet rose to ask Her Majesty's Government what is their present policy towards Lebanon.
The noble Lord said: My Lords, in rising to ask the Question which stands in my name on the Order Paper, may I say how distressed I am to see that the noble Lord. Lord Trefgarne, has to do everything this afternoon: to introduce the Second Reading of a Bill, to wind up the Second Reading debate, and then to take an Unstarred Question. He is doing all the Government's business from the Government Front Bench in one sitting day of this House. I have never known that to happen before. If I had known that it would happen, I should have offered to do what I could to prevent it happening and, frankly, I question the wisdom of the Government in allowing it to happen. No personal judgment is intended, but it is an exhausting thing for anyone to have to do.
Over the years there has been a demographic change in Lebanon, which the constitution and the political system of that country have not proved flexible enough to meet. It is rather like what has happened in Northern Ireland. The constitution was framed enshrining the Christian majority. There is no longer a Christian majority; there is a Moslem majority, and the state has gradually broken up into disorder and warring factions due to purely internal circumstances. Added to that there has been massive intervention by both its neighbours.
Over the years the state of Israel has suffered very much from the inability of the greatly weakened state of Lebanon to prevent the PLO establishing itself in the southern part of Lebanon and bombarding Israel across its legitimate frontier. Not all Israeli frontiers are legitimate. The frontier with the Lebanon is legitimate and Israel put up with bombardments over it for many years. During that period the disintegration of the Lebanon caused an invitation to be issued to its other neighbour, Syria, to come in and give military help to stabilise the northern end of the country.
Israel took the law into its own hands in June 1982. In order finally to put an end to the many years of
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terroristic bombardment across the frontier, Israel invaded southern Lebanon, thereby completing the hegemony over that part of the country which they had partially achieved through the agency of their dependant, Major Haddad, with his militias over several years, and, in the course of the invasion, walked over a small United Nations force which had been deployed there at an earlier time. The Israeli army continued to walk up the country, bombarded Beirut, and finished in a position where its guns covered Damascus, the capital of Syria, and there it remains.
At a certain point during the shambles the invitation to Syria from the Lebanese Government was withdrawn. The diplomatic situation remained stalled. One half of the country was under Syrian occupation, which was invited, and the invitation was then withdrawn; the other half of the country was under Israeli occupation, which was by right of invasion alone.
We come now to the Western intervention in Lebanon. I want to give a short account of the various reasons which have been advanced for it and to invite the Government to ponder on the undesirability of having discrepant reasons for putting their troops in other countries. I say in advance that I shall not be blaming our Government very much for this. They were rather consistent, but we were tagging along behind the United States Government which, as I shall show, did not know its own mind.
In July 1982 the United States, President Reagan, agreed to put American troops into Lebanon as part of a multilateral force to cover the evacuation of the PLO. The evacuation of the PLO had been the main object of the Israeli invasion, and in order to guarantee its peaceful evacuation the United States offered to put its troops in. President Reagan said that it would not be for more than 30 days, and he demanded guarantees for the safety of the United States forces. Unhappily, of course, that was quite unreal. If anybody could guarantee the safety of the United States forces they could have guaranteed the safety of the departure of the PLO in the first place. This was not tourism.
The forces were put in, the PLO was evacuated—on the whole peacefully—and American forces pulled out, and they came straight back in again when the President of Lebanon, the first President Gemayel, was assassinated. Only two months later, in September, President Reagan had committed US marines to the Lebanon until:
"all foreign forces are withdrawn [and until the Lebanese Government] can preserve order in its own country".
In October of that year President Reagan used the words:
"President Gemayel can rely on the help of the United States".
A week after that President Gemayel said, rather pointedly, that it would require 30,000 to 60,000 troops if order was to be restored in the Lebanon.
One month after that, in November 1982, we come to the first British statement of our intentions in getting involved in the Lebanon. Mr. Pym, as Foreign Secretary, said:
"We fully support American efforts to bring about a speedy withdrawal of foreign forces from the Lebanon which is the key to the restoration of Lebanese sovereignty and independence".
At that stage the British Government fully backed the American purpose of getting all foreign forces—meaning both Syria and Israel—to withdraw. After that, sobriety supervened in London and there was an exchange of notes with the Lebanese Government in January 1983 where our purpose in going in with the Americans and putting our tiny contingent of 100 ashore with their contingent of 1,600 or 1,800 was laid down as follows:
"To assist the Lebanese Government and the Lebanese armed forces in the Beirut area"—
mark, in the Beirut area—
"to restore Lebanese Government sovereignty and authority over the Beirut area, and thereby to further efforts of my Government"—
that is our Government in Britain—
"to assure the safety of persons in the area".
Mark the curious use of the word "persons". We are quite used to assuring the safety of British subjects, but this seemed to be assuring the safety of a rather wider group of persons than that.
We then come to the first appearance in this House of the matter when the noble Lord, Lord Skelmersdale, on behalf of the Government, said much later, on 11th May 1983, at column 459:
"the role of our contingent is to patrol undesignated routes and to report any trouble it finds to the Lebanese armed forces, who will of course deal with it as appropriate, it being in the Lebanon".
I think "undesignated" was probably a mistake for "designated", but we now see the British troops appearing in a quite different role: acting as scouts for the Lebanese Government and reporting trouble, which the Lebanese armed forces were presumably incapable of detecting on their own.
A week later there came the Israeli-Lebanon agreement by which Israel was to pull out. This was greeted with hope at the time. The hope was unjustified because the agreement allowed the Israeli armed forces to come back in on joint patrols with the Lebanese armed forces, and required the Lebanese Government to obtain Israeli agreement before flying military aircraft over their own territory in the Lebanon. So it naturally did not stand much chance of obtaining Syrian agreement, which by this stage was necessary to everything if it was to be any good.
By September last year the United States' language had changed. I quote President Reagan:
"Our mission has not changed, [that] of being a stabilising force as Lebanon tries to reinstate itself as a sovereign nation".
But of course their language had changed, because their original purpose was to ensure the departure of all foreign forces, as I have just reminded the House.
At this stage also we began to hear much of the right to self-defence enjoyed by the United States forces. By September that year there were United States bombardments in support of the Lebanese army which could not conceivably be related to self-defence by the United States contingent.
In September 1983 Secretary of State Schultz said that the United States forces were essential for:
"a kind of equilibrium which will encourage a ceasefire".
Here is a fourth definition of the United States role:
"a kind of equilibrium which will encourage a ceasefire".
This presupposes that the equilibrium is to be achieved by their propping up a minority which would otherwise be out of equilibrium; and the minority concerned was, of course, that of the Lebanese Government.
In October of that year President Reagan said that the American forces would be there:
"until the situation is under control".
He did not specify under whose control. Then he used the gloomy phrases:
"Lebanon is central to our credibility on a global scale",
"the struggle for peace is indivisible".
And he linked it to Grenada. There was a fifth justification for the presence of the American forces—United States credibility round the world.
A week later we had:
"vital interests in Lebanon"—
another United States specification—and:
"our actions in Lebanon are in the cause of world peace".
We now return to the sober voice of this country. Mr. Luce in the House of Commons said:
"The aim of the multinational force contributors is to help create the conditions in which national reconciliation and reconstruction can take place".
Good. Nevertheless, at the time we noticed that HMS "Fearless" and the Buccaneers were standing off in Cyprus. It might have been thought to be too much; or it might have been merely to cover our necessary retreat, which began to seem inevitable about this time.
In December 1983 Mr. Rifkind in the House of Commons said that we were there to help the,
"Lebanese Government restore stability and create conditions in which the Lebanese people can themselves sort out their differences free from outside interference".—[Official Report, Commons, 5/12/83; col. 19.]
So we were no longer in support of the Government, but for the Lebanese people who are by a majority Moslems, as all knew, and therefore against the present Lebanese constitution and against President Gemayel.
The same day Mr. Rifkind said in the House of Commons:
"We would not support the use of British or other forces in the multinational force for other than peacekeeping purposes".—[Col. 21.]
The voice of reason is getting stronger and stronger. On the same day Mr. Rifkind again said:
"The Government could not support the use of the MNF to remove the Syrians or anyone else from the Lebanon".—[Col. 22.]
The voice of reason is really getting very strong.
In January this year a new British justification appeared. This is only the third British justification to six or seven American ones.
"The function of the troops in Beirut is to provide physical evidence of the presence of the multinational force by patrolling in Beirut".—[Official Report, Commons, 19/1/84.]
The presence of the multinational force is now justified by its presence. The argument becomes completely re-entrant.
A month later, in February this year, Sir Geoffrey Howe—at last we begin to see a way out—said:
"The presence of our contingent during this period has helped to provide an opportunity for political reconciliation. Sadly that

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opportunity has not been taken".—[Official Report, Commons, 8/2/84; col. 887.]
The first paving stone is laid on the lines for the necessary retreat, which took place a month later in February 1984.
The United States battleship "New Jersey" went on bombarding defenceless villages for a few days after the withdrawal of the multinational force. I doubt whether anyone in Washington knew which villages or why, and I suppose the informed views of those very few United States diplomats who had remained in Lebanon were overruled—as has so often been the case with this American administration in other parts of the world. It was painful to see uninformed optimism turn to impotent rage, but it was not surprising. There is no substitute for information.
The moral, I believe, for Her Majesty's Government is that this country should have the courage of its convictions. I do not know whether we really wanted to keep out all along. I believe that we should have been wiser to do so; but, having once got in, we had good information, we had a good understanding of the Near East, and the Government are to be congratulated on not having put in more troops. That was wisdom. And they may also be felicitated in not having suffered the appalling loss of life which was suffered by the United States and the French troops. That, I think, was luck. We were lucky to get away in one piece, and we were lucky that it was a small piece that we got away with. I would give advice to the Government, if I may, as one would to a daughter: "Never tag along with anyone unless you are sure".
As to the future, the settlement of the Lebanese question depends, we all know, upon two things. It depends upon the agreement of Syria and the withdrawal of Israel, which will render possible the withdrawal of Syria. The question then arises: under United States auspices or not? I think it is clear that, if the United States has a role in this—and we must not forget that the Government of Lebanon has roundly declared that it has not—if it has a role, then so has the Government of the Soviet Union. If one super-power is to be in, then both have to be in. Once the position of the Soviet Union in this is admitted to any degree, then, plainly, it becomes, a United Nations situation and we might as well go at the same time for an overall settlement of the Arab-Israel conflict in a United Nations framework.
The United Nations approach is the coming approach, I believe. The Government agree, China agrees, incidentally (and it is quite interesting that that highly informed observer from far away should agree) and the Lebanese Government appears to be quite close to agreeing. Syria, of course, has been asking for it all along, as we know. I leave my Question there and ask whether the Government agree with much of what I have said; with little of it; with none of it, or even with all of it; and whether they can go a step forward in the wise things that they have already been saying about a United Nations settlement of this matter.
2.37 p.m.
Viscount Buckmaster: My Lords, I warmly welcome this debate this afternoon initiated by the noble Lord, Lord Kennet. As your Lordships know, it has been
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postponed many times but, by an extraordinary chance, this debate is now taking place almost exactly two years after the last Unstarred Question on Lebanon asked in your Lordships' House by the noble Lord, Lord Mayhew, on 21st June 1982. I find to my surprise that I am the only noble Lord speaking in this debate who also spoke in that debate. When I spoke on that occasion, I came to the conclusion, very reluctantly but not without considerable thought, that there seemed no reasonable solution to the problems of the Lebanon other than some sort of federal or cantonal arrangement. Two years later, there is no end to the violence, the terror, the torture and the senseless slaughter; and we find in much of that lovely country, which I have known as a diplomat and a traveller for more than 40 years, that blood and tears are flowing more abundantly than milk and honey.
There is a faint hope, of course, even now, that a properly unified Lebanon may re-emerge, but my Lebanese friends tell me that so great has been the destruction, so strong the pull of fissiparous tendencies in the various tribal and religious groups, that any hope of reconstructing the Lebanon as it was is an unrealisable ideal. In fact, we may even have reached what one would call a "Humpty Dumpty" situation. Humpty Dumpty has had such a great fall that all the Christian horses and all the Arab men will never be able to put him back again. I hope, my Lords, that I am wrong.
Before considering the main point in this Question, which is of course Her Majesty's Government's policy towards the Lebanon, I should like to look at two aspects of the baffling kaleidescope of Lebanese politics which may not be well known but which are, I think, of considerable importance. The first is the position of the Shia Moslems. The point to make here is that, thanks to their very high birth rate, which I am told is higher than that of any of the other religious group, they are the largest denominational entity in Lebanon. There are now about I million Shia—there may even be 1·1 million—compared with 900,000 Maronites and about 600,000 Sunnis, who were formerly the largest Moslem group. Under their able leader Nabih Berri, about whom I shall speak briefly in a moment, the Shia have extended their influence very effectively in the southern part of Lebanon, so that most of the area south of Beirut now lies under Shia control and they are also gaining ground in the north. As an example of that, I would say that when Nabih Berri called not long ago for student demonstrations against the Israelis, he achieved considerable support in the northern part of Lebanon, which is of course essentially Sunni.
What of Nabih Beni himself as the new leader? He is leader of the Amal militia; he is a man of about 40; he has powerful links with the Druze; and he came to prominence not long ago—in fact, it was in February of this year—at the time of the Shia-Druze takeover of West Beirut. At that time he was able to curb the excesses of some of his followers. I should perhaps remark that there are among the Shia a number of extremists who follow Khomeini, but they are in the minority.
Nabih Bern has the rather remarkable title in the new Government of National Unity of Minister of State for South Lebanon and for the Reconstruction of

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Beirut and the Southern Suburbs. He has two brigades under his command and he seems to be exercising his command effectively. But his main aim is of course to achieve the withdrawal of the Israelis from Southern Lebanon. So much for Nabih Berri.
The second leader who has come to power recently, and about whom very much less is known, is a man called Antoine Land, who took over what I might describe as the ragtag and bobtail army, formerly led by Fuad Haddad. As Haddad grew sicker and weaker, so morale in that extraordinary force deteriorated. Haddad's men were generally described, particularly by the Israelis, as little better than bandits. These two men could not be more different. This is an important point to make. Haddad was of course an Israeli puppet. When one went to call on him in his office at Merj Ayoun, he was always flanked by two Israeli officers. On the other hand, Antoine Land seems to have kept his distance from the Israelis. His role seems to be rather more civil than military. He appears to be working to stabilise the situation in the south pending a takeover by the Lebanese army. But both these men—this is the important point—are working for the withdrawal of the Israelis.
There has been a lot of talk in the Arab press—the Arab League has made statements about it—and, indeed, there have been remarks even in the British press about the extent of Israeli aggression against civil institutions and places of worship in South Lebanon. I do not want to go into that; some of it is distortion. However, may I quote very briefly from an article which appeared in The Times on 29th March:
"Israeli troops stormed the southern Lebanese village of Jibchit with tanks yesterday and fired into a crowd of stone-throwing demonstrators, killing at least six…Among the six was a teenage girl who bled to death after Israeli soldiers refused to allow ambulances and Red Cross workers into the village."
That is a report which we have to accept.
It is relevant and very important to our debate to consider the Israeli presence in the Lebanon. One of the facts which I regret greatly is that the resources of your Lordships' House do not run to a map. If they did, we should see that the Israelis are now in occupation of just about 20 per cent. of the whole country. They are in possession south and east of the Awali River, and some of their guns are only 15 miles from Damascus. There are 15,000 troops there, and their upkeep costs 1.3 million dollars a day.
There is a very considerable feeling in Israel in favour of the withdrawal of this force. As your Lordships may have read in the press, they have suffered very heavy casualties. It is reported that 583 have been killed in the last two years, and the total of the wounded exceeds the total of the Israeli wounded in the 1973 war. But the Israeli Cabinet seems to be unable to make up its mind. However, there has been a very interesting development: a statement by the leader of the Labour Party, Simon Peres, who is tipped to win the next election in July. He has said that if Labour get to power he will withdraw the Israeli forces and leave only small observation posts.
Although some of your Lordships may hold opposing views, I feel that whatever the Israeli Government may say they are unlikely to withdraw, for four reasons. First, there is the long-term Zionist (I
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must call it) aim, which goes way back before the foundation of the State of Israel, to expand north to the Litani River, which lies about 17 miles north of the Awali River, where the Israeli troops now are. That was enunciated way back in 1890. Linked with that is the Israeli desire to make use of the waters of the Litani.
Thirdly, and the most obvious point of all, the Israelis want to counter the PLO activities in the south and ensure that they are no longer in a position to bombard the Galilee settlements. Fourthly, and finally, one could say, looked at from the Israeli side, that Syria is vulnerable and that Southern Lebanon represents an ideal springboard. I feel very strongly that the Israelis are likely to stay on. If I may be a little flippant, I am reminded of that chorus in The Pirates of Penzance when the policemen are being urged to leave. They keep on saying, "We go, we go", and the chorus comes back immediately. "But you don't go".
As for the other occupying forces, I can deal with them briefly. The Syrians are fairly unpopular in much of Lebanon. But there are close ethnic links between the Syrian Sunnis and the Lebanese Sunnis, and there is quite a useful dialogue emerging between the Syrians and the Maronites. Their role—this is an important point—is to try to recreate a unified Lebanon and to promote stability. The Palestinians are only there to counter the Israelis. Several Palestinian leaders have told me that, and I think we can accept it.
What of Her Majesty's Government's attitude? The noble Lord, Lord Kennet, has spoken of the defence aspect, and I should like to touch on other areas where Her Majesty's Government can play a useful role. The presence of our small force, by far the smallest of all the four, was greatly welcomed and we have achieved over the years a great deal in the way of developing cultural relations with Lebanon. I hope that those may be continued. There is of course the possibility of expansion of aid—a very important area—and trade, too. Perhaps I could mention that there is now in Beirut a school for teaching English which was established way back in 1964, exactly 20 years ago, by British initiative and. despite all the trials and tribulations and alarums and excursions, that school is still going strong.
I should like to end on a slightly different note. I should like to remind your Lordships of the genesis of the present troubles. The escalation of violence began after an incident on 13th April 1975, when a Maronite boy of only 14 held up a bus containing Palestinians at a little village called Ain al Rummaneh. He made them get out from the bus, he mowed them all down and 27 were killed. Those are the facts.
I mention that incident because I believe that that 14 year-old boy was no different from any 14 year-old boy among the sons of your Lordships, but he had been corrupted. His mind had been twisted and corrupted by the terrible escalation of terrorism. It is a situation which we find not only in Lebanon. We find it in Iran, for example, where teenage children are being dragged into the army. We see it among the Palestinians—the so-called ashbal, wolfcub guerrillas. The same situation applies in parts of Africa and in Latin America, too. I feel that at some time or other someone has got to try to examine what it is which

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causes this terrible escalation of terrorism and the corruption of the minds of the young. In other words, we should examine what it is that turns a man into a monster and a boy into a beast.
2.53 p.m.
Lord Weidenfeld: My Lords, on the day that I first saw mention of this debate, for which we are so greatly indebted to my noble friend Lord Kennet, I distinctly noticed six headings on the front page of my morning paper, all focusing on the Middle East: news of horror, terror, war in the Gulf, the West Bank, Southern Sudan, the edge of the Sahara, Chad, the streets of London, and of course the Lebanon—a grim reminder of the polycentric and indeed hydra-headed turmoil in the Arab world. This observation is relevant to our approach to any individual crisis in the area, and thus to any discussion of how Her Majesty's Government and the European Community should view the Lebanon. For we must focus on each problem on its own merit and not persist in that obsessive notion epitomised by the hapless Venice Declaration, that all ills in the area stem from, lead to and pale before the Arab-Israeli conflict and the Palestian issue.
In a more recent article in The Times, Sir Anthony Parsons contrasts the hectic and panicky reaction of the West after the 1973–74 war and oil scare, with the calmer, more aloof and even-handed approach to the current Gulf crisis. Calm, aloofness and evenhandedness must be our order of the day in the present phase of the Lebanese tragedy.
No student of the Lebanon would disagree that the campaign of 1982 is but an episode in the seemingly unending horror story which, like some bloodthirsty soap opera, has gone on so long that the viewers seem to have forgotten where it began; 1975 perhaps, or 1958, or 1941—or, perhaps more relevantly, in 1918? But as in any continuous series, it is unfair to take one episode out of context and cast one's villains, saints and sinners with an air of stentorian self-righteousness. History will judge much more conclusively than we can today the true significance of Israeli intervention. History will judge also the wisdom of America's action and inaction in the pursuit of her goals.
But there are certain issues that are less of a danger to peace and stability today than they had been before June 1982. I submit that the destruction of the menacing military infrastructure of the PLO in Lebanon was a positive move. To have removed a band of pyromaniacs from a powder keg has been not only an act of pre-emptive self-defence but a service to the cause of peace in the region.
The other fact that is clearly beyond all doubt is that the Lebanese themselves—of every persuasion and provenance—wish to be left alone; Moslems as well as Christians. They may not get on wih each other but they do not want outside domination. But, of course, each one being too weak to achieve success alone, they form tactical alliances with outsiders—Syrians, Israelis, Americans, Iranians, and Europeans. Then they get trapped into commitments and try to jettison and replace them with breathtakingly sudden reversals of alliances. Such, at any rate, has been the habitual cycle of Lebanese politics.
Our interests in the West converge with those of the majority of Lebanese people. The West needs a free
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and sovereign Lebanon, not one whose governing personnel and policies are dictated and directed from Damascus, Jerusalem, Washington, or Riyadh. That Lebanon is part of the Arab world is, of course, a truism. She trades with, she borders on, and she has strong cultural ties with other Arab countries. Half of her people have religious links with the two main strands of the Islamic family, but Lebanon's role and wish is to be neutral—and a neutral must not be dragged into the feuds and passions of the litigants.
Lebanon has every reason to be friends with Syria and not to harm Syrian interests. But she has also on her southern border Israel—a country with which she genuinely wants to converse and trade, and this should be encouraged by all peace-loving parties in the West. To deny her this right and this opportunity is a blatant infringement of her sovereignty.
In Europe we have three neutrals who are, unquestionably, Western and democratic, both culturally and politically. Yet they feel free to deal with East and West while scrupulously avoiding military entanglements with either bloc. The majority of Lebanon's population wants to be as neutral as Sweden, Switzerland and Austria. That also must be Europe's and Britain's wish and declared aim.
It must be one of our main endeavours to urge that all foreign armies be withdrawn, within a reasonable space of time, from Lebanese soil. To single out the Israelis for unconditional withdrawal confers unwarrantable legitimacy on Syria's claims. It is of course true, as the noble Viscount said, that in 1975 an embattled Lebanese Government, through the Arab League, called in the Syrians, but successive Lebanese governments and presidents have made it clear that they want the Syrians to leave. No one could begrudge Syria far-reaching security arrangements, but President Assad refuses to negotiate even the principle unless the Israelis leave first. To concede to Syria a special relationship which confers historic claims and historic rights in Lebanon would not be wholly dissimilar from conceding, for instance, to a German nationalist a rightful aspiration to Alsace-Lorraine, or from sympathising with an Italian nationalist who is still chanting, "Savoia, Nizza, Corsica!" That is about the measure of the legitimacy of the Syrians' claim to the Lebanon and other parts of that Greater Syrian Empire which in their minds encompasses both Jewish and Arab Palestine.
We talked about the May agreement of 1983. I do not quite agree with my noble friend or, indeed, with the noble Viscount, that this agreement gave Israel an unfair advantage. It must be repeated that although she would have had certain special rights, the Israelis made it clear, and the Americans made it clear, that they would invite a similar symmetrical deal with the Syrians to safeguard their interests. Quite a few people in Europe and Britain saw this agreement as an obstacle to reconciliation in Lebanon and its cancellation as the removal of a road-block to peace. But now that it has been unilaterally cancelled, what has changed? Murder still stalks the streets of Beirut. Disunity abounds. Syria shows no sigh of withdrawing. She still occupies 60 per cent. of Lebanese territory and employs every method of brutal pressure to force her will on the Lebanese leaders.

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Let us not forget that it was Syria who allowed hundreds of Iranian military and religious shock troops to enter Lebanon to convert and subvert the population, making their strongholds in the Bekaa a front line of the Iranian revolution in the Arab world. Now, whereas the Syrians still see as their goal continued domination, the present Israeli Government and, without doubt, any alternative Israeli Government in the future, would wish to withdraw lock, stock and barrel from the Southern Lebanon as soon as adequate security arrangements could be achieved.
I had the opportunity recently of talking to Israeli Government Ministers and opposition leaders, and, to my mind, there is unanimity about one point. I want to assure the noble Viscount, in all sincerity, that Israel has no heart nor stomach for continued physical presence in the Lebanon a minute longer than is necessary. There is unanimity in Jerusalem today that both Syria and Israel have a right to adequate security and that, as soon as both these countries withdraw behind international frontiers, regional or bilateral arrangements should be made to ensure continued calm. A peaceful Israeli handover of the northern part of Southern Lebanon to the Lebanese army, with safeguards for the local population, is essential. A hasty, disorderly withdrawal of Israel would mean endangering the 15,000–17,000 Christians, and some Moslems, including Palestinians, who are still resented by a large part of the indigenous population.
I agree with my noble friend Lord Kennet that there is a positive role to be played by UNIFIL as well as the Lebanese army. The establishment of order in the southernmost part of Lebanon would be best served if the Lebanese army could be immediately strengthened by forces which could induce some trust in the local population.
Since we have a situation in which both Syria and Israel are entitled to security on their borders, but given the mosaic of political currents and ethnic and religious traditions, these Lebanese military elements destined to guard the country's borders must not be out of sympathy with the respective neighbouring power. Thus, the Lebanese army in the Bekaa must include pro-Syrian elements. In Southern Lebanon, the South Lebanese forces under General Lahad—and here, again, I agree with the noble Viscount that General Lahad has proved a very worthwhile and important influence, and his recruiting drive among the Shia, as well as the Christian population, has recently met with much more noticeable success—are in a key position because he entertains correct, if not friendly, relations with the Israelis.
I believe that Europe has an important though discreet role to play. After all, it was two European powers, Britain and France, who were responsible for the order or, if you like, disorder in the Levant in the wake of two victorious world wars.
Since Europe is today militarily, economically and psychologically neither able nor willing to intervene in force and with conviction, it must remain in the wings, compassionate and even-handed. Europe should, specifically, reiterate its view on four basic issues: it should urge the cessation of communal bloodshed and
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the withdrawal of all foreign troops from Lebanon, it should offer to help Lebanon to achieve true sovereignty and be heard and seen to oppose Syrian hegemony.
Europe's attitude towards Israel has—so it is noted in Jerusalem—undergone a slight yet discernible change to the better—perhaps a more realistic perception of Israel as the strongest regional power, and one with a political system that is both stable and flexible—stable in its institutions, and flexible in its capacity for policy changes, thanks to the democratic process. Perhaps it has become evident that to antagonise Israel, to seem to want to split her from her American ally or, conversely, to try to tilt America away from that alliance, can no longer be a main goal of Europe's Middle East policy.
Equally, there has been a sobering realisation of the limited influence of the conservative Arab regimes in resolving conflicts. The Saudis have been disappointing mediators, and I think always will be, for their mercantile prowess is not matched by military or diplomatic clout. The King of Jordan has his hands tied by fear of Syria and ambivalence towards the Palestinian revolution, which is still devouring its own children. While the Gulf is aflame, the Lebanon will not tempt Arab rulers into risky and costly new initiatives. That is why I think that for those in the West who have the true interests of the Arab cause at heart this may well be the moment for a reappraisal of their basic psychological approach.
To nurture illusions and to raise false hopes of decisive intervention is dangerous, and indeed indecent. The best friend is a frank friend, and a frank friend must counsel in the present circumstances a much more realistic attitude to the problems, processes and attainable objectives of peace. I believe that European policy should move away from romantic mirages—the Fata Morgana of facile formulas—and, if I may say so, instead undergo an evolution along Darwinian lines—from prostration and genuflection to an upright stance of friendly equals, striving for a solution in the Lebanon and elsewhere in the Middle East which can ensure the survival of the species.
3.7 p.m.
Lord Caradon: My Lords, our debate has lessened our public support in this House, and we cannot claim that what we say is going to carry great weight among those on the other side of the House or on this: but, nevertheless. I think that the short debate which we have had this afternoon has been of real value, well-timed and indeed most necessary.
Perhaps I might first of all refer to the remarkable speech to which we have just listened. I think that what has been said has been of very great importance. As I listened I went back in my experience to the time when I went up with a British and Free French army into Damascus and Beirut years ago, and worked with the people of the Lebanon in the hope that we could establish a free Lebanon, capable of administering their own affairs. I remember those days, and I wish to say—if I may, with great respect—that the call given to us just now for a declaration from every side that the Lebanese should be free, and enabled to administer

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their own affairs without conflict and bloodshed for the first time for a long time, is I think of very great importance indeed.
I wish to thank my noble friend for his intervention this afternoon, which I think has given increased hope and expectation to us all. We were certainly fortunate in the noble Lord, Lord Kennet, who knows this subject so well and who gave us an excellent historical introduction. Then we had another speech from an expert, the noble Viscount who knows this subject so well and so intimately. So it may be that, late as we are in our timing, the debate may have been of real value.
I wish to put to noble Lords one main point on this subject. It is certainly clear to me and has been for a long time that there are obviously three purposes to be pursued in the Middle East: first, that the Lebanese should be independent; secondly, that the Palestinians should be free in their own homeland and, thirdly, that the State of Israel should be secure. Yes, security in Israel can come only if there is independence in the Lebanon and freedom for the Palestinians; they go together. Without achieving all three of these objectives you cannot achieve any one of them. That is a basic fact which it seems to me is obvious but also absolutely necessary at this time.
Over this weekend there is the possibility that the Lebanese will be able, with all the effort that has been made, to come together with their new cabinet and to agree on processes for establishing peace and security in the Lebanon. It could happen. It is dependent on the withdrawal of Israel from Southern Lebanon. Of course that cannot be immediate, but there should be a real expectation that that withdrawal can take place, and soon. If that can happen, then the coming together of the Lebanese in their new cabinet can be strengthened and they can be given a new opportunity of uniting that lovely country. At the same time there can be a greater hope that the Palestinians in their own homeland—small though that hope may be—will have an opportunity of taking their own decisions about their own future. So there is a hope that all three can go forward: the freedom of Israel; the freedom of the Palestinians and the independence of Lebanon, and that those three purposes can be achieved. If one fails—if, for instance, there were to be a determination by Israel to dominate, to control Southern Lebanon in Tyre and Sidon—then, even with the other two purposes being achieved, there will be no hope of security for Israel.
At the moment we have the worst of all worlds. We have a situation in southern Lebanon which, as we read in the papers, is encouraging violence day by day instead of giving an opportunity for a new understanding between Israel and the Lebanese cabinet. There could be an understanding. There could be a gesture now from Israel, which might say, "We will certainly withdraw. We have no desire"—as my noble friend has indicated this afternoon—"to stay for a minute longer than necessary and we will work out an arrangement whereby we can withdraw". Then this could be the beginning of new developments in the Lebanon, in Palestinian lands and in the security of Israel which would be to the benefit of everyone.
I believe there is an opportunity. This weekend they are meeting in the new cabinet in the Lebanon,
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anxious, ready and eager to see at any rate this main advance as an encouragement for their future. There is also an opportunity for our country and for France to contribute, because, as has been indicated, our country and France have, historically, special obligations in that part of the world. At the moment I do not think the Americans have much to contribute, but I hope that that may change. But there is the opportunity for the English and the French, who have ties, and confidence, in the Lebanon and in the rest of the Middle East, to take over now the leadership in international affairs and not just to accept everything that the United States says.
There is an opportunity for us to take a determined line of our own to insist that the present opportunity is not lost. Yes, I think that could be. I believe, therefore, that we in this country have a very special obligation at this time. It is not an obligation to say, "Me, too," and to go along with what other people say. No, we have something to say for ourselves, along with the French. I believe. Now could be the time, this weekend. I read in my newspaper this morning of talk of closer association between the various representatives of the Lebanese cabinet, of the insistence on one prerequisite—the withdrawal of Israel from their southern territories.
I believe that at this time we could take a lead which would, God willing, in the end, restore to these lovely countries—we think particularly of the Lebanon today—their self-respect. They are extremely intelligent people, and I have great hopes that they will be able to find a way forward if they are allowed to proceed without foreign intervention.
3.16 p.m.
Lord Trefgarne: My Lords, I welcome the chance to respond to the noble Lord, Lord Kennet's Question, for recent developments in Lebanon, especially the formation of a new government of national unity, hold out some prospect at last of movement towards restoring peace in that unhappy country. It is right, therefore, that we should review at this point what we and others in the West, sympathetic to Lebanon and to the plight of the long-suffering Lebanese people, can do to help the new government in the daunting tasks which they face. I should like to review, briefly, some aspects of the conflict in Lebanon and of our policy in this area, and then look to the future and comment on what Lebanon's friends might be able to do to help.
The renewed fighting which broke out in Lebanon in February this year was only one more twist in the Lebanese tragedy which has inflicted so much suffering there for the past nine years. We have now passed the ninth anniversary of the outbreak of the civil war in Lebanon, which was the start of a cycle of appalling violence which has left thousands dead and injured and even greater numbers of Lebanese living without a roof over their heads.
There are some horrifying statistics which give some idea of the scale of the suffering. It has been calculated, for example, that over 100,000 Lebanese have been killed or wounded since the start of the civil war in 1975. As so often in these conflicts, the civilian population has borne the brunt of the suffering. Few people in Lebanon have been untouched by this

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disaster. I mentioned the year 1975. I recall that that was the last occasion on which I had the privilege of visiting that country. I recall, too, that my noble friend Lady Trumpington was with me on that occasion.
The Government, and many in this House, have followed these events with dismay. Peace initiatives have come and gone. Periods of calm have lasted just long enough to raise hopes that Lebanon was on its way back to peace and prosperity, only to give way to renewed bouts of savage, and often senseless, fighting. We have watched these events closely, not just out of compassion, but because what happens in Lebanon matters to Britain and the West. It is in our interests that stability should be restored to Lebanon. A Lebanon in perpetual crisis will continue to attract the attention, and sometimes active intervention, of other countries in the region, making even more remote the prospects for establishing a comprehensive peace in the Middle East and threatening at any moment the escalation of a local conflict into a major crisis not only involving Lebanon's neighbours, but even bringing the super powers to a dangerous confrontation. That is why we continue to take a close interest in developments in Lebanon. That is why we welcome the formation of the new government of national unity under Mr. Rashid Karame.
The new Government face daunting tasks. The immediate ones are to establish an enduring ceasefire in the Beirut area and elsewhere, to reopen more crossing points between East and West Beirut, to end Lebanon's beleagured state by re-opening the international airport and seaports, and to ease the restrictions on communications within the country. At the same time, the Government are pledged to begin to tackle the fundamental problems which come under the broad heading of national reconciliation—those issues of power-sharing among Lebanon's many communities which have aroused so much passion and violence. It is encouraging that the Government have been able to agree in broad terms on a programme for their work, and that this was endorsed by the Lebanese Parliament on 12th June.
Since, as I have indicated, our interests are affected by the success or failure of these efforts, how, then, can Britain help? I think it is important not to exaggerate what we can, or should, attempt. Indeed, we should distinguish between what outside powers can and cannot realistically do.
Let me look back briefly at what we have already done. Throughout Lebanon's crisis we have spoken out in support of the restoration of Lebanese independence and sovereignty. These principles were endorsed again by the statement of the Foreign Ministers of the Ten on 27th March. We shall hold firm to those principles.
But we have also provided practical help. Your Lordships will recall that for a year, from February 1983 until February this year, we provided a contingent for the multi-national force in Beirut. The British contingent earned a high reputation for the courage and efficiency with which they carried out their tasks, which were to assist the Lebanese authorities by patrolling the streets of Beirut, and, at a later stage, by providing an impartial guard for the ceasefire talks between the Lebanese factions.
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As your Lordships will recall, my right honourable friend the Prime Minister announced on 6th April in another place that Her Majesty has graciously approved the award of the General Service Medal 1962, with "Lebanon" clasp, in recognition of the outstanding service performed by the British contingent of the multi-national force and those supporting it.
The resumption of fighting in Beirut, which put an end to these tasks and greatly increased the risks to our men, led inevitably to the departure of the multinational force. The contributors to that force—the Americans, French, Italians and ourselves—hoped that it would provide a basis for political reconciliation. Unfortunately, this opportunity was not grasped.
Britain has also given further practical help in the form of humanitarian assistance to the victims of the conflict in Lebanon. We have contributed generously to the emergency appeals of the International Committee of the Red Cross and the UN Relief and Works Agency—a total of over £750,000 in 1984. This is in addition to our regular contributions to the core budgets of both organisations. Part of the £5 million which we have contributed to UNRWA's budget this year will also be spent in Lebanon.
What neither we nor other outsiders can or should attempt is to interfere in Lebanon's internal affairs. And the truth which must be faced is that the foundation of any long-term settlement is likely to be concerned with the details of agreed reforms to the delicate structure of Lebanon's institutions and to the unwritten agreements governing the administration of the country. It is not for us to pronounce on whether any changes should take place or what those changes should be, still less to become involved in the necessary complex negotiations on these difficult points. All we can do is wish Lebanon's leaders well in this immensely difficult task.
We recognise, of course, that external factors are also crucial to the return of Lebanon to her former stability and prosperity. The Lebanese will not be able to regain their sovereignty and independence while the greater part of Lebanon remains under the occupation of foreign forces. We and our partners in the Ten, and others in the West, have consistently called for the early withdrawal of all such forces. In our view, national reconciliation and the withdrawal of forces should go hand in hand. It is for the Lebanese Government to address themselves to the question of when and under what conditions the withdrawals should take place. They can rely upon our support.
The Israeli Government have stated that they do not intend to retain a single inch of Lebanese territory. We welcome that very necessary assurance. This month is the unhappy second anniversary of Israel's invasion of Lebanon in June 1982. This attempt by Israel to impose her will by force was profoundly mistaken and rightly condemned by the international community. The Israeli occupation of Southern Lebanon, now entering its third year, is a wearisome burden on the Lebanese people in these areas, who find their communications with the rest of the country severely restricted and the local economy disrupted. We recognise however that Israel's primary concern now is

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with security arrangements for her northern border, to prevent any recurrence of attacks launched from South Lebanon on Israel's northern towns and settlements. At the same time we have been concerned at the activities of the "South Lebanon Army", under General Lahad, a local Lebanese militia recruited and armed by Israel. We cannot believe that this force can do anything to contribute to greater security in South Lebanon. However, we naturally support the principle of security arrangements which ensure safety for citizens on both sides of the border. Peace on that border is clearly in the interests of all concerned, inhabitants of Israel and Lebanon alike.
Nor should we confine our attention to Israeli withdrawal. We hope that Syrian withdrawal too will be discussed soon between the Syrian and Lebanese Governments. Syria, like Israel, has security interests which must be protected. But the security concerns of Syria and Israel cannot be met at the expense of Lebanese independence and sovereignty.
Here too, Lebanon's friends in the West and elsewhere should be active. We shall continue to support the Lebanese Government's efforts in international fora and in our diplomatic contacts with those countries who have influence in Lebanon. We shall continue to urge the better use of international forces already in Lebanon. We voted in April for the renewal of the mandate of the United Nations Interim Force in Lebanon—UNIFIL—and strongly favour the idea that the Secretary-General, who has just visited the Middle East should continue his consultations. We hope these consultations may eventually result in agreement by all parties concerned to a wider and more useful role for UNIFIL in helping the Lebanese Government to maintain security in Southern Lebanon. This will particularly be needed in the event of an Israeli withdrawal, to give added protection to Lebanese and Palestinian civilians who may be at risk.
Finally, we and our partners in the Ten and many others in the international community are pledged to help the Lebanese Government in the immense task of reconstruction, to repair the shattering effects of nine
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years of war. Much of the country's infrastructure is in ruins. The economy has been severely dislocated. We can rely on the skill and perseverance of the Lebanese people to make rapid progress in reconstruction, once the all-important foundation of a durable political settlement of both internal and external problems has been laid. But they cannot do it alone. They need—and deserve—a helping hand. We shall be ready to play our part, within the confines of our necessarily limited resources.
In brief, therefore, we shall continue to do all we can to help the new Lebanese Government in their efforts to move once more towards a peaceful settlement, to help preserve that peace, to relieve the suffering of the victims of the conflict and to contribute to the reconstruction of the country. The plight of the Lebanese people, and our own interests in a peaceful and stable Middle East, demand no less.
House adjourned at twenty-nine minutes past three o'clock.