Lords Sitting of 26 June 1985

Preamble
The House met at a quarter-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ripon.

Lord Donoughue
Bernard Donoughue, Esquire, having been created Baron Donoughue, of Ashton in the County of Northamptonshire, for life—Was, in his robes, introduced between the Lord Lever of Manchester and the Lord Cledwyn of Penrhos, and made the solemn Affirmation.

Lord Wolfson
Sir Leonard Gordon Wolfson, Knight, having been created Baron Wolfson, of Marylebone in the City of Westminster, for life—Was, in his robes, introduced between the Lord Zuckerman and the Lord Fraser of Kilmorack.
The Earl of Lytton—Sat first in Parliament after the death of his father.

Royal Assent
2.44 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Enduring Powers of Attorney Act,

Ports (Finance) Act,

Wildlife and Countryside (Amendment) Act,

Hill Farming Act,

Rating (Revaluation Rebates) (Scotland) Act,

Nottinghamshire County Council Act,

King's College London Act,

Leicestershire Act,

Associated British Ports Act,

Nottinghamshire County Council (Superannuation) Act.

The Nuclear Winter Hypothesis
2.45 p.m.
Lord Jenkins of Putney: 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 why they have circulated comments on the nuclear winter hypothesis but have not circulated the hypothesis itself.
Baroness Cox: My Lords, the Government are aware that a nuclear winter is one hypothetical
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outcome of a nuclear attack, but research has indicated that the situation is very complex. We are therefore awaiting the outcome of two major research studies before considering appropriate action. The comments which have been circulated, to which the noble Lord, Lord Jenkins, refers, were distributed by the Home Office civil defence adviser in response to requests from emergency planning staff for information to balance the wide publicity which had already been given by proponents of the nuclear winter theory.
Lord Jenkins of Putney: My Lords, I am grateful to the noble Baroness for that informative and accurate Answer. Would she not agree, on reflection, that to circulate a comment on a hypothesis without circulating the hypothesis itself is perhaps not the correct way to proceed? Will she therefore give this matter a little further consideration?
Baroness Cox: My Lords, as I have already said, the Home Office civil defence adviser circulated those comments in response to requests received in view of a great deal of publicity which had been given to the nuclear winter theory, and they formed a counter-balance, as it were, to the wider publicity that that theory had already obtained.
Lord Orr-Ewing: My Lords, is my noble friend aware that Dr. Turco and his group, who forecast a nuclear freeze, are very keen on promoting unilateral disarmament for other political causes? Two famous Soviet scientists have forecast, not that the temperature would go down but that the temperature would go up by 25 degrees. Does my noble friend recall that 85 years ago scientists and mathematicians were forecasting that a heavier than air machine would never under any circumstances fly? Would it not therefore be better to await the results of this deep study which is now being undertaken before jumping to unfair and alarming conclusions?
Baroness Cox: My Lords, I am grateful to my noble friend for those comments. There is indeed a very complex range of proposals and hypotheses which are currently being considered, and one of them is the so-called "nuclear greenhouse" theory, suggesting that temperatures might rise rather than drop. I should point out that the two major studies which are being conducted are of the first importance. One is by the Scientific Committee on Problems of the Environment, which is part of the International Council of Scientific Unions. The results of that study are expected later this year. The other research is sponsored by the United States Government, and an interim report of that is available in your Lordships' Library. However, I think these findings highlight the need to wait before considering the policy implications of any hypothesis.
Lord Mishcon: My Lords, without making a long speech and without making any comments at Question Time, may I ask the noble Baroness what justification in logic there can be for printing comments without printing that upon which the comments are made?
Baroness Cox: My Lords, in reply to the noble Lord, Lord Mishcon, the hypothesis, which had already been widely distributed, contained its own premises. The comments were an attempt to put that hypothesis, the assumptions and the alleged results of a nuclear winter into a proper context.
The Earl of Halsbury: My Lords, could the noble Baroness elucidate a little further? What we are waiting on is the opinion of disinterested meteorologists who are unconcerned with political propaganda on one side or another. In the event of our being in for a nuclear summer rather than a nuclear winter, has the noble Baroness any information as to whether it might be worse than the present one?
Baroness Cox: My Lords, I can hardly imagine a summer which would be worse than the present one.
Lord Zuckerman: My Lords, is the noble Lord who put this very important Question aware that there are two bodies—both of which are international and apolitical—which are considering this matter and are due to report? There will not be anybody able to say that these people are in favour of unilateral, multilateral, more or less disarmament. One is the International Council of Scientific Unions, on which we are represented through the Royal Society, which has commissioned a report through the organisation concerned with problems of the environment. It will be reporting in Washington in late September, and then in Munich internationally in October. There will be a two-volume report which ought to satisfy everybody.
Baroness Cox: My Lords, perhaps I may assure the noble Lord that the Government will take account of all serious research which has a bearing on this matter.
Lord Jenkins of Putney: My Lords, in view of the highly reinforced nature of the already adequate reply of the noble Baroness, I think it would be appropriate to leave this matter, at least for the time being, for a few days if perhaps not a little longer.

Johnson Matthey Bankers
2.51 p.m.
Lord Bruce of Donington: 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 they intend to privatise Johnson Matthey Bankers, and if so, whether they will insist that the investment by the Bank of England of £75 million is not disposed of at less than this sum and that the £25 million loan advanced by the Bank of England, plus interest, is repaid in full.
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie): My Lords, the Bank of England have made it clear that Johnson
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Matthey Bankers will be returned to the private sector as soon as practicable and for the best possible price.
Lord Bruce of Donington: My Lords, will the noble Earl answer the Question as to whether it is the intention of the Government to ensure that there is no loss falling on public funds, either directly on the Government or indirectly on the Bank of England? Also, will he answer the Question as to whether it will be insisted upon that no loss is occasioned on the sale back to the private sector of JMB?
The Earl of Gowrie: My Lords, naturally I have no idea what price movements may be viable at the time. The Bank of England's own resources were involved in the rescue. These come from profits derived from the bank's own activities. They are not voted by Parliament and they are not drawn from taxes.
Lord Bruce of Donington: My Lords, has the noble Earl's attention been drawn to the views of The Times leader on 21st June, which stated:
"In the end, the Chancellor cannot; however, avoid responsibility for politically sensitive actions of the Bank, nor, in such circumstances, maintain the fiction that the Bank's money is not public money."
Will the noble Earl please answer also as to whether the guarantee given by the Bank of England, amounting to £150 million although underwritten backwards by £75 million, will form part of the public sector borrowing requirement?
The Earl of Gowrie: My Lords, I usually agree with The Times, but I do not always. The fact of the matter is that my original Answer stands, and naturally it is in the interests of the Bank of England—indeed, in the interests of the Government—that the best possible price should be obtained, given the circumstances at the time.
Lord Diamond: My Lords, as the Question refers to the Bank of England, perhaps I may ask the noble Earl whether it is the intention of the Government to renationalise the Bank of England, so that the close co-operation between Mr. Governor and the Chancellor of the Exchequer of the day may continue. Without it, one of the country's most priceless assets—the integrity and high standing of this country's and the City's financial services—might be prejudiced.
The Earl of Gowrie: My Lords, with respect to the noble Lord, Lord Diamond, the Question on the Order Paper asked whether Her Majesty's Government intended to privatise Johnson Matthey Bankers, and I answered in the context of that Question. But my right honourable friend the Chancellor has had discussions with the Governor of the Bank of England and he, like I, very much values that association. The Governor has agreed that in future rescue cases, should such be necessary, he will inform my right honourable friend of his concerns and intentions as fully and as far in advance as possible.

Prisoners: Remand Accommodation
2.54 p.m.
Baroness Masham of Ilton: 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 they will introduce a system whereby first offenders under the age of 21 and other prisoners under the age of 18 held on remand in prisons do not share cells with older prisoners.
Baroness Cox: My Lords, I understand the noble Baroness's concern, but prison rules and departmental instructions already provide that unconvicted prisoners under 21 should be kept separate from adult prisoners and from convicted prisoners as far as this can reasonably be done. Those who have not previously served a sentence in custody should, so far as is practicable, be separated from others. Governors have regard to those principles in allocating prisoners to cells, as well as, of course, to the availability of accommodation and the circumstances of individual prisoners.
Baroness Masham of Ilton: My Lords, I thank the Minister for that reply. Is she aware that in theory that is the policy but in practice, so far as Leeds Prison is concerned, this does not happen? Is she also aware that many young people under the age of 21 are locked up with older prisoners for 23 hours a day? This concern was expressed to me by one of the visiting chaplains and by many of the young people themselves.
Baroness Cox: My Lords, as I have already said, it is our intention that people under 21 should not be located in the same cell as older prisoners, whether convicted or unconvicted. If on rare occasions unconvicted under-21-year-olds have temporarily been placed in the same cell as older unconvicted prisoners, this is regrettable and I share the noble Baroness's concern. If she knows of any particular instances, I am sure that my noble friend the Minister would be willing to hear of them.
Turning briefly to the second point with regard to the number of hours in which prisoners may be in their cells, may I draw your Lordships' attention to the fact that, in addition to their exercise period and education classes, prisoners are allowed to leave their cells to collect meals, to shower, to see prison staff or to receive visits. There are many variables; but even in the most overcrowded establishments on days with few opportunities it would be unusual—and I agree that it would be unfortunate—if prisoners under 21 remained in their cells for such long periods.
Lord Mishcon: My Lords, will the Minister, having regard to the seriousness of the Question that was asked by the noble Baroness, Lady Masham, give a categorical assurance that instructions will be given that in no circumstances are these conditions to be allowed to obtain: namely, that somebody under the age of 21 who is a prisoner, whether on remand or otherwise, shall be in the same cell as an older
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prisoner? Does the Minister realise that any policy for the reform of young people is completely invalidated by circumstances such as are recited in this Question?
Baroness Cox: My Lords, I share the noble Lord's concern for the seriousness of the Question. As regards the under-21 population, governors do their best to ensure that younger prisoners do not share cells with those who are considerably older or who have serious previous criminal convictions. We cannot make hard and fast rules to suit every case, taking into account all the factors such as age, nature of the offence and state of mind, so some discretion must be left to the governor.
Lord Nugent of Guildford: My Lords, in view of the anxiety about the serious bottleneck of prisoners on remand, can my noble friend tell us whether the Home Office have any plans to relieve that bottleneck?
Baroness Cox: My Lords, the main source of the problems which are causing such concern to your Lordships is the delay which takes place in the courts, and the Government have taken active steps in this area. Field trials of the statutory time limits provided in the Prosecution of Offences Act will soon take place. My noble and learned friend the Lord Chancellor is providing a substantial increase in resources in terms of both judges and courtrooms for the Crown Courts which have suffered the most rapid recent increase in business. Very briefly, perhaps I may also point out that, as your Lordships will be aware, this Government have embarked upon an extensive prison building and renovation programme which will result in two new establishments being planned as remand centres for those under 21. Five establishments will be local prisons. Much refurbishment work will be aimed at improving conditions in local prisons. Taken together, the current proposals on building projects will provide about 11,700 new places by the early 1990s and should well help to solve these problems.
Baroness Vickers: My Lords, can my noble friend state the average length of time that young people have to stay in prison? Can she also say whether they have any form of education while they are there?
Baroness Cox: My Lords, I am afraid that I cannot give any information on the average length of time because it varies a great deal. But there is certainly a statutory requirement for formal education for juveniles.
Baroness Sharples: My Lords, does my noble friend agree that under the conditions described by the noble Baroness, Lady Masham, the danger of drug-taking must be increased?
Baroness Cox: My Lords, I would hope that the actual taking of drugs in prison would not be increased, but obviously such contacts with people with other kinds of problems and records is a serious matter. That is one of the reasons the Government are so deeply concerned about the problem and are trying to remedy it.
Lord Elwyn-Jones: My Lords, is not the undesirability of young people under the age of 18 who are on remand, many of whom are likely to be acquitted, having to share cells with adult prisoners so intolerable that it ought to be prohibited by the regulations of the prison system?
Baroness Cox: My Lords, unconvicted prisoners under 21 are mainly held in remand centres. If under-21s are held within the prison itself, they will wherever possible be located in a separate wing on a separate landing. But they will always be held in separate cells unless there are exceptional circumstances—for example, perhaps where a father and son are both remanded together in custody.
Baroness Macleod of Borve: My Lords, may I ask my noble friend the Minister whether in the area of which the noble Baroness, Lady Masham, has been speaking there are sufficient bail hostels? From experience I can say that it is possible to send a young person to a bail hostel rather than to remand in custody, if there are sufficient bail hostels.
Baroness Cox: My Lords, we are aware that it is very important to make provision for bail, and we believe therefore that hostels which take people on bail have an important role in reducing the remand bottleneck. New hostels have recently been opened and we are reviewing the arrangements for assessing demand for places to see how this option can be better utilised.
Lord Mishcon: My Lords, will your Lordships forgive me if I return to the Dispatch Box? I do so only because of the seriousness of this Question. The noble Baroness has mentioned on more than one occasion "wherever possible" and "if possible". Because of the concern shown on all sides of the House, is she prepared to take up this matter with the Secretary of State with a view to seeing whether there cannot be a prohibition, except in the most urgent circumstances, in regard to the conditions mentioned in the Question asked by the noble Baroness? Will she please speak to her right honourable friend about this and tell him of the great concern shown by this House?
Baroness Cox: My Lords, it is a concern that we all share. I shall certainly draw it to the attention of my noble friend the Minister, and I imagine that he will draw it to the attention of his right honourable friend.
Baroness Faithfull: My Lords, following the last question of the noble Lord, Lord Mishcon, perhaps I may ask my noble friend whether we should not consider a policy different from the one that we have at the moment, whereby these boys are accommodated in a place and in a way more suitable to their age and more constructive to helping them so that they can adapt to life when they come out. Furthermore, may I ask my noble friend the Minister whether her right honourable friend the Home Secretary is aware that when I visited Oxford Prison on 31st May, 40 boys aged 17 to 21 were in the prison, of whom 22 were untried? Yesterday there were 38 boys in the prison, of whom 30 were untried. Is my noble friend the Minister aware what excellent staff there are at
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Oxford Prison? They do not put the boys with men, but this means that there must be three boys to a cell.
Baroness Cox: My Lords, my noble friend has raised a number of questions. Perhaps I may point out that, with regard to the placement of young persons under 21, three-quarters of those on remand are held in remand centres. The reason they are held in remand centres is that they need to be as close as possible to their families and friends, relatives and legal advisers, in order to facilitate visits. Very few juveniles are remanded in custody and those who are almost always go to remand centres.
With regard to the situation in Oxford, it is recognised that there are very real problems with the prison in Oxford, which is a small, overcrowded local prison. It has a limited life and there is an intention for a new local prison to be built at Bicester which should relieve that problem in due course.
Lord Melchett: My Lords, may I ask the noble Viscount the Leader of the House whether, in the light of the exchanges we have had so far today, the new policy which he announced recently of only one supplementary question being asked at Question Time and only one question being answered by Ministers on the Front Bench has been subsequently changed?
The Lord President of the Council (Viscount Whitelaw): No, my Lords. I believe it to be my duty to interpret the wishes of the House with some flexibility. It seemed to me that this afternoon there was a genuine concern for this particular subject which the House wished to pursue. I considered that in those circumstances it would be wrong for me to interpret the rules too literally, but I should like to make it clear that it is my duty to interpret the wishes of the House. I hope I was doing so.
Noble Lords: Hear, hear!

Privatised Bodies: Conservation Requirements
3.5 p.m.
Baroness Nicol: 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 what plans they have to extend the requirements of Section 11 of the Countryside Act 1968 to industries and authorities which are to be privatised, and whether they will seek to ensure that such bodies have specific duties to consider the needs of conservation in the future.
Lord Skelmersdale: My Lords, the Government naturally recognise the vital importance of conserving the countryside and we will give active consideration to this in our privatisation plans.
Baroness Nicol: My Lords, I am grateful to the Minister for that reply, but I must say that I am a little sorry that he cannot be more forthcoming. Does he not consider that an extension of Section 39 of the Wildlife and Countryside Act, which allows for the

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responsibility for conservation to pass on to a subsequent owner, might be used in this case? Will he consider whether this section of the Act should be used, or failing that will he agree to give every support to the United Kingdom Centre for Economic and Environmental Development, which could tackle the problem in its own way?
Lord Skelmersdale: My Lords, in privatisation each industry or firm is considered on its merits. For example, we recently went through the long exercise in this House of passing a Bill for the privatisation of British Telecom. In that Bill safeguards were made, having regard to the particular circumstances of that industry. I do not believe that the scattergun approach which the noble Baroness is suggesting would be appropriate to what are very differing circumstances.
Lord Molloy: My Lords, does the noble Lord the Minister agree that it is quite futile for the Government to impose more hard work upon themselves? All they have to do to stop any damage to the countryside or to industry, and therefore to our economy, is to have a hard look at the absurdity of their privatisation plans and abandon them.
Lord Skelmersdale: My Lords, I do not think that Governments have been spectacularly good in recent years at running industries.
Lord Melchett: My Lords, is the noble Lord aware of the particular concern that has been expressed about the possible plans to privatise the water industry? Will he agree that in that area particular safeguards will be needed to safeguard the countryside and wildlife?
Lord Skelmersdale: My Lords, there are in force already particular duties on water authorities, which we debated at some length during the course of the Water Bill through this House in 1983. In view of what I have already said about particular circumstances pertaining in different industries and firms, it would be premature to comment further at this stage on the detailed issues arising from what is a possible, but as yet by no means probable, privatisation of the water authorities.
Baroness Nicol: My Lords, I am sorry to press the Minister on this matter, but to refer to overall legislation as a scattergun approach is not terribly appropriate. We have general legislaton for the control of pollution. It seems entirely reasonable that we should have general legislation for taking care of conservation in newly privatised industries. Will the Minister not at least say that the Government will have a concern for this and will do their best to ensure that the concerns of conservation are pursued in any privatisation?
Lord Skelmersdale: Yes, my Lords, and that is why I answered the original Question which the noble Baroness put down on the Order Paper in the way that I did. I said:
"we will give active consideration to this"—
meaning conservation—
"in our privatisation plans".

Business
The Earl of Swinton: My Lords, it may be for the convenience of the House if I make a short statement about tomorrow's business. As the Committee stage of the Social Security Bill was completed yesterday, the House is likely to rise early tomorrow and therefore dinner will not now be available. It has been agreed through the usual channels that the Education Support Grants (Amendment) Regulations 1985, which were to be taken on Friday, should be brought forward to tomorrow. The business Motion to make this possible will be tabled today.

The Defence Estimates 1985
3.10 p.m.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne)The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne) rose to move, That this House takes note of the Statement on the Defence Estimates 1985 (Cmnd. 9430).
The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper.
Defence is unique. There is no other single component of the Government's expenditure programme that is subject to annual reports to Parliament and to the taxpayer like our annual Statement on the Defence Estimates. This is as it should be. It reflects the importance that successive Governments have attached to the maintenance of the country's security—the first and greatest responsibility of all Governments.
But defence does not come cheap. In the financial year 1985–86, we are planning to spend over £18 billion on defence. This is a huge sum of money. And it is of course true that spending money on defence means forgoing expenditure on something else—expenditure to which, in an ideal world, we should all like to give priority. But, as I recall reminding the noble Baroness, Lady Gaitskell, on one occasion, we must take the world as we find it, not as we should ideally like it to be. Wishful thinking is no substitute for a credible security policy, based on a sober and realistic analysis of the threat that we face.
The Statement reminds us of the realitites of today. After the last war, we in the West turned with relief to the tasks of reconstructing our societies and rebuilding our prosperity. By contrast, our wartime ally, the Soviet Union, kept 6 million men in arms and tightened its grip on the countries of Eastern Europe that it had occupied. It then turned the searchlight of its hostility on the West as a whole, and in the intervening 40 years has lost no opportuntiy to extend its political and military power-base. East Germany, Hungary, Czechoslovakia and Afghanistan are merely the most conspicuous examples.
There are those who say that all this simply reflects Soviet insecurity, which in itself stems from centuries of Russian experience of invasion, and that the Soviet Union offers no real threat to Britain. But we must judge them by their deeds and not their words. It is a pretty extreme form of insecurity that necessitates the build-up of a massive superiority in both conventional

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and nuclear weapons; that requires the construction of a mighty navy equipped for offensive operations around the world; and that justifies the development and maintenance of a huge chemical warfare capability—all to the accompaniment of a ceaseless cacophony of propaganda against the West.
The response of the free world is now part of history. In 1949 we joined together in the North Atlantic Alliance. Indeed, it is through NATO, and only through NATO, that we can succeed in preserving peace with freedom because it is only by the collective commitment of all members of the Alliance that, between us, we can maintain the military strength necessary for successful deterrence. But as the foreign ministers of the Alliance reaffirmed at the conclusion of the Council meeting in Lisbon on 7th June:
"We do not seek military superiority for ourselves. None of our weapons will ever be used except in response to attack".
And at the earlier May meeting of the Defence Planning Committee, faced with the continuing buildup and modernisation of Soviet nuclear and conventional arms, defence ministers stated:
"We are resolved to maintain the credibility of NATO's strategy of flexible response and forward defence".
The Statement on the Defence Estimates describes NATO forces, and the United Kingdom's contribution to them, in detail. But I should like to take the opportunity of reminding your Lordships of the scale and extent of Britain's contribution. We commit the vast majority of our forces and about 95 per cent. of our defence budget directly or indirectly to NATO. We are the only European nation to contribute to all three elements of NATO forces; strategic nuclear, theatre nuclear and conventional. We provide forces for all three major NATO commands—the Atlantic, Europe and the Channel. And we concentrate our military contribution in four areas: nuclear forces, defence of the United Kingdom, the European mainland, and the Eastern Atlantic and Channel.
In addition, we have important responsibilities outside the NATO area. Some of them are ours alone, such as our responsibility for the external defence of our dependent territories. Some we share with other Western countries, such as the security of supply of vital raw materials and the protection of trade routes. Some we share with the international community as a whole, such as participation in peacekeeping forces or in humanitarian missions such as the Ethiopian airlift.
I cannot let the occasion pass without saying a few words about the superb operation carried out over the weekend by the Royal Navy, the Royal Air Force in close collaboration with the coast guard, the United States Air Force, and the Irish authorities following the dreadful tragedy which befell the Air India Boeing 747. The first RAF aircraft was airborne within 20 minutes of the emergency call being received, and was on station in less than an hour. The operation was co-ordinated by RAF personnel at the search and rescue centre at Plymouth. I am sure your Lordships would wish to join me in paying thanks to all the emergency services concerned in this tragic affair.
The Government are committed to maintaining a substantial contribution in all four areas of NATO
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commitment, as well as our activities outside the NATO area. I think that it is worth emphasising this point because there are those—not least the defence committee in another place—who do not think that we can do it. Our critics draw attention to the ending, after 1985–86, of the Government's commitment to annual real increases in defence spending in line with the 3 per cent. NATO target. They refer to the programme that we have embarked on to replace Polaris with Trident in the 1990s. They point to the ever-increasing cost of defence equipment. They stack all these factors together, and conclude that we cannot hope to sustain all our commitments from our future resources, that we are therefore heading for a defence review, and that we are being less than honest for not admitting the fact, and discussing it in detail, in the Statement on the Defence Estimates.
But by stacking the deck like that, our critics make the mistake of underestimating the cards in the Government's hand. I leave on one side the fact that had we conducted a defence review in the pages of the White Paper our critics would have taken us to task for not announcing such a major undertaking to Parliament. The first point that our critics ignore is the major and continuing impact that is being made by the increased resources that are now available to defence. The increased level of spending in the current year marks the culmination of an unprecedented period of real growth in defence spending; a record unparalleled in peacetime. As a result, the United Kingdom's defence budget is the second in NATO in absolute terms and on a per capita basis, and contains the highest proportion spent on equipment of any NATO nation.
As for Trident, your Lordships have discussed the relevant issues in detail on more than one occasion. I do not intend to rehearse the arguments now. If any noble Lord is unsure of the Government's policy or of the reasons why we have embarked on the Trident programme, may I commend to his attention the excellent and cogent essay on page 6 of the Statement. There are just two points that I would emphasise. The first is that Trident is expected to absorb on average only about 3 per cent. of the defence budget over the period of its procurement, and about 6 per cent. of the equipment budget. The Ministry of Defence is well used to managing large projects within the year-to-year constraints of the normal budgetary process. Tornado, for example, not only cost more than Trident in real terms; it also absorbed a higher proportion of the equipment budget during its period of procurement. But Tornado was easily assimilated in the defence programme, as will be Trident. The second point is that, although the capital costs of the Trident programme are comparatively large, the running costs will be small. By contrast, the costs of running and manning conventional weapons are normally a high proportion of their total costs. It is therefore a mistake to assume that without Trident we should be able to sustain much larger conventional forces than with it.
The Defence Committee in another place has drawn attention to the historic tendency for the costs of defence equipment to increase every year above the rate of inflation generally. Many voices have been raised predicting a shortfall between resources and commitments if this were to continue. But the

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Government do not accept that this tendency—a product, we believe, of slack practices in defence contracting in the past—is inevitable and that we can do nothing about it. Indeed, we are committed to increasing efficiency and improving value for money, recognising always, as the recent NATO ministerial meeting also did, that what really matters is the output we get for our money. Chapter 5 of the Statement sets out the ways in which we are going about this process: more competition, tighter contracts, savings on overheads, and better management. It also sets out some of our recent successes, of which the competition for the new RAF basic trainer aircraft is but one example. Elsewhere in the Statement we describe the measures we are taking to improve value for money by increasing collaboration, both within NATO as a whole and specifically within Europe, and by making a concerted and systematic effort to exploit the new technologies to the full.
This Government are not in the business of retrenchments and withdrawals. We are in the business of improvements and enhancements. We are certainly not retreating from our adherence to the principle of deterrence, which has kept this country and our allies in peace and freedom for 40 years. Nor do we believe that NATO's strategy of forward defence and flexible response has outlived its usefulness. We shall maintain and strengthen our contribution to NATO's military posture, and we shall continue to pursue the goal of value for money in the equipment programme. In case I have not got the message across, let me emphasise it again, in plain language: we are not conducting a defence review, by stealth or otherwise, and we have no intention of embarking on one.
So far, I have touched only on our defence policies and military capabilities. By themselves, these are not the whole picture. Part and parcel of our security policy is our commitment to arms control. A symbol of this commitment is the setting up within the department of the Defence Arms Control Unit, which provides a focus of advice to the Secretary of State and his Ministerial colleagues in the Ministry of Defence on arms control issues. Substantial all-round reductions in armament levels are, of course, the aspiration and the ideal of us all. That does not mean that arms control is an occupation for the starry-eyed. As I have said to your Lordships on a number of occasions, arms control measures must be realistic, balanced and verifiable. Negotiations are not easy. Significant successes have been achieved in the past in the control of arms, if not in their reduction. The task ahead is to maintain and build on those agreements, at Geneva and elsewhere.
The United States have demonstrated the importance they attach to arms control by their decision to continue their political commitment not to undercut the provisions of the unratified SALT II treaty. The Government strongly support and applaud that decision. We hope that the Soviet Union will be prepared to show that they, too, take arms control seriously by an equally scrupulous attitude to their obligations and by entering into serious negotiations at Geneva.
This leads me to President Reagan's strategic defence initiative. This is another subject that has
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benefited from extensive discussion in your Lordships' House, and I have no intention of rehearsing all the arguments again—although I have no doubt that some of your Lordships will wish to comment in depth on these matters. There are those who say that the very existence of the SDI programme is a violation of the Anti-Ballistic Missile Treaty of 1972. But, with your Lordships' permission, I should like to read an extract from a speech that was made in a very different place:
"The ABM treaty does not place any limitations on carrying out research and experimental work directed towards solving the problems of defence of the country against nuclear missile attack".
That was said, not in the American Senate but in the Supreme Soviet in 1972 by Marshal Grechko, then Soviet Minister of Defence. The Soviet Union has been acting on his words for the last 13 years. In these circumstances it would have been folly for the United States not to undertake its own programme of research into ballistic missile defence. The Government support the SDI, in line with the four points agreed between the Prime Minister and the President at Camp David, and we are at present in detailed discussion with the United States Administration about British participation in research in areas relevant to strategic defence. Our objective is to ensure that the traffic in technology and expertise is two-way, and that there will be clear benefits for our own defence programmes and industrial base.
"Peace in our time" is perhaps an unwise slogan for a British politician to use. If it is based on wishful thinking, it is not just unwise but downright dangerous. The White Paper reminds us that 50 years ago, when the first ever Central Statement on Defence was published, we hoped for the best but were unprepared for the worst. It also reminds us of the futility of one-sided disarmament. We have learnt the lessons of the 1930s. We must not be complacent; but we can take comfort from the success of the policies that hitherto have been followed by all Governments and generally supported by all parties since 1945. So long as we sustain these policies, "peace in our time" will not again become an exercise in wishful thinking.
The Statement describes the massive increase that the Government have provided in the resources devoted to defence. It describes the measures we are taking to ensure that these resources are used as efficiently and as effectively as possible. It reaffirms our commitment to realistic measures of arms control and disarmament; and it sets our defence policies and capabilities firmly in the context of our commitment to NATO and our determination to maintain the strength and credibility of the alliance. Security does not come cheap; nor is it won easily; and, given the strategic realities of today, it cannot be won alone. But, so long as the NATO alliance remains united and steadfast, we surely have nothing to fear. I beg to move.
Moved, That this House takes note of the Statement on the Defence Estimates 1985 (Cmnd. 9430.—Lord Trefgarne.
3.28 p.m.
Lord Boston of Faversham: My Lords, I thank the Minister, the noble Lord, Lord Trefgarne, for introducing this debate on the defence estimates in his customarily clear and competent way and also for his

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wide survey of our commitments. Perhaps I may also join him in the tribute which he paid to the forces of this country and elsewhere in the rescue operations which were carried out a few days ago.
I wish I could be as complimentary about the Defence White Paper as I am able to be about the Minister himself. It has, it is true, some improvements and more information, including more on Trident, although there is nothing new; and there is more about the Merchant Navy, as promised. But on policy it has severe shortcomings, and I shall come to those shortly. First, I want to emphasise one thing on which I hope most of us can agree—that the NATO Alliance remains at the heart of our defence policy, as the noble Lord indicated. Central to that is our relationship with the United States. We have our differences from time to time, of course, but that should not prevent us from remaining the closest of partners, as we have under successive British Governments since the war. It is right that in this 40th anniversary year of the ending of the Second World War we should remind ourselves of that.
That anniversary also reminds us that policies pursued over those years, not least of deterrence, have preserved the peace in Europe. I have always been among those who believe in the need for an effective Western deterrent pending all-round agreement on disarmament. But that does not mean that we should not constantly seek ways to see that we make the best contribution that we can to NATO; and that brings me to some of the shortcomings in the White Paper.
As the Minister indicated, defence expenditure is now £18,060 million. We have a duty to subject that to the most searching scrutiny. I think that it must have been particularly hurtful to the Secretary of State for Defence to find that among his severest critics was the Daily Telegraph. In a leading article headed. "Heseltine's Fudge", it said:
"If the statement on the Defence Estimates were the accounts of a public company they would at best have sent the share price sliding and at worst been qualified by the auditors. The picture which Mr. … Heseltine … is trying to present … has only a passing resemblance to reality. The White Paper claims that the defence budget for the current year 'will provide for annual real growth in the region of 3 per cent.'. In order to reach this number there has been some pretty ruthless fudging".
It went on to explain that once inflation was taken into account there would be not just zero growth but a reduction in expenditure in real terms.
We know that the Government have already announced that from next year they will abandon the agreed NATO target begun in 1979 of a real increase in defence spending of 3 per cent. a year. The Daily Telegraph points out that,
"the respected defence economist David Greenwood [says] adherence to the 'programme in being' will result in a defence funding gap of £4 billion by 1987–88".
It could not have been any more encouraging to the Secretary of State to see the comment of the Economist on the White Paper that,
"this bland document has avoided all important decisions and contains no new signposts to future defence policies".
But it must have been especially disturbing for him to see the criticisms which have already been alluded to, although not I regret to say in detail, by the noble Lord, Lord Trefgarne, of the Select Committee on Defence of another place chaired by Sir Humphrey Atkins. In its third report published this month it says:
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"In terms of broad policy, there is little new in the 1985 … White Paper. We said in our Report [last year] that there was: 'little new in the 1984 Defence White Paper. This was acknowledged by the Secretary of State, who said … he hoped next year to move towards a review of policy priorities'. The 1985 White Paper does not realise that hope. We regret this and expect that next year such a review will be included".
Far from being surprised, as the noble Lord, Lord Trefgarne, suggested just now, if such a review had appeared in this year's defence White Paper, it was indeed expected by no less a body than the Select Committee in another place.
Later in its report the Select Committee says that its,
"concern that there might be difficulties in managing the defence budget in the 1990s has as a result of our inquiry turned into the strongest suspicion that there will indeed be considerable difficulties leading to cancellations, slowing-down of acquisitions and the running on of equipment beyond its economic life-span. The evidence … from the Ministry has not allayed our fears".
It says of future expenditure that its view,
"which was confirmed by the thrust of the evidence [of the Chief of Defence Staff], is that with the present policy there is bound to be a substantial real cut. It was acknowledged in evidence in the clearest terms that the conventional equipment budget is particularly at risk".
The report ends with these words:
"We have drawn attention … to substantial pressure developing on the defence budget over the coming years, and have no doubt that this will require some hard decisions. We are told that there is no immediate need for a defence review; but we fear that the cumulative effect of managing the defence budget in the manner endorsed in the White Paper may result in a defence review by stealth".
Just one crisp answer in evidence by the Chief of the Defence Staff says it all. Asked whether we were facing a substantial diminution in defence expenditure in real terms after 1985–86, he said:
"Yes, that is exactly it".
There is growing strain on the defence budget just when two things begin to happen—first the need to renew conventional projects builds up, and then peak expenditure on Trident starts.
That brings me to Trident itself. As the White Paper states, the cost has now reached £9.285 billion, which almost everyone but the Secretary of State seems to see as a wildly conservative estimate. David Greenwood, the director of the Centre for Defence Studies at Aberdeen University, puts it at some £13 billion. Even the Secretary of State still sticks to an exchange rate of 1.38 dollars to the pound, when it is 1.28, so we can add on £250 million straight away, and it is now, £9.7 billion.
Viscount Trenchard: My Lords, has the noble Lord a forecast of the exchange rate over the next 18 years?
Lord Boston of Faversham: My Lords, with respect to the noble Lord, who has considerable knowledge of these matters as a former Minister in the Ministry of Defence, that is a point which has been put repeatedly from the Front Bench opposite. It is no excuse to stick to an out-of-date exchange rate when we know the up-to-date exchange rate.
At least the White Paper acknowledges the high costs of Trident. It says:
"Trident will undoubtedly cost a lot of money".
I shall refrain from saying, "It can say that again!", if only because I would rather say, "It should have said

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that before!". It goes on in another belated admission:
"money that will not therefore be available for other defence purposes".
I shall come back to that.
Before leaving costs, it is worth noting that since Trident was announced the proportion to be spent in this country has kept going down and the proportion to be spent in the United States has gone up. When it was first announced it was noted that 70 per cent. would be spent in the United Kingdom and 30 per cent. in the United States. Then the Comptroller and Auditor-General reported last year that of the total costs some 60 per cent. was expected to be incurred in the United Kingdom and some 40 per cent. in the United States. This year's White Paper says:
"we expect 55 per cent. to be spent in this country".
So it is not 70/30 in our favour, nor even 60/40, but only 55 per cent. to be spent here and 45 per cent. in the United States.
That is not all. The Government say that Trident will cost on average 3 per cent. of the defence budget and 6 per cent. of the equipment budget. But in the years of highest costs—and we are just approaching those—it will be taking 15 per cent. to 20 per cent. of total capital spending on defence. It is a pity that when the Government acknowledge that point they do not actually give those figures. On equipment in those peak years the Chief of the Defence Staff says that it will absorb not 6 per cent. but 11 per cent. of the total equipment budget. As David Greenwood said:
"the sums spent on Trident will soak up 12–15 per cent. of the money for research, development and production".
In The Times in February of this year he said that,
"it will take 15–20 per cent. of the funds available for major equipment purchases".
The former Navy Minister, Keith Speed, said that it would take 30 per cent. of the Royal Navy's equipment budget. No wonder there is such widespread concern about the wider effects of this project.
There are other weighty arguments against Trident. It has been pointed out that while the Government claim that our deterrent when equipped with Trident will remain the minimum size compatible with cost-effectiveness and credibility, there will in fact be a huge leap in destructive power from Polaris to Trident; and that what is the minimum now with Polaris will clearly be many times more than that minimum when the force is expanded with Trident.
Let us just look at the facts. At present we have four Polaris submarines, each with 16 missiles with two warheads, totalling 128 warheads. By the mid-1990s they will be replaced by four Trident submarines, each capable of carrying 16 missiles with up to 15 warheads in each, so that is up to 960 warheads, all with separate targets and greater accuracy and range than Polaris.
Of course, the Government say:
"current plans for the Trident force will not involve using the full capability of the system."
That is an odd statement in itself because, having said that we will keep things to a minimum, why build in something way above it? As the Guardian said,
"What surely is now beyond belief is that we need to leap from the ageing Polaris stand-by into one of the most extravagant systems so far developed with a potential striking power 14 times as great."
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There is an ever-growing body of expert and informed opinion against Trident and it is no wonder that Ministers do not spend more time in debates on this particular matter. In the vanguard, from the earliest days, has been the noble and gallant Lord, Lord Carver, who speaks with all the authority of a former Chief of Defence Staff. The analysis he made back in 1982, when he called for Trident's rejection, has gained strength with time. Another example of foresight was the early criticism of the noble Lord, Lord Chalfont, when he noted the Government's claim:
"provision of the new Trident force should not prevent or emasculate continued improvement in other areas of our contribution to NATO".
He then said,
"This is almost certainly what it will do".
He can now dispense with the reservation "almost certainly" for, on the Government's own admissions now, that is what is happening and he is being proved right.
We have had the call from the Government's former Navy Minister, Keith Speed, for Trident's cancellation. Another leading authority, outside Parliament this time—again not a supporter of my party; in fact he supports the party opposite—has been proved right. That is Professor Michael Howard, who said that the strategic rationale for Trident remained to him utterly obscure, that it was a waste of money and that its purchase could only be at the expense of the conventional forces we could contribute to the Alliance. That was in 1983. How right he was!
What has also been notable has been the growing concern and opposition among such a wide spectrum of responsible journals and newspapers. The concern focuses increasingly on one major point: the effect on our conventional capability, and at a time when the Supreme Allied Commander Europe is urging NATO European countries to raise the nuclear threshold in Europe by increasing their conventional forces.
That leads on to proposals for improving our conventional contribution to NATO. I will not go into those in detail now because that has been done before, and I have too quite recently. However, I hope that the Government will not again trot out their familiar and totally unconvincing claim, as indeed the Minister suggested this afternoon, that savings on Trident would not buy anything worthwhile in conventional arms. Ask any of the service chiefs and they will come rushing with briefcases full of shopping lists. Just to quote one simple example, even £3 billion would buy some 27 frigates, let alone what £9·5 billion would buy.
Anyway, there is an admirable set of proposals put forward in a book just published, Strengthening Conventional Deterrence in Europe. It is the second and updated report of the European Security Study, a distinguished group of people, including Lawrence Freedman—who, by the way, is not an opponent of Trident—and Professor Michael Howard. Also, among those who took part in the original study, and on the steering group, is the noble and gallant Lord, Lord Carver. One of its basic purposes is to strengthen NATO's conventional capability so as to enhance its overall deterrent and lessen its reliance on the early use

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of nuclear weapons should deterrence fail. It notes that a widespread consensus has emerged in the Alliance in favour of that aim.
It is a masterly, thorough and practical report with precise and specific proposals, all costed. I am not able to embrace all its proposals. For one thing, I notice it endorses the follow-on-forces-attack concept on which I have previously expressed reservations. (I hope it is the only piece of defence jargon that I shall thrust on your Lordships this afternoon). In any case, the proposals need closer study than is possible in the six days I have had them. However, there is much that appeals in it. What strikes one at once is that the costs are realistic and manageable. Spread over a 10-year period, the total comes to 22·5 billion dollars.
The report points out that the actual costs may exceed those costs if only because of inflation, but many of the proposed systems are already in production or substantially mature, so should not vary greatly from the estimates. Also, even if the real costs of the less mature systems were to double, the total for the revised programme should still be less than 30·1 billion dollars. We bear in mind that Trident will cost us, alone, £9·5 billion over a 20-year period, also subject to inflation and exchange rates, while the conventional proposals would be shared by the whole of Western Europe.
A feature of this year's White Paper we welcome is the extra information on the Merchant Navy as promised by the Secretary of State. But what is not so welcome is what has happened to the size of our merchant fleet. I realise that most of the details about the Merchant Navy come in Chapter 4 of the White Paper, which comes into the second half of our debate next week. But the role of the fleet and the strategic implications come into the early chapters, so I should like to deal with them here.
We all recall the splendid part that the Merchant Navy played in the Falklands campaign. It fulfilled its historic role of augmenting the Royal Navy in times of war and emergency, something it has done from the time of Elizabeth I and beyond. Not long ago we still had the largest merchant fleet in the world. Last year, we were down to seventh place. Your Lordships heard this month from the noble Lord, Lord Brabazon of Tara, that in March 1985 we had 758 ships with a total dead weight tonnage of 21 million tonnes in our fleet of 500 gross tonnes and over. The figures for March 1980 were 1,297 ships and 42 million deadweight tonnes. In five years the tonnage halved, the number of ships down from 1,297 to 758.
That is a tragedy. It is also a danger. No wonder the Select Committee on Defence of another place in its report, The Use of Merchant Shipping for Defence Purposes, which was published on 10th June this year, began with the words:
"The availability of merchant shipping to meet possible defence needs has become a matter of concern".
By the end of the report it was saying,
"Effective deterrence requires that no would-be aggressor is tempted by vulnerability. Present trends seem to be setting in this dangerous direction".
Its final words were that the comparison between the Allied position and that of the Warsaw Pact was
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"extremely disturbing". Beside that, the Government's defence White Paper on this aspect sounds complacent. However, it does say that if the decline in our merchant fleet continues for several more years at the present rate, it could become increasingly difficult for us to discharge at least some of our NATO obligations.
Now, I know that the Department of Transport, with the Ministry of Defence, commissioned consultants to do a major study of the availability of merchant ships. I gather that is now being studied. We hope that that will help, but it will not be enough—nowhere near enough. We need to know the causes of the decline. It is all very well for the Government to say that the causes are well known, but let them be set out and examined. After all, the merchant fleet is one of the bases of our economy. Ninety-eight per cent. by weight of our trade still travels by sea. Our capacity to take goods out and bring goods back by sea will long remain an essential need.
The Defence Select Committee said that when the consultants' report has been considered, the Government should publish a White Paper or give further evidence to it on the availability of ships for defence. But that is not enough. We need to know what, if anything, can be done about the decline; whether anything can be done to discourage British ships from flagging-out; whether flagging-in can be encouraged. The president of the General Council of British Shipping, Mr. Menzies-Wilson, said they only stay in business at all because they are among the most efficient ship operators in the world. However, he said:
"no amount of efficiency can overcome the handicap of being the only Western fleet to have suffered withdrawal of all Government support.
"So the Government should not be surprised if shipowners move their fleets to other flags or else put their money into non-shipping".
Those are harsh words from traditionally strong supporters of the party opposite. But this is not a party matter, or need not be if something is done. What is needed as a first step is a White Paper on the entire subject, defence and civil needs. We have a Defence White Paper. Let us have a Merchant Navy one.
Before turning to one final matter, let me just mention a subject to which the noble Lord, Lord Trefgarne, referred. This is a two-day debate on defence and not on disarmament. But it would be remiss of us not to mention it. The fact that the Geneva talks are on at all gives some ground for hope if as yet not too much optimism. But we must continue to exert all possible efforts to securing agreement. We must not be deflected from that. It was certainly a welcome sign that President Reagan decided to continue to observe SALT II.
My final point concerns something not in the Defence Estimates. Your Lordships will recall that a year ago the air was rent with the sound of trumpets heralding the Secretary of State's great reorganisation of the upper echelons of the Ministry of Defence—the great battle over his proposals to change the relationship between the service chiefs of staff and himself and the Chief of the Defence Staff. That was in full swing. Yet not a word appears in the White Paper. Yes, there is something on reorganisation and some welcome savings in money, but nothing about the chiefs of staff and all that.

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Not that I expected a blow by blow account of the battle within the Ministry from the Minister. But last year the Secretary of State kept us all on the edge of our seats as he went round upsetting almost everyone. He kept us all entertained and lightened our lives for a bit, or would have done if it had not been such a serious matter. So it is deeply disappointing to have nothing on it. We have heard nothing on this from the Secretary of State, neither in his White Paper nor in his speech on it in another place two weeks ago. I wonder if it could be that he did not win the battle. After all, when the Secretary of State gets his way, he usually finds a way to let us know. We can seldom accuse him of being shy, or reluctant to publicise a victory.
And what have we heard from the chiefs of staff? Nothing! That is a comfort. That is reassuring. Their silence could mean—I will not embarrass them by suggesting that it does mean—that they have had some success. But if they have not, I suspect that a way would have been found to let us know. After all, it is hard to suppress those mercifully strong-minded characters. Last November, I ventured to suggest that, thanks to some words from the Chief of the Defence Staff, the indications were that a way had been found to ensure that all would go on much as before. Now we see that the one person to say something recently is the Chief of the Defence Staff himself. In an interview last month, Field Marshal Sir Edwin Bramall said:
"I think there was some worry"—
I like the delightfully modest words that he chooses—
"that in the years ahead the individual chiefs would find themselves more distant from policy making, that they might not be quite so effective in their professional advice as they had been in the past. I think we have written in adequate safeguards"—
I shall refrain from commenting on those words. I will content myself with repeating them—
"I think we have written in adequate safeguards and I think that now the new organisation has been thoroughly accepted".
One can only ask, "Why did not the Secretary of State tell us that?" How apt it was that those well chosen words of the Chief of the Defence Staffs appeared in that most aptly named journal of Defense Diplomacy, last month.
I take it, therefore, that those adequate safeguards mean that all our service chiefs are safeguarding our security in all ways as before and that they are carrying on much as before. That will be a great blessing to us all, just as all our forces, regular and reserve, with their high and continuing record of achievement and courage, are a great blessing to us all. We join in a warm tribute to them all.
3.54 p.m.
Lord Kennet: My Lords, we endorse what has been said about the role of the armed forces in connection with the recent airliner disaster in the eastern Atlantic.
I shall spare the House a sixth speech about SDI in a period of 18 months. I must, however, take up the noble Lord, Lord Trefgarne, on his statement that there are some who maintain that the present research phase of the strategic defence initiative is against the ABM treaty. He may have met some people who maintain that, but I have not. If I may respectfully put the suggestion in the mind of the House, that may have been a bit of an Aunt Sally to cover up the fact that he
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was not answering the real objections of those who think that SDI is a bad plan.
On the defence review, we must all have been struck by the vehemence with which the Parliamentary Under-Secretary denied any possibility of there being any prospect of a defence review in public, in private, or in secret. Okay, we, here, would not have any objection if there were one. Indeed, I believe we would think it a rather good plan, particularly in connection with Trident. I hope, however, that the Government will not talk themselves into a position in which they will feel ashamed about having another defence review within x years of the last one. It is a changing world. Any self-defensive feelings about that, I submit, would be a danger to the country.
It is a great pleasure to follow the excellent speech of the noble Lord, Lord Boston, not only because it was clearly expressed but because in the opinion of the Alliance parties, it was correct in every detail. It is something that we absolutely endorse. I take personal pleasure in pronouncing the unanimity of the Opposition parties on the subjects at issue today. This depends, of course, upon the crucial fact that what the noble Lord, Lord Boston, has been saying is not in all respects concordant with the official policy of his party.
A noble Lord: My Lords, not in any respect!
Lord Kennet: My Lords, in some respects, yes. I believe that the Labour Party, as a whole, is against Trident. But what the noble Lord said about NATO is certainly not in accordance with official Labour policy. Over the years, a welcome tradition has developed in this House that the Front Bench of the Labour Opposition does not bother itself with its own party policy so much as it does with truth.
There is one thing especially to be welcomed—the noble Lord, Lord Boston, has already wisely done so—in the Defence White Paper. That is the dawning awareness of what is happening to Britain's maritime presence as a whole, civil and military. We all realise that the Prime Minister learnt at her father's knee that if you look after the pence the pounds will look after themselves. Many of us are beginning to wish that she had also learnt, perhaps at her mother's knee, that a stitch in time saves nine. The pence saved in the past are now putting too many future pounds at risk. We may be saving a few of them today but in the long run we have been losing, losing and losing in the matter of the sea.
Shipping and shipbuilding are told to be competitive. But in what way? Of course it means that they have to be economically competitive. They are told to compete with the merchant marines of countries all of which, as the noble Lord, Lord Boston, correctly pointed out, receive Government subsidies in one form or another, and to do so without Government subsidies. Apart from being the linchpins of innumerable other nationally lucrative service industries, the merchant marine, the fishing fleet and so on, are also linch-pins of national security, which justifies their discussion today. I hope very much that the new arrangements in the Ministry of Defence mean that all senior officials and senior officers and, most importantly, all Ministers, will now read their

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Gorshkov and will take his book The Sea Power of the State, 1979, with them when they talk to the Treasury and when they discuss shipping and shipbuilding, if they ever do, with other departments. They could even leave a copy at Number 10 Downing Street, open at page 109, with the passage marked in which Admiral Gorshkov says:
"The plan of Hitler's Germany to gain dominance in western Europe, chiefly by the forces of the land troops and aviation, appeared to be close to a successful conclusion. But there remained defiant England, and it was impossible to make her surrender in the absence of adequate naval forces".
Admiral Gorshkov continues by saying that the Soviet Union is now facing "a coalition of naval powers" and has to develop what are for it quite new naval capabilities. He then says, that, as well as the need to destroy the enemy, there is:
"a qualitatively new task … the curbing of his military economic potential by directly acting on his vitally important centres from the sea".
That is what we face.
The House of Commons Select Committee found, as indeed the Government themselves found in the Falklands War, that ships have to be available to be "taken up from trade" if they are to play their role in a crisis in support of the Navy, and to do so without delay. For that you need two things: first, ships and, secondly, their availability.
Let us consider the ships. The noble Lord, Lord Boston of Faversham, began to touch on this subject, but I should like to take it a little further. Looking at the register of ships, Britain has fallen from 1,600 to 690 in 10 years. Norway, a neighbouring country, has suffered rather the same fate. Norway is down from 45 million tonnes GWT to 27 million tonnes in 10 years. Greece—which has had a freak history—is up 37 million tonnes to 59 million tonnes in five years. There are many other countries moving under the Greek flag because—and let us face it—of low standards. France is very similar to us; France is down from 18 million to 14 million in 10 years. The United States—and here we have a success story—is up from 17 million to 25 million in 10 years. Let us consider the effect of all that on NATO as a whole. The NATO fleets collectively are down from 206 million to 184 million tonnes in 10 years—not, perhaps, a very catastrophic fall, but we must remember the role of Greece in that regard. The principal merchant shipping powers—Norway, Britain and, to a lesser extent, France are rocketing down.
What do we find on the other side? We find that the Soviet Union is up from 16 million tonnes in 1975 to 23 million tonnes now, and that excludes the astronomical and well-known growth of its fishing fleet and all the other disguised military capabilities which it has at sea.
The second matter for the Ministry of Defence must be the question of availability, which is now to be investigated. I am sure that the Department of Transport has studied the problems, even possibly taking the good advice which I gave it a year or two ago to consult the trade unions. God knows why, but between them the Ministry of Defence and the Department of Transport have not been able to find their own answers and have had finally to go to consultants to find out the state of affairs as regards the
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availability of ships, largely, I gather, because they do not like what the General Council of British Shipping and others have been telling them; namely, the figures which I have just given the House. They have put the matter out to consultants—a good commerical course which covers as many sins as the setting up of Royal Commissions in the past under Governments of another colour.
I should like to quote to the House the circumstances in which this consultancy report was commissioned. I am referring to the Minutes of Evidence taken before the Defence Committee of the House of Commons in December last year. The Chairman of the Committee said to Mr. Stanley, the Minister of State for Defence:
"you said in your evidence that this study was based on various assumptions as to the size of the British merchant marine. Now we are told that you are hiring consultants to forecast the availability in each category of the defence role. What has happened to your studies?"
Mr. Stanley then gave an answer to that question. The Chairman went on:
"I see. Mr. Stanley, are you telling the Committee that it took you seven months to decide that you had not got enough expertise in your own department to produce the answers.?"
Mr. Stanley replied:
"No, Mr. Chairman … The intervening months have been taken up in negotiations between consultants and the Department of Transport".
Presumably they got a good fee for that, but I do not know whether that can be published. A little later in the same session Mr. Stanley was asked:
"I am interested in knowing … your concept of 'availability'".
Mr. Stanley answered that question and was asked further:
"have you told the consultants what your requirements are, in terms of immediacy of availability"?
Mr. Stanley answered:
"We would assume that if a ship is UK registered, then we would have very ready access to it".
At that point he was interrupted by the question:
"Wherever it was?"
Mr. Stanley answered:
"No, please. We would have very ready access to it, in legislative terms".
A little later he continued:
"I do not believe the terms of reference"—
that is, the terms of reference of the consultants—
"have been couched in a form of words … which asks them to take a view as to how many [ships] are going to be available within a certain timescale".
I submit that that is prima facie evidence in advance that the study will be quite useless for any practical purpose. I do not know what "legislative availability" means. Even so, the two departments have said that they are to carry out a further study when they get the SEA, the consultancy study, in. We should be grateful if all this apparent muddle could be sorted out and also if we could be told; is that not the type of thing that departments are paid to know in the first place?
The registers themselves could be the subject of a good deal of shuffling. It may be that when the availability figures are made known they will be found to contain ships on the so-called UK dependent registers as well—that is, Hong Kong, the Cayman

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Islands, and, for instance, Vanuatu—which will make the situation look less bleak. The Hong Kong Register itself has increased fivefold in the last 10 years, and that is because it includes a lot of Chinese-owned ships. Presumably not even the most optimistic report could maintain that they would be readily available to us in time of international crisis. We also know that our own register includes a great many Norwegian ships which they would be as free to withdraw in a Norwegian time of crisis as we should be to withdraw our ships in a UK time of crisis. I think that it would be better not to massage the figures, if the Government had that in mind to do. The situation is very serious indeed, and Ministers know it.
If our shipping and shipbuilding industries vanish, not only will it have an immediate effect too obvious to be spelt out on our preparedness for a major political crisis and the possibility of war, but other industries and national capabilities will vanish with them. I am referring to engineers, designers, draughts-men, the entire maritime education industry, which is a big earner, and all the sea-related service industries of the City. Will the Government wake up to what is happening in time? Can the Government wake up to what is happening in time? Our hopes are high, our faith needs restoring.
There is another peacetime security role which the Government have consistently ignored. I am referring to the provision of a British presence at sea in places where a British absence creates a dangerous vacuum. I am referring to British fishing vessels, fishery protection vessels, and research vessels of all kinds. They are the bottom rungs of the ladder of deterrence at sea. Deterrence at sea is different from deterrence on land, as we learned at the time of the absurd Cod Wars against Iceland, when they came out against us with wooden gunboats and we had nothing smaller than frigates, with which we scarcely wished to ram them. So they were free to ram us. Small ships were lacking. We also learned a great deal about it from the withdrawal of HMS "Endurance" from the South Atlantic. The Argentine junta's reading of that withdrawal, and the actions which they took in consequence of it, should be written out in Gothic script and left on the mantelpiece of every Defence Secretary and every Foreign Secretary from now on.
Twenty years ago we had fishing fleets in the Barents Sea. Now, perhaps in part thanks to the convicted Norwegian spy, Treholt, things have been made difficult for us, and there are no British trawlers, no British fishery protection vessels, and virtually no other British maritime presence in the Barents Sea. We all remember what happened to HMS "Glasgow" when she made a rare outing beyond the usual frontier of NATO maritime activity.
In another place the Minister of State, Mr. Stanley, has sung the usual litany about the overriding importance of the central front, and of course it is of very great importance. But do we not also remember that the Russians are chess players, besides being a very strong military power, and that the central front is so obvious a place to attack that NATO has devoted most of its resources over 30 years to defending it? If one was a chess player, would one not seek an element of surprise? If one were to seek an element of surprise,
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would one not turn inevitably towards the northern and marine flanks of this country?
A few years ago I asked for some figures. They were about the number of Soviet vessels in our ports. I got the answer that it was about 1,200 in a given year. What is it now? Has it gone up? How many Soviet sailors are allowed ashore without visas on a given night? How many Soviet sailors are wandering around this country without visas? Is there any other class of Soviet citizen allowed to wander around this country without a visa? On any given night how many British sailors are wandering around the Soviet Union without visas? How many nights last year did British ships spend in Soviet ports? I am referring to merchant ships all the time. Are Aeroflot air crew allowed to wander around this country without visas? I raise these questions in, I hope, a spirit of constructive curiosity.
We are at the beginning of a new age, I hope, in defence policy, and there is time for a new age in the co-ordination of maritime policy. It is now six years since the last Conservative Government abolished the co-ordinating role in maritime policy of the Lord Privy Seal. That is left to low level ministerial co-ordination by the Department of Transport. It is co-ordination of funding which counts. There is no way to co-ordinate policy except by controlling the flow of money through the entire system; and I commend that view of things to the Government in the efforts that I hope they will shortly be making to restore even that little central co-ordination of maritime policy in the national interest which existed under the last Labour Government.
4.13 p.m.
Lord Carver: My Lords, I wish to concentrate on Chapter 2 of the Defence White Paper which is called The Western Approach—nothing to do with the western approaches—relating it at the end to the insert on pages 6 to 8 in Chapter 1 about Trident, to which the noble Lord has already referred. Defence faces the same challenge today as do industry, commerce, Government agencies, and every activity of modern society in developed countries: the high standard of living that people have come to expect, and the electronic revolution.
The former results both in the high cost of employing manpower and womanpower, whether in uniform or not, and also in falling populations of an age normally considered suitable for military service. I suppose that our predecessors in this century and the last could, no doubt, have made much the same complaint. They should have also drawn attention to the potential effect on defence of the technical revolution which was going on in their time; on the equipment the armed forces needed; and how they should be organised, which ought to be, but seldom in fact is, determined by the former.
These two factors combine to exert a tight grip on the resources the nation is prepared to devote to defence. It is clear from Chapter 5—which we are not supposed to be discussing today—that the Government acknowledge this as a significant problem, and it is made more so both by their announced intention of abandoning next year their commitment to NATO to increase defence

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expenditure by 3 per cent. per annum in real terms, and by their recent sleight-of-hand over service pay.
Although they have appeared generous in accepting the Armed Forces Review Body's recommendation of an average increase of 7 per cent., I understand that they have not relaxed the Treasury's tight-fisted grip on limiting cash to their original forecast of 3½ per cent. inflation. It is my understanding that the pay increase therefore means a reduction in other elements of the defence budget. If I am wrong, I hope that the noble Lord the Minister will correct me.
In these circumstances therefore it is as clear as daylight that the Government must clarify priorities and see that they obtain the best value for the admittedly large sums of money spent on defence. Economy in the employment of full-time manpower has obviously got to be exercised, and the implications of the electronic revolution, both to ourselves and to our allies, and to our potential opponents, must now be faced.
Let me first deal with the first. I suggest that NATO as a whole should organise its forces and resources on the general principle that what is static and what can be provided from civilian resources, both human and material, should be found, so far as is practicable, from reserves: that is, men and women and material resources which do not form part of the standing forces and their equipment. This of course is more easily applied to those countries which are themselves potential battlegrounds, and I know that most of those countries say that they are doing all they can in this field already; but I am not convinced that they are. More imagination, less conservatism, and greater political and military will and enthusiasm for that concept is needed.
Let me turn now to the electronic revolution, or what is sometimes called new or emerging technology. Over the last 100 years our armed forces have been slow to adapt themselves to the technical revolutions which have occurred: first of all, the steam age, when we were inclined to hang on to sail for too long, and to fail to appreciate the significance of railways to continental warfare; then the electrical and internal combustion engine age; slow to appreciate the influence of the submarine and the torpedo at sea, to develop radio communications, and to replace the horse by the motor vehicle; reluctant to recognise the significant effect of aircraft.
The electronic revolution is perhaps more radical and swifter in its development than any of those. It revolutionises the acquisition of information in a vast variety of forms; it affects every aspect of weapon systems, their means of delivery, their control in flight, and their effectiveness on impact, as it does all means of trying to counter them; and of course it has an immense effect on all forms of communication and on methods of interference with it or detection of it.
If NATO's forces are to be able to face those of the Soviet Union with confidence and therefore present a credible deterrent to their embarking on a military adventure, they cannot afford to fall behind in this technical race. However different the views held in this House about nuclear weapons there is, I think, little disagreement that we must maintain and, if possible, improve the capability of our conventional forces.
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The noble Lord, Lord Boston of Faversham, has already referred to the Anglo-American-German European Security Study, in which I took part, three years ago, the report of which was published two years ago under the title, Strengthening Conventional Deterrence. The noble Lord the Minister and his colleagues received copies at the time. I make no apologies to the House for reading what the Economist said in its review two years ago:
"Defence thinkers are second only to economists in squabbling among themselves. It is therefore startling when two dozen of them can agree on anything: it is doubly startling when the group includes such powerful intellects as Professor Michael Howard, General Sir Hugh Beach, Professor Lawrence Freedman, Mr. William Perry and General Andrew Goodpaster; and downright astonishing when the agreement has to do with nuclear weapons. Yet it has happened".
That report had a rather lukewarm reception in the Ministry of Defence. Paragraphs 212 to 215 of the White Paper reflect that. Some of the projects referred to in those paragraphs are in line with the report's recommendations, and I welcome the effort devoted to them. But the trouble is that the great majority of defence spending goes into weapons systems, and the men to man them, which are little more than modernised versions of what we were using 40 years ago—and that applies to all three services. There is little left over, either in terms of money or manpower to devote to new systems and radical changes. It is the same old story that has inhibited progress for the last century. Only wars have shaken us out of that attitude.
In the light of the reactions of the report that I have referred to in this country, in the United States, in Germany and NATO generally, not only to that report, but to similar suggestions emanating from other sources, including SHAPE and the Pentagon, the steering group deputed four of its members—two Americans (the two, in fact, referred to by the Economist) one German General and one British Air Chief Marshal, Sir Alasdair Steedman, assisted by an American research corporation—to review its recommendations, especially the costing, on which some doubt had been thrown. The result of that review, as the noble Lord, Lord Boston, mentioned, has been published and copies have been forwarded to the noble Lord and to practically the whole of the hierarchy of the Ministry of Defence.
Like the noble Lord, Lord Boston, I should like to draw the Minister's attention to Table VIII-4 on page 111 which is headed: "The Total Estimated Costs for Recommended NATO Conventional Improvements". These include both acquisition costs and running costs for 10 years. The cumulative total, as he says, taking the average cost estimate at 1984 prices, is 22·5 billion dollars. If you add up all the maximum estimated costs, it comes to 30·1 billion dollars. That sum would be spread over the nations contributing forces to NATO's Central Front: that is, the United States, Germany, Belgium, Holland, Luxembourg, Canada and ourselves. I am afraid that I have not been able to work out what proportion of the total would be considered appropriate either for us to man or for us to contribute, in financial terms. At the maximum, I would suggest 20 per cent. and it might well be less. Taking the worst case, that is, the 30 billion dollar total and one-fifth of that falling to us, at the current exchange rate of about 1·27 dollars to the

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pound, our contribution over 10 years would be £4·72 billion. That is about half of what the Government themselves estimate that Trident will cost.
But it should not all be considered as additional expenditure. Not only are some of the projects ones on which we are already engaged, notably stand-off missiles, airfield attack weapons and the multiple-launch rocket systems, but the introduction of the systems recommended should place a large question mark, in my opinion—and this is my opinion and not the report's opinion—over the requirement for fixed-wing aircraft in some of the roles for which they are now used. The manned aircraft, taking off from and returning to a fixed airfield, is increasingly expensive to produce and operate, increasingly vulnerable to a host of counter-measures, and in many ways less effective than unmanned systems for reconnaissance, strike and air defence. Perhaps the noble Lord would suggest to his right honourable friend the Secretary of State for Defence that he might think again about whether he really needs to develop the new European combat aircraft which is causing him and his NATO colleagues such a headache.
Nobody doubts that it is going to be a constant struggle to maintain the effectiveness of our forces within the limits of finance which this or any other administration is likely to provide. The Government have already applied two severe squeezes. The Trident programme is one, and their decision to abandon their commitment to a 3 per cent. annual increase in real terms, is the other. Either of the sums they represent would more than pay for a British contribution to the recommendations of the report to which I have referred.
My Lords, why do the Government obstinately persist in wasting money on a so-called British independent deterrent? The standard rationale is set out on pages 6 to 8 of the paper: it is what is called the second-point-of-decision argument. The paper states that that is:
"an essential element of the deterrent strategy of NATO".
In other words, that, if it did not exist, the whole panoply of the United States nuclear systems in the United States, at sea and all those based in Europe, including the aircraft and cruise missiles in this country, does not provide a credible nuclear deterrent. That is the argument. And that the Soviet Union would disregard the risk they represent and launch into a military adventure across the Iron Curtain were it not for the knowledge that the British, unlike the Americans, would be prepared to sacrifice their cities in the hope of stopping the Russian tanks.
That absurd argument is not the justification for an independent deterrent which most Ministers and others usually employ when they are being pressed about the subject. They tend to call it a weapon of last resort and to conjure up scenarios either of the Americans having abandoned Europe or of NATO having failed to hold a Soviet attack which has reached the shore of the Channel without, apparently, our ballistic missile submarines having fired off their weapons in spite of the second-point-of-decision theory and the statement on page 8 that they are,
"assigned to NATO and targetted in support of the policy and strategic concepts that have been collectively agreed".
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Our ballistic missiles submarines are not an essential element of NATO's strategy. Whether they are regarded as an addition to the force assigned to the Supreme Allied Commander Europe or as an independent force, they are superfluous and a waste of money. The essential element is the stationing of United States conventional land and air forces on the Continent; and, in order to persuade the American people that it is right, proper and in their own interests that they should continue to make that vital contribution to European defence, it is essential that we and our fellow-European members of NATO should convince them that we are using our money and manpower effectively to maintain, and if possible to improve, the capability of our conventional forces to fight alongside them. That, my Lords, is the first priority of our defence policy, not illusions of nuclear grandeur.
4.27 p.m.
Viscount Eccles: My Lords, I have first to apologise to my noble Leader that tonight I have to attend an annual dinner, the date of which was fixed a long time ago. I do not intend to follow those who are really expert in weapon systems; but if we are to have the best chance of preventing a war with Russia, our strategy must embrace assets beyond weapons and armed forces. That is acknowledged in a very few words in paragraph 217 of Part I of the Defence White Paper. An important part of policy must be to increase the number of allies and benevolent neutrals seen to be on our side before an aggressor has made up his mind to take the plunge.
Winning friends outside the NATO Alliance, individuals as well as governments, including the Communist bloc, is an aspect of non-military defence that is bound to become more and more important as the world gets smaller and smaller and every continent almost is within range of the other. I remember 30-odd years ago a discussion in Churchill's last Government in cabinet when we were to decide whether or not to abandon one of our overseas military bases. The case was put by the Minister of Defence, the late Lord Alexander of Tunis. Sir Winston listened to the argument in silence. Then he said—and his words impressed me so much that I well remember them: "A base is a place from which to sally forth to fight the enemy. What good is it if the natives round about don't like us and won't help us if it comes to a war?" That is the sound judgment of a great man of common sense.
How important is it in 1985 that as many people as possible all over the world should like the Americans and their allies? How much in fact do they like us? It would make a very great difference to their attitude if we were explaining to them more often, more skilfully and less one-sidedly the objectives for which we are prepared to fight rather than surrender to the communists. I hope to show your Lordships that these explanations have to go beyond telling other people what good fellows we are. If it is strategically important to have their friendship, what we say to them must take account of their views as well as our own. It is not enough for the propaganda to repeat over and over again that the United States is much richer than they are and that we in the United Kingdom are remarkably tolerant. Non-military defence requires a continuing discussion on fundamental issues.

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Very well, then. What are our instruments for this kind of dialogue? We British have our missions abroad. Some of them are very good. We have the British Council and the BBC overseas broadcasts; and of course the way our citizens behave when they are abroad is also important. The United States has much larger missions and it has the "Voice of America". Just recently a new, round-the-clock programme is being broadcast from Miami to Cuba in Spanish. It is going to be highly interesting from the point of view of the strategy of the Caribbean to see how that programme develops and what results from it. Perhaps it is true—it is very often said—that in this kind of international conversation the Americans have more money and less skill than we have, while we have more skill and less money than they have. If that is true, and I think probably it is, that is a very good reason for putting our heads together and working in this field for a common end.
Be that as it may, all these instruments of communication are potentially very powerful. Are we satisfied that the resources devoted to them are adequate to achieve the results that our defence policy should require? Is the balance right within this enormous expenditure on defence? I do not think it is and I hope I can convince your Lordships that you should agree with me.
Our worldwide information services could be improved in several ways. We start with the enormous advantage of the English language. The men in the control tower at Beirut Airport spoke to the captain of the TWA aircraft in English. There was no chance of their understanding each other in any other language. But how can we speak to all the other terrorists and all those who instigated the act of terrorism, when probably not more than one in a thousand knows a word of our language?
Therefore I think that part of our defence policy must be to spread the use of English. Our language is the entrance ticket to the appreciation of what our global strategy is all about. English, as the only possible world language, places upon all the English-speaking peoples a duty not only to keep the language as pure as we can—and we are not doing much about that—but to exploit the strategic importance of being able to talk to neutrals and would-be opponents far more widely than we are doing at present. We have at our disposal the only effective medium of world communication. What is the message that should be communicated?
Of course it is a huge benefit to have, as the BBC has, the foremost reputation for telling the truth. Governments spread awful lies, distorting or suppressing the facts, with the result that half the world now turns to the BBC in the hope of learning a bit of the truth. These services should be steadily expanded as part of our defence, both in English and in other languages—and that in co-operation with the Americans. It does not make sense to be the ally of the United States in military preparations and then not concert with them in winning benevolent neutrals. I could give your Lordships some nasty examples of where we have been saying quite different things to the same overseas country.
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There is something more to communicate than news and an accurate account of current events. "Communicate" is not the right word: what I should have said is that there is something more we ought to discuss with anyone anywhere in the world who will listen. We have to persuade these people to prefer us as partners, rather than the communists, in shaping the future. That means listening to them as well as talking to them. They have their own religions; they have their own cultures; they have their own ambitions; and their political and spiritual resources may be as important to our future as our military strength is now to them.
So I would conclude these few words by saying very definitely that there is a gap in our defence strategy. We are missing an opportunity to make it less likely that a war will occur and more certain that, if it did, we would win. I come back to Sir Winston Churchill's summing-up at that Cabinet discussion: how much use are weapons and fortifications if the natives do not like us?
4.37 p.m.
Lord Shinwell: My Lords, if I fail to follow the noble Viscount, Lord Eccles, in his submissions about defence strategy, it is not because I reject any word he uttered in that connection: it is because although I have no standing engagement for dinner or anything else tonight, physical deterioration makes trouble for me as the day wears on and I may have to leave before the end. I apologise. However, as I have been interested in defence matters for many years—even as far back as the Boer War, the First World War and the Second World War—and in all the turbulent affairs in which we have been compelled to indulge, I thought that I might make a contribution.
The first thing I do is to direct attention to the fact—and it is a fact—that we are not asked to approve the White Paper: we are only asked to take note of it. That raises a question in my mind. Are there doubts in the minds of those associated with the Minister of Defence as to whether all that appears in this White Paper is accurate, desirable, and should have been publicised? I ask the question. On the other hand, I accept the interpretation, because if we are not asked to approve the White Paper then at least we can indulge in some investigation of its contents and engage in what might be regarded as a defence study. In this statement on strategy we proceed on certain assumptions, to which I direct your Lordships' attention. For many years, the Soviet Union constituted a threat to the democratic sentiments and liberties of the West—the United Kingdom, the United States of America and many of our allies. That threat continues, and, in consequence, because they have built up a formidable military organisation such as has never existed before, we have been compelled to follow suit and have created a military organisation which is far greater and, I believe, more effective than anything that we have ever produced before. The question must then arise: for what purpose?
As I have just mentioned, there is an assumption contained in the White Paper which will be realised at some time or other—perhaps not before the next century, though it could take place within the next few weeks—who can tell? There is a great deal of uncertainty about the intentions of the Soviet Union.

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At any rate we must be cautious, we must be prudent, and we must keep a note of their activities. In particular, we must take note of their victories. Especially, I direct your Lordships' attention to the remarkable victory that they gained at the end of the last war when they succeeded in dividing Germany. They have continued to weaken it in the hope of destroying their hereditary enemies, who are now Federal Germany. Moreover, they turned Czechoslovakia, Hungary and other countries into satellites and then proceeded to invade Afghanistan, where they have been operating for four or five years but have still failed to achieve success.
We must ask ourselves the question: what are the intentions of the Soviet Union? Are they, as many suppose—there may be some objection to this view—at some time to launch an attack on the West with everything they have in their possession, in order to make it impossible for us to continue or to destroy us? On the other hand, do they have intentions to proceed as they have done in Germany, Hungary and now Afghanistan, and to create in many parts of the world additions to the communist society? Is that their main objective? Is that what they are after? And are we certain that we are the target?
When all is said and done, what are they likely to gain? It would be of no advantage to them at all to destroy the united nations in the West, the strength of the United Kingdom and the trading and financial activities and strength of the United States of America. They are not intent on a scorched earth policy. That is not their aim. They are seeking, as they have sought since 1917, to create a communist world, and that will not be achieved by destroying Europe and the West or other parts of the world. We should direct our attention to watching their efforts. We must regard them as a threat to this country in the long run and we must therefore have a defensive strategy of the most formidable character. That we have, but it has shortcomings.
If I had been asked to express an opinion about the publication of this White Paper, I should have said without hesitation, "Don't publish", because it not only contains some strengths but also admits many weaknesses. It refers to our maritime weakness, to which attention has already been directed and which has been mentioned many times in your Lordships' House by myself and by other colleagues. It also refers to the fact that Trident is not the last word. It is very expensive and, as the noble and gallant Lord, Lord Carver, said, it may be of no value in any event, whether it is used for NATO or in other connections.
But if you start with Trident, then the scientists, the technocrats and the military experts will decide that we must go further, as the United States are now doing. They are talking about space satellites, and heaven knows where they want to go. The scientists never stop, though of course we must give them all the credit they deserve, because they are seeking discoveries which are important to society in all parts of the world. I would say let us be very careful about our assumptions; let us build up our defence, but let us be careful to look round the world and take note of what is happening elsewhere.
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If I may interrupt my remarks at this stage, I will ask a further question. If the Soviet Union are attacking Afghanistan, is it for Afghanistan alone or do they have their eye on Pakistan, and on India, where there is a great deal of turbulence, mischief-making and difference of opinion? Do they want to control some parts of India, as we controlled India in the past, for a wrong purpose? After all, we can hardly raise any objection. We had our period in India and the Russians will say that they also want their period in India. Afghanistan would be a way out or a way in, however you look at it. That is the situation.
I come now to the question which we ought to be discussing, which is this study of defence strategy. I note that my noble colleague Lord Boston admitted that there were shortcomings, and that is apparently the official view of the Labour Party. Of course there are shortcomings. There are bound to be shortcomings. When you embark on defence measures, there are gains but there are also weaknesses and very often losses, and that is happening at the present time. All the money that is spent now will lead to a need for more money in the long run, as indeed the noble Lord ventured to suggest. It never stops, and because of our economic and financial position, I doubt very much whether we can afford it. Therefore we must exercise great care.
I come now to the question: do we need any defence at all? I say this without hesitation: I have 100 per cent. support for the Government's defence policy, apart from some criticisms in which one may indulge. We must have a formidable measure of defence; the greatest strength we can create. It may be necessary some day and it may prove to be the deterrent that many of us have thought it wise to produce. Whether that deterrent will be effective enough in the long run is difficult to say, as indeed the noble and gallant Lord, Lord Carver, seemed to indicate, as have other colleagues. Nevertheless, we must have it. So, as regards the Government's policy of defence, whether there are shortcomings, whether there is too much expenditure and whether we can afford it, the fact remains that with the Soviet threat throughout the world we must continue with our defence measures. Whether we have the right strategy is another matter and to that I come in a sentence or two.
You cannot indulge in strategy until the battle begins. The late Field Marshal Montgomery found that in the deserts of Africa. When he was asked to take charge, what did he ask for? Did he ask for documents about strategy? Not at all. He said, "Give me masses of manpower, give me the most modern weapons and masses of them, and I will deal with the situation." Without the masses of men and modern weapons for which he asked, and with which we provided him, he never would have succeeded as he did in that part of the battleground.
All the military experts—I do not care where they are, whether in your Lordships' House, in the defence departments or in the Cabinet—and all those in the past, all the Field Marshal Hardings of the past (some of them still alive, I am glad to say, and thriving) have rendered great service to our country. But when it comes to strategy, it is only when you are facing the enemy that you can determine the right kind of strategy that is required in order to gain victory or, at

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least, to avoid defeat. That has been found in the past, and it may have to he found in the future.
I have a right to speak about the subject because about seven or eight years ago, as a result of a visit to NATO with a few colleagues, which was in an almost infantile condition at that time, not very effective and not very strong, I ventured to suggest that in your Lordships' House we ought to have a study of defence. We created the Defence Study Committee, which has been thriving for seven years or so, chaired by our noble friend Lord Chalfont. I venture to suggest that that committee has done excellent work. All we can do—we are doing it today, and we should do it when we are dealing with the next sector of the defence documents—is to engage in a study, but we cannot determine what the strategy will be. We can decide whether we can afford the money or whether we should stop somewhere and create a new situation, such as in the shipbuilding industry of the country.
By the way, when we talk about producing more vessels to create a more effective maritime situation—I advocate that myself; I have done so in the past and will continue to do so—we have to ask ourselves the question: how will they be used? In the last war we used them in the convoy system, which was useless because they did not have the speed to elude the submarines. If that is the intention, they will not be of very much value in the future. But we must have masses of vessels in order to convey our stores and our manpower from one part of the battleground to the other. We need those vessels, apart from the need to employ vast numbers of men who will be only too glad to gain the opportunity of working in their industry again. But we must be very careful about it.
So I conclude on this note. A study, yes: a strategy within the limits of our capacity, our knowledge, the information in our possession and the advice that we receive from those more expert that we can expect to be, yes, of course. Some sections in the country, the peace movements and all the rest of them, have expressed criticism. I do not doubt their integrity and honesty for a moment. I can understand their sentiments. But in the situation as it presents itself to us, with the Russian threat which, as I have said, has continued for a long time and may continue for many years to come, we must ignore these peace movements. Despite the sentiment involved and the objectives in the minds of those behind the people who prefer peace rather than see the country engaged in another conflict, we have to proceed with our defence measures.
That should be the policy, not only of the Government but of the Labour Party; and, indeed, it is the policy of the Labour Party. When we have been accused of faltering on the subject of defence, it has been because some of our members have been regarded as militant. They have been anything but militant. They want peace. I cannot understand anybody being militant who wants peace. He should he only too glad to attack the enemy where there is a chance, provided he is satisfied that he is attacking the right enemy.
So, accepting the facts as they are, we accept this document as a note and we shall accept the next document as a note. There will be further reviews for many years to come. Better the reviews, better the talk
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and better the negotiations, though I do not expect much from the negotiations. But proceed with them, in the hope that we shall be able to prevent another great conflict.
4.57 p.m.
Lord Reay: My Lords, I should like to start by congratulating the Government on the excellent presentation of their Statement on the Defence Estimates. It seems to be well laid out, lucidly argued and illustrated and admirably open and fair in its presentation of the military facts, or what is known of the facts. The White Paper, notably in Annex A, displays the relentless build-up of Soviet Russia's conventional and theatre nuclear forces in Europe and the astonishing growth of her submarine and surface fleet; and indeed, as the noble Lord, Lord Kennet, was so right to point out, of her merchant shipping fleet as well. It shows the bewildering succession of new types of intercontinental missiles which she has introduced, and which have succeeded in making vulnerable the United States land-based nuclear retaliatory capacity.
This momentum will be hard for anyone to stop and, on the face of it, the West has to take very good care to repair or prevent any weakness or potential weakness, military or political, which exists or which could develop in the alliance, lest one day the West's inferiority in military strength or political resolution, or its perception as such by the Soviet Union, might provide an irresistible provocation for Soviet aggression.
It is unfortunate, but unquestionable, that the strategic defence initiative could provide a divisive issue for the alliance. I was in Washington last week on a Western European Union parliamentary delegation and I returned convinced that Europe generally does not appreciate the degree of attachment that the Americans have for the concept of SDI. In the first place, the American public is, naturally enough, attracted to the idea of receiving protection from nuclear attack; indeed, the majority of Americans had probably not fully grasped the fact that they are now unprotected. Secondly, the defence stategist would like to see protection given—and, hence credibility restored—to the now vulnerable land-based nuclear retaliatory capacity. Thirdly, I think that the whole challenge is appealing to the United States and will be embraced in rather the same way as the space programme was embraced when launched by President Kennedy; and, incidentally, like that programme, launched in response to an initial Soviet lead.
It is true that a full space-based or partially space-based defensive system, which is what would be required to protect populations, is some way away. No one can say now with certainty that it will prove practicable. However, land-based defensive systems capable of protecting military targets are a much more feasible proposition and much closer in time.
In the face of this American commitment and its probable developments, how should Europe react? In the first place, Europeans must remember that on this issue, unlike on the issues of the cruise missile or the neutron bomb, which needed to be stationed on European soil, European co-operation is not required. The Americans will proceed or will be able to proceed

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whatever the Europeans say. But if Europe dissociates herself, at whatever stage, from SDI, the Americans will likely say, "Very well, you go your way. We'll go ours". They will not then develop a defensive shield to cover Europe, if it proves possible to create such a shield. They will also in those circumstances be more likely to withdraw their troops from Europe, rather than less likely, for they will hardly choose to leave troops to defend a Europe which is perceived as having refused to allow some of the means for those troops themselves to be defended.
On the positive side, European Governments should also start to consider what uses there might be for them in elements of SDI. Apart from the more distant prospect of population protection, which presumably would be as attractive for European populations as for the American population, the land-based defence of missiles, airfields, submarine bases, command and communications posts, including those on which our own submarine-launched missiles will be dependent, would enhance the deterrent value of our military retaliatory capacity, whether nuclear or conventional.
In some circles it is even thought that it may prove easier to develop a system against short-range missiles than against long-range missiles. The argument in favour of Trident would not be affected. For the reasons stated in the White Paper, it would still be desirable for the United Kingdom to have its own deterrent—its credibility possibly enhanced by a measure of SDI—and to have in Trident the best deterrent available.
The point is that I think the United States and the Soviet Union are going to move towards strategic defence, a strategic situation in which defence plays a part, perhaps a predominant part, either by negotiation or independently in parallel. If that is so, Europe should take care to make the best of it, and above all not give the impression that we consider that our security requires the United States to remain vulnerable. This is something that we need to keep very firmly in mind whatever superficially attractive proposals the Soviet Union may announce to the world at large while engaged in talks with the United States in Geneva.
Another issue of importance for the alliance is the need for Europe to make a greater effort in conventional defence. The great American defence effort of the past five years has exposed Europe for some time to come to the risk of an American reaction, based on the feeling that Europe is not contributing enough to its own defence. I am pleased therefore that the decisions have been taken to allocate increased finance for infrastructure—in particular for the hardening of aircraft shelters—and for increasing ammunition stocks.
Another means by which the Europeans could do more to improve their conventional contribution is through a greater degree of co-operation in arms procurement and manufacture. This is a field in which great duplication of effort takes place and in which, accordingly, both financial savings and greater efficiency, as a result of standardisation and interoperability, could be achieved. It may also in the long run provide the only way of preserving an independent European defence industry. But the
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difficulties in the way of breaking down the standard pattern of six or seven independent national governments contracting out to their own defence industries are of course formidable. It must be particularly difficult to increase international co-operation while at the same time trying to preserve the principle of competition among contractors. I know the importance that the Government give to this area.
Accordingly, I should like to ask them—I have given notice of my intention to ask this question—what progress from this point of view has been made in three fields: first, in the development of the European fighter, where there have been difficult negotiations; secondly, with regard to a battle tank for the future, where I understand the French, the Germans and the British are all conducting their independent lines of research; and, thirdly, on the almost unbelievable situation where there is no agreed NATO system of aircraft identification, with the result that in the event of hostilities it is likely that NATO itself would shoot down most of its own aircraft.
The last issue I should like to take up is one which I have introduced before into debate in your Lordships' House—the question of a ban on chemical weapons. Here I think the Government labour under an illusion. The White Paper states that progress has been made towards reaching an agreed ban on the production and use of chemical weapons. I do not believe this to be the case. I do not believe that the Soviet Union has any incentive to alter the present situation in which it holds, to all practical purposes, a monopoly on the manufacture and deployment of chemical weapons. Why should it agree to a ban for itself when it enjoys all the advantages of a ban applying only to its opponents?
The concessions offered by the Soviet Union recently after 15 years of negotiations have, I believe, been made simply to prevent the West abandoning hope of an eventual agreement. The White Paper states that the Soviet Union has accepted the principle of on-site inspection of the destruction of chemical weapons stockpiles. The Soviet Union in fact has accepted the principle of on-site inspection of the destruction of its own declared stockpiles of chemical weapons. It has refused to accept the right of any other country to challenge what it declares to be its own stockpiles. It also refuses the right of inspection of manufacturing facilities.
But even if the Soviet Union was to make further concessions I do not think that a verifiable ban is attainable, since I do not think that verification is possible. It would require an almost inconceivable degree of constant access to possible manufacturing facilities throughout the world. Therefore the only way to prevent the use of chemical weapons in the event of war is by deterrence. At the moment the situation is very dangerous. On the one hand, as the White Paper says, the Soviet Union,
"has retained, and continues to develop a massive chemical warfare capability".
On the other hand, NATO possesses no credible deterrent of its own.
In the event of a conventional attack, therefore, NATO has to assume that chemicals would be used against its forces. It is particularly likely that they

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would be used against points of congestion, airfields, bridges, supply ports and so on. The need to take protective measures against this possibility will severely degrade NATO troops' fighting capacity. The Warsaw Pact forces, on the other hand, need currently suffer from no such comparable disadvantage. There is perhaps no other single factor which would be more likely to force an early use of nuclear weapons to defend against a conventional attack as this imbalance in chemical warfare capacity.
The importance of this issue at the current time is enhanced by the fact that Congress seems to be in the process of voting funds for the production of binary chemical weapons in the United States—the first time the United States will have manufactured chemical weapons in 16 years. Yet those weapons will be useless unless Europe is prepared to receive them. Once America has overcome its own emotional inhibitions and manufactured them, it would do little good to the state of the alliance if, in the face of Europe's obvious self-interest in possessing that deterrent, Europe nevertheless was politically too inhibited to accept chemical weapons on its soil.
The House of Representatives has attached two conditions to its favourable vote: first, that NATO formally endorses the need for modernisation of its chemical stocks, and secondly, that the stocks can be stored on the territory of European members of the alliance. Whether these conditions remain, after both Houses of Congress have met in conference, we shall have to wait to see. But already the Soviet Union, naturally enough, has reacted in a hostile manner. In the Bundestag there were immediate moves to try to push the Federal Government into declaring that in no circumstances would that country permit any further storing of American chemicals on its soil.
Her Majesty's Government should act quickly to try to ensure that Europe plays at least this very minimal role in co-operating with the United States in the interest of Europe's own security. Given the inhibitions felt in other European countries—for example, Denmark, Norway, Germany and Italy have all renounced the right to use chemical weapons even in retaliation, and Norway and Denmark already prohibit storage of chemical weapons on their soil—it really falls on the Government of this country to rally what European support can be rallied on this question.
In conclusion, let me say this. In our time, no task is more important for all of us who wish for the survival of demoracy in Western Europe than the maintenance of the cohesion of the relationship between Western Europe and the United States. In the years ahead this task will require vigilance, courage, sensitivity and endurance. For its own security, Europe is asking the United States to make big efforts and run great risks. In return, we should give them what they above all want of us. And what they want of us, I believe, is support in what they conceive as the task they have taken on of defending the free world against the encroachments of the Soviet military empire.
The support need not always be material; very often it is only political or moral support that is required. But the United States want an acceptance by us of some share of the responsibility they have
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assumed—whether it is in challenging the Soviet Union over treaty violations (where they feel we tend to wash our hands, even while at the same time we call for new treaties on arms control, and so forth), or whether it concerns activities to protect Western interests outside the NATO area (which they feel are our interests as much as theirs), or whether it is a question of research into new technologies necessitated by a developing Soviet lead in those technologies, as was the case with SDI.
Europe needs to shed itself of a tendency towards irresponsibility, whereby we leave all action to the United States and ourselves claim only the right to judge and to criticise. If we can avoid that course, then perhaps, with good fortune, we can help to secure that peace in Europe which we have now enjoyed, although not without anxiety in recent years, for four decades, for our children and our children's children.
5.15 p.m.
Lord Gladwyn: My Lords, our considered view—and here I speak for the Liberal Party—will be expressed later in this debate by our defence spokesman, my noble friend Lord Mayhew. Beyond saying, then, that I agree with every word of the splendid speech which we have just heard from the noble and gallant Lord, Lord Carver, I will chiefly confine myself to a few remarks on star wars—a subject on which I have recently been corresponding at considerable length with the noble Baroness, Lady Young. I rather hope that the noble Viscount the Leader of the House, who I believe is to wind up this debate, will not be surprised by what I have to say; I do not know whether or not he has read that correspondence; but it appears not. Anyhow, the correspondence exists and if the noble Viscount has not read it, then perhaps he will do so at some stage in the near future.
The noble Lord, Lord Reay, will equally not be surprised to hear that on the subject of star wars I disagree totally with what he had to say, though on other matters as regards defence, I thought that the noble Lord was very sensible. In any case, as I see it, star wars is a great matter on which, above all matters, the European members of the North Atlantic alliance ought to speak with one voice. This, if only because of the fact that if by any chance the Americans are successful by the turn of the century or earlier in making themselves immune, or nearly immune, from nuclear bombardment by the Soviet Union, it is almost impossible to imagine (and here I think that the bulk of scientists are on my side) that the Americans could at the same time devise means for extending such immunity to their European colleagues, who would hence remain exposed to nuclear attack from the East by methods not susceptible to interception by lasers or direct energy weapons based on huge platforms in space.
It is also true I think that most informed scientists regard the whole project of star wars as a vast and destabilising waste of money, being incapable of realisation even by the year 2000. But, along with the Russians, we cannot ignore American assurances that star wars may be established well before then. If it is so established, then so much the worse for Europe. That is something upon which the European members of

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the alliance should, I suggest, now speak out loud and clear.
There is another and equally important, and certainly more immediate, reason why the Europeans should unite in frankly condemning this scheme—at least as it is currently formulated and not simply used as a bargaining counter, which is, after all, a possibility. If star wars goes ahead as now proposed—and that depends largely on whether Congress votes the money for it—there is no doubt that the Russians will, over the years, necessarily feel obliged to take some sort of counter measures, which would presumably imply the end of the negotiations for arms limitations now going on in Geneva. There is scarcely any doubt about that. For if the Russians have any regard for their own security, they must do their best to avoid being placed at the mercy of their great adversary, if only in a quarter of a century's time. Accordingly, we shall be faced with the likelihood of an uncontrolled and insensate arms race, the end of which cannot be foreseen and which cannot be other than highly dangerous for all of us.
The proponents of star wars will of course ask at this point, "What if the Russians have their own SDI projects and are even now themselves preparing to set up great platforms in space or otherwise to achieve a position of nuclear superiority? What of that?" For some time there have been mysterious references emanating, I believe, exclusively from United States sources, to experiments with lasers and directed energy. Much emphasis is in any case placed on Russian efforts to establish an effective ABM system around Moscow. I therefore ask the Government —and this is my main question—what actual concrete evidence is there that the Soviet Government are at work now on any space-based system? The development of an ABM system round Moscow is neither here nor there, because it is essentially a land-based system and one which is specifically authorised by the famous treaty of 1973. In any case, simple experiments with lasers and directed energy can hardly be seen in themselves as proof of work on a star wars system, since such experiments can be perfectly consonant with the preparation of weapons of an entirely different sort.
As I see it, the only hard evidence there is that the Soviet Government are possibly at work on a space-based system lies in the erection what is called a "phased array radar" station at Krasnoyarsk, in Siberia. The Russians say that it is simply designed to track satellites but the Americans may be right in suggesting that it violates the treaty of 1973. Here, the only solution seems to lie in Soviet agreement to its inspection by Western experts. I believe I am right in saying that this possibility has not been dismissed by the Soviet ambassador in Washington, Dobrynin. Perhaps such a concession might be traded against a considerable reduction in United States expenditure on research on the SDI. Why not? In return, obviously, the Soviets should also be ready to accept a notable reduction in the number of their land-based strategic nuclear missiles. That is the sort of arrangement which ought to be negotiated in Geneva.
To sum up an argument which can only with difficulty be compressed into a speech of a few minutes
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my suggestion is that the European allies should, if possible, express a joint view on the kind of agreement which they should like to see achieved on star wars at Geneva. In no circumstances should they be tempted by what in any case might be severely circumscribed offers to participate in a research programme now contemplated by the United States Administration. Of course we must preserve the alliance, on the continued existence of which, I entirely agree with the noble Lord, Lord Reay, our whole future depends. But that need not—and should not—prevent us, along with a large section of informed American opinion, from telling our great ally that pressing ahead with star wars, irrespective of what the Russians may say or do, might very well be the one action calculated to undermine the alliance on which we all depend. It will be interesting to hear whether the Government spokesman can at least make out a brief case for any rejection of this general thesis.
I end with one other question on a totally different subject but which I believe is relevant to our defence in general. Have the Government by any chance read a pamphlet which has just appeared called The Defence of the United Kingdom base in War? This has been issued by a group called "Defence Begins at Home" headed by the noble and gallant Lord, Lord Hill-Norton. The case for the institution of a voluntary and part-time body to act alongside territorial detachments for the protection of a vast number of key points likely to be attacked in the event of war by specialist saboteurs trained in the Soviet Union strikes me as impressive. As I see it, such a force of at least 100,000, at only about 100 per year per person plus capital expenditure over five years of only 17 million, is not only financially tolerable but is likely also to be popular in all our towns and villages.
I urge the Government not to dismiss this proposal out of hand. A non-nuclear war is entirely possible and there is much evidence that the Soviet Government are already training men to act as professional saboteurs behind the lines in such an emergency. Again, I ask the Government to pay real attention to what I think is a highly intelligent proposal by the group.
5.25 p.m.
Lord Zuckerman: My Lords, I should like to focus my contribution to the debate today on an observation made by the noble Lord, Lord Trefgarne, in his opening speech about the desirability of a two-way exchange given that we co-operate with the United States in the SDI programme. Yesterday, the main editorial in The Times began by telling us that the purpose of the present trip to Western Europe by Vice-President Bush is to explain about the nature of SDI. It went on to say:
"He must allay fears about a possible future brain-drain".
In a debate on 14th June in another place, the Secretary of State for Education and Science referred to the fact that,
"it may in future become more difficult to borrow technology developed overseas because the increasing awareness of scientists and industry the world over of the commercial potential of research seems likely to inhibit the free circulation".

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He went on to say:
"I view with some concern reports that increasing numbers of our brightest scientists are leaving this country, perhaps for good, to take up research appointments overseas … The impression is that the loss of our brightest scientists is not being balanced either by the return of British scientists or by immigration into Britain of overseas scientists".
He concluded that section of his speech with the statement:
"In other words, there is a net brain drain".—[Official Report, Commons, 14/6/85; col. 1135.]
I was interested in that fact because many years ago I was concerned in a report which was prepared for the Government by Dr. F. E. Jones, a Fellow of the Royal Society and then a research scientist at Mullards. He conducted an inquiry into the nature of the brain drain and he concluded that a significant number of scientists and engineers who had been trained in our universities and colleges of advanced technology were seeking employment overseas because prospects were better there. I have not had time to refer back to the actual report—I am speaking from memory—but I managed to obtain today some figures from the American sources for the period. They are extremely interesting and very important for the future.
What it adds up to is that in the seven years 1957–64—which is when we were having our first major discussions on anti-ballistic missiles and also when the Apollo programme was being launched—40,000 professional scientists and engineers entered the United States and took up permanent employment. During that period this country contributed a total of 6,000–15 per cent. Admittedly, these figures relate to a period of nearly 20 years ago, but I think it represents a marker because the report we had previously on the brain drain was unable to obtain exact figures. I know that the advisory board for the research councils, to which the Secretary of State for Education and Science referred in the debate in the other place two weeks ago, is having difficulty now in providing hard information to back up the statement which he made then.
I was interested in the fact that the Secretary of State was talking about the brightest scientists and it suddenly occurred to me to ask: who are the brightest scientists? I confess I found it extremely difficult to find a good definition, and for want of a better source I decided to refer to the Royal Society, assuming of course (and it is not an infallible test), that those who become fellows belong to the community of the brightest.
I had noted for some time that among candidates elected to the Royal Society there was an increasing number of British passport holders who were working abroad. I got in touch with the librarian, who did some research for me yesterday and who is continuing the research. He limited his inquiry to the past 10 years—a period in which the society has elected 40 new fellows a year, which is more than twice the number elected at the time when I became a fellow. While the statistics are still obviously inadequate, it turned out that in the first five years of this recent period 14 of the 200 fellows elected were working in the United States —about 7·5 per cent. But in the last five years the proportion has doubled.
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I make these two observations—the American information about where the people have come from and the figure which I managed to get hold of—merely to give an indication of the numbers of British passport holders who have been trained in this country, many of them well beyond first degree course ("post-docs" as they are now called), at very great expense, who are now in the United States. I hope that this will be followed up.
This brings me to the question to which the noble Lord, Lord Trefgarne, drew attention. I should like to know what substance there is to the fear that there might be another brain drain. Recruiting sergeants from the United States are already around. I think we all know that, and I have met one. They have been approaching individuals and firms in this country to encourage people to participate in the SDI research programme. Obviously the fear is that there might be another brain drain. That was the point made in the editorial in The Times yesterday.
In addition to the general job opportunities that lead men who have been educated here to seek employment in the United States, there was the particular attraction in the 1960s of the Apollo—the man-on-the-moon—programme. That programme differs from SDI research because the scientific work which NASA encouraged then was open work. It was unclassified. We all shared in the benefits. I knew several of the British nationals—and I know them still—who were working on that programme.
On the other hand—and I hope that the noble Lord, Lord Trefgarne, will take this on board—the work which will be done under the SDI programme is almost bound to be classified—not all, but certainly the major part of it. The question then is: what about that two-way exchange? Whatever form in which we co-operate, we may not necessarily have free use of either the intellectual or the industrial property rights which derive from any work in which we might co-operate.
Furthermore, I believe that if our lawyers were to look closely at the full ABM treaty they would discover that there are constraints on the passage of information between the two parties which concluded that treaty and any third party. That is another point to which I think attention should be paid. Attention is certainly being paid to it in the United States, and it is a matter on which the USSR has differed publicly in its legal interpretation of what can and cannot be done under the treaty.
The noble and gallant Lord, Lord Carver, spoke about the shortage of resources that affects some of our own defence problems or our defence problems within the context of NATO. I think that your Lordships should know that there are serious shortages now in the recruitment to some of our critical establishments. The number of first degree science and engineering graduates that we are turning out is something like 35,000 a year. They will be needed here, with the help of judicially directed investment, if British industry is to adapt to the new technological age, to which the noble and gallant Lord referred, and so contribute to the improvement of the national economy. I therefore hope that the statistics to which the Secretary of State for Education and Science is looking forward at the

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end of August, I think, will be there and that a real effort will be made by combing not just our own sources of information but also American sources about the number of people who are going over there.
Anyhow, much of the SDI programme and what is being pursued in the USSR was going on long before President Reagan coined the umbrella term, strategic defence initiative. Many of the items in the programme, all of which have been laid out in a report to Congress, are old items. I can well imagine that related work is also going on in our own Government establishments. When I say that President Reagan coined a term which covered old work, he was not the first Amercan President to express the wish that nuclear weapons should be eradicated from the world. I believe that if one looks at the record one will find that every President bar President Truman has given that promise or expressed that wish.
The real point is that we know that the United States recruiting sergeants, if I may call them that, are interested in specific fields of inquiry which are being pursued in some of our universities, in West Germany and in France. There are questions there which need to be asked.
If participation therefore means the encouragement of such work as we might do without restriction on the use of intellectual and industrial property rights, well and good. But if the amount of good is to be counterbalanced by a brain drain of some of our brightest and best potential intellectual property, it will not be to our benefit, any more than I believe that strategically the whole concept of SDI, in so far as it might prove destabilising to our present state of mutual deterrence, in which I have full confidence, will be in the interests of our national security.
5.38 p.m.
Lord Stewart of Fulham: My Lords, I was interested to hear the noble Lord, Lord Zuckerman, say that he had complete confidence in our present system of mutual deterrence. That was one of the topics on which I hoped to say a few words—that of nuclear weapons.
A number of speeches have mentioned the part played in our defences by formidable conventional weapons and by chemical warfare, but it still remains true that in the end the defence of the liberty of this country and of our allies in NATO depends on the mutual balance and deterrence of the nuclear weapons on both sides. If one imagines the country neither possessing nuclear weapons nor allied with any nuclear power, it would not be in a position to defend itself against any country that had nuclear weapons. It would be completely at its mercy and be unable to defend its liberty.
In those circumstances surely what we have to search for in disarmament arguments is an agreement which retains the present balance, one hopes at much lower levels, much lower totals on both sides, and above all one which is verifiable. If we can search for that, we must at the same time try to avoid the kind of argument that would commit us as to the circumstances in which we might or might not use nuclear weapons. It seems to me that what NATO ought to be able to say to any potential aggressor is that
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we have no intention of using weapons of any kind against anybody if we are not attacked; if we are attacked, we reserve the right to use whatever weapons we have in whatever way seems most likely to be effective at the time. However, if we start committing ourselves to not using nuclear weapons first, or using them only in certain circumstances, we present to a potential aggressor an obvious advantage. It is important that a potential aggressor should always be in a state of ignorance as to that might or might not be used against him. I hope we shall always bear that in mind.
We must also avoid the illogical kind of argument which crops up in many forms and which says, in effect, that nuclear war is a dreadful thing therefore this country ought not to have any nuclear weapons. This of course is a gigantic non sequitur. There is no reason to suppose that if this country had no nuclear weapons, then nuclear war would be any less likely than it is at the present time. Indeed, by the upset of balance between NATO and the other powers, it might make nuclear war more likely. Thus, there is really no point in propagandists constantly reminding us how fearful nuclear war is. I should have thought that by this time we all knew that.
The question is: what kind of policy will make it less likely? Here, we should do well to follow the excellent advice of the late Lord Mountbatten, in a part of his famous speech, which is not usually quoted, where he said that the first and most important thing to do is to retain, to preserve, the balance that we have at the present time. If we can go on doing that, then, like the noble Lord, Lord Zuckerman, I have confidence in our present system of deterrence.
However, notice how all this depends on the Atlantic Alliance being real and solid. This is the second main topic about which I wish to say something. However much argument one engages in about Trident or an independent British deterrent, it is still quite clear that for our defence we cannot rely completely on our own efforts alone. The effective nuclear defence of this country depends on the North Atlantic Alliance being effective and real. Today a real and effective alliance does not only mean a promise on paper to come to the aid of one's ally if he is attacked: it means making recognised plans for how one will do that. Modern war is too complicated for mere promises that one will come and help to be of much use, if it is not at all clear how this will work out in fact.
Recently, as part of the Atlantic Alliance, we agreed to have in this country, and so did certain other European countries, cruise missiles as an offset to the SS.20s which the Soviet Union was planning throughout Eastern Europe and targeting on this country and other countries in Western Europe. It has been suggested that we ought now to adopt a policy of sending them back to the United States or getting rid of them and making this country a country in which there were no American or other nuclear weapons.
I invite your Lordships just for a moment to consider what is involved in that. In the first place, are we saying that we ourselves want to get rid of the cruise missiles that we have here but that we should be very glad if the other European countries that have them would retain them because that would help our

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security? I can only say that I should not care to be the British Foreign Secretary who had to argue that singularly inglorious policy in front of the NATO Council. More serious than the embarrassment of the Foreign Secretary at that time would be the damage done to the credibility of this country if we put forward a proposition of that kind.
If, on the other hand, we mean that not only do we want cruise missiles removed from here but removed from Western Europe generally, then we are left with the SS.20s targeted against us, with no nearer method of retaliation than weapons sited in the United States that would have to be flung across the Atlantic as a possible deterrent. That is to say we would be relying on American help but insisting that it should be done in circumstances of the maximum difficulty and risk to the Americans. I cannot think there would be much credibility left in our repeated assertions that we were loyal members of the Alliance.
Thus, let us be frank about this. In effect, a policy of that kind will mean in time—and not a very long time either—leaving the Alliance with all the grim consequences that would follow from that. Of course there are people who will argue that we ought to leave the Atlantic Alliance. I shall not pursue that now. It is a topic that one could discuss at great length but I am assuming that a great majority of your Lordships on all sides of the House do not want to see that done.
The third topic to which I want to refer, where I fear I shall not command such agreement, relates to the cost of all this. I shall not make a pronouncement about Trident. The noble Lord, Lord Kennet, referred to those of us who were on the Front Benches and those who were not. Of course, the great advantage of not being on a Front Bench is that one is not required to express an opinion on all the controversial topics that crop up. I therefore do not propose to express an opinion on Trident. But whether this country spends its money in that way or not, it is quite clear that anything like an adequate defence of a kind about which this White Paper is talking will be extremely expensive and will become more expensive as time goes on.
While that is so, the Prime Minister is going around making speeches about the absolute necessity of reducing taxes. I want to know how one adds this up. If one reduces taxes and spends more on defence, one has to meet the gap by cutting the social services. Of course, the Government have already shown us the way in that particularly mean decision on child benefit, where inflation goes up 7 per cent. and child benefit is raised by 2·5 per cent. Is that how we propose to pay for our defence? Apparently that is the Government's view.
I do not believe that that will do. If the Conservative Party are serious about defence, they have to have the courage to say, and say to many of their own influential and wealthy supporters, that defence and freedom have to be paid for and have to be paid for by everybody in this country, particularly by those who are most well off. This will mean a reversal of what has been the Government's approach to taxation ever since they came into power, since one of their first acts when they were elected was to reduce taxation on very wealthy people. They cannot go on doing that if they
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are serious about defence. They will have to decide that the freedom of this country is worth defending. That is not only on this country's account because bound up with it is the freedom of mankind.This is something in which we are all involved and of which everybody ought to pay their share. It is time that the Government made that clear.
5.48 p.m.
Viscount Mersey: My Lords, the 1985 defence White Paper has the same principal object as its predecessors: the prevention of world war three by our possession of inter alia nuclear weapons. That indeed must be the proper object of our military thinking. I was delighted to hear just now that the noble Lord, Lord Stewart of Fulham, was broadly in agreement with that.
There are other options but I think all of them are dangerous. At one extreme we rightly dismiss as a complete "nutter" that Danish politician who suggested disbanding his country's armed forces and substituting a simple loop of tape, bearing on it the recorded message, "I surrender" in Russian. We dismiss it not only because of its defeatism but also because we remember the unhappy lot of countries, such as Italy, which did surrender, some of them twice, in the second world war. Surrender is not only defeatist, it is no soft option. Nor indeed is neutrality a soft option. Armed neutrality is very expensive. Were we to adopt that line, with the rest of NATO fighting the Warsaw Pact, or indeed just the Americans fighting the Russians, we could for a while say, "I'm all right, Jack", but not for very long because we are not self-sufficient.
Those extreme options of surrender or neutrality are not very common. What is common is the conventional weapons only argument. That is an argument that I have heard noble Lords opposite leaning towards this afternoon. It is the argument that war fought only with high explosives would somehow be bearable and perhaps even respectable. In order to contemplate that course of action we would have to build up NATO forces to exceed those of the Warsaw Pact. That would be very expensive, far more expensive than the nuclear deterrent. Yet I should like to suppose that NATO decided so to do, and to examine the consequences. I hope to demonstrate that a massive conventional build-up would be far more dangerous than the development of our Trident submarines.
How would Russia feel about a superior army facing her across the Elbe? Would she not feel frightened, particularly when her own satellites went through periods of unrest and revolt, as they so often do? And a frightened country is a dangerous country. Might not Russia be tempted to take the valuable prize of West Germany before NATO had achieved conventional superiority? West Germany is a valuable prize indeed. It contains 24 per cent. of NATO's steel-making capacity. The heartland of NATO is hard up against the Iron Curtain. But the heartland of the Warsaw Pact is 1,000 kilometres back and east of it. I ask therefore, might not the Russians be tempted? For them, it would almost be a colonial war, far removed from Moscow. For us, it would strike immediately at the heartland. NATO's heartland is in the front line. We

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cannot afford to yield one kilometre of German territory.
Let us not underestimate the awfulness of conventional weapons. In the event of nuclear attack on this country, some people throw up their hands in horror and say that all 50 million of us would be killed. Those who say that would do well to remember that exactly the same number of people were killed in World War Two—50 million. And they were killed by conventional weapons and their side-effects. In a conventional third world war, that number would be greatly exceeded, for Russia's conventional capability is the greatest that the world has ever seen. Not only has weaponry increased; so also has our vulnerability. The United Kingdom depends more on petrol and electricity than it did 40 years ago. So, bomb the power stations, bomb the oil refineries and it is fairly easy to see what would happen here. There would be starvation. Immediately, milk production would be hit as our powerless milking machines went out of action and we then discovered that we did not have enough people left on the land who could milk the cows.
The whole modern pattern of food production could easily be destroyed. Food, nowadays, is transported, stored, processed and distributed to supermarkets, transported again by the customer and then stored in his refrigerator or deep freeze before being eaten. Take away the transport and the power and you have taken away the food. Power stations and oil refineries are therefore obvious targets for any enemy, as indeed is the petro-chemical plant that makes our pesticides and fertilisers. Thus, in the longer term, we should be unable even to grow enough food and, as I have said, we should starve. Not only should we starve, but, also, without electricity, we should freeze. We should be like the people of Leningrad in the last war. We should suffer a perpetual winter. What politician would be rash enough to get up and say to us, "don't worry: it's not a nuclear winter; it's just a conventional one!"?
There is, I believe, as dangerous fallacy about a conventional alternative to nuclear weapons. I believe that conventional weapons are more dangerous than nuclear as they make world war three more likely. The noble Lord, Lord Gladwyn, has just said so. He has said that a non-nuclear war is entirely possible. But that war, my Lords, would still be the worst the world has ever known. If I am practical for a moment, noble Lords will know that the scrapping of Trident would only generate sufficient funds to create two more armoured divisions. That would scarcely tilt the conventional balance in our favour. But the essence of my argument today is to be impractical and theoretical. If we did achieve a conventional balance, that would be dangerous specifically because conventional weapons cannot reach the Russian heartland as can the inter-continental ballistic missiles. Therefore, it is conceivable that Russia might regard a conventional threat as a mere frontier threat, far from home. She might think the game worth the candle.
Members of the CND like to describe themselves—in all sincerity, I am sure—as the peace movement. But Professor Hermann Bondi, in his excellent article in Catalyst, gives CND a new set of
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initials. They are BECW. That stands for the Band of Enthusiasts for Conventional War. I am no enthusiast for any sort of war at all. Each one has become progressively more awful since David slew Goliath. All that I am saying today is that we must avoid world war three. If we keep our nuclear deterrent, it is obvious to one and all that world war three will be the end of us all. Therefore, no one will allow it to happen, just as no one has allowed it to happen over the past 40 years. But if we throw it away, it is not obvious to one and all that world war three will be the end of us all. Therefore, it might happen. Only when it does happen will we discover that the difference between nuclear and conventional war is the difference between sudden death and lingering death.
As to the nature of our deterrent, I am not sufficiently expert to argue the merits of the D5 over the C4 system. I feel that the system must be submarine-launched and that it must be ballistic, for a cruise system would not be subject to the ABM treaty and it would need more submarines since cruise missiles have only one warhead. It would therefore be more expensive and less effective. I do not feel that Trident or the NATO Tomahawk GLCMs, or cruise, at Greenham are particularly dangerous for us. I feel that they are at least less dangerous than the short range weapons like Lance or Honest John. Those weapons are near the forward edge of the battle area and a comparatively junior gunner would have to decide in the heat of battle whether to use them or lose them. Any reassurance that my noble friend the Lord President of the Council can give that such short range weapons are to be replaced by longer range weapons would be more than welcome. Strangely, it is safer to have more missiles in the United Kingdom and fewer in West Germany. By that, I mean safer for us here in England.
I must therefore say, beware of the subtle danger of respectable conventional war. For there is no such thing. While we must not forget those two brave men who won Victoria Crosses in the Falklands, we must also remember the 60 Welsh Guardsmen at Bluff Cove who never had a chance to show that they were brave. Modern conventional war has little to do with heroics. I could not better conclude than by repeating what my right honourable friend the Prime Minister said on 23rd May last year;
"We are founder members of NATO, the shield of the West. A NATO with a nuclear deterrent, fearful weapons though they are. But so are conventional weapons. Let no one forget that".
5.58 p.m.
Lord Jenkins of Putney: My Lords, in so far as the message of the noble Viscount, Lord Mersey, was that we must do everything in our power to avoid war altogether, any sort of war, I could find myself in agreement with him. But he will forgive me if I do not follow him on other parts of what he had to say. The Statement on the Defence Estimates begins with a chapter called "The Strategic Context". In such a statement as this, one would be foolish not to expect it to be partisan. It is obviously a statement of the Government's point of view. But this year's opening summary of post-war history goes beyond what is reasonable. It is so oblivious of anything other than a narrow Western point of view as to be almost

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laughable. The brief of the noble Lord the Minister was, I fear, perhaps prepared by the same hand. I found that he seemed to follow rather closely the mistatement of history, I believe, that leads to the conclusions that are behind Government policy at this time.
The picture is as black and white as its Soviet counterpart with the difference, of course, that in the Soviet version they are the white knights and the West are the wicked nuclear dragon. In this version the West are "the goodies", in the white hats, offering Marshall aid which is scurvily rejected by the graceless Soviets. It is conveniently forgotten that the acceptance of the dollar in those years was widely considered to be acquiescence in a yoke of economic imperialism. That thought was not entirely misplaced, as recent history suggests.
The fact is also ignored that the division of Europe was, to a large extent, a matter of agreement. It recognised strategic and geopolitical reality. However, here a picture is drawn of the Soviet Union surging over Europe, but not in the course and as a consquence of helping us all to defeat fascism. Instead. Russia is seen as imposing communism on unwilling states deserted by the West, which is presented in the Government's opening statement as being stupid to the point of being naive.
The reality is that all sides were war-weary and that in those years we still saw the Soviet Union as our ally—or, rather, some of us did. In the United States, the Soviet Union was often seen as a threat to the very existence of capitalism, and I think that it still is seen as such. However, as politics there and in Europe moved to the Right, the Prime Minister of the time, Clement Attlee, was soon having to point out that the alternative to co-existence was co-death. Not until the second page of the introduction, in paragraph 107, is it admitted that the central reality of the post war years was that American hostility to communism was hacked by the nuclear weapon in the sole possession of the United States. That pre-war hostility resurfaced on VE-Day, and from then on the peacemongers in the United States fought a losing battle.
I was sorry to hear Lord Kennet's suggestion that the Labour Front Bench in this House does not support the policy of the party which it represents. It is true that the post-war history of Parliament—and this applies not only to the Labour Party—was that parliamentary parties reluctantly followed the views of the people whom they represented outside Parliament. However, over recent years Parliament as a whole has moved closer towards the view of the Labour Party, which is that the nuclear weapon is something which we ought to be rid of as soon as possible. I hope that it will be seen this evening that our Front Bench are not willing to drag their feet on this matter. I am not speaking myself from the Front Bench. I have never dragged my feet on this matter. I know that my noble friend on my left, Lord Stewart of Fulham, has always taken a different view from the one which I take about this matter. My noble friend's consistency about the matter is only exceeded by my own. We have over many years taken a different view on this subject, and that, I think, is permissible and reasonable. What is more difficult to justify is a strong difference of view
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between the Front Bench of a party and the view held in the party elsewhere.
I should like to say a few words about the present position. The American stock of nuclear weapons has increased year by year in number, in variety, in accuracy and in methods of delivery. The Soviet story has been one of continually trying to catch up until the position was reached several years ago when either or both of them could destroy the world and possibly even all life on it. In at least one range of weapons the Soviets established superiority. All over, of course, the Americans spend much more on arms than the Soviet Union, which because of its relative economic weakness, cannot hope to match the West.
However, the present position of the American Government seems to me to be verging on the insincere. They appear to see arms control talks as a front behind which the weapons can continue to grow as they have done over the years. Our own Government are left with the task—which they are attempting to do, as far as some of your Lordships are concerned, with success—of presenting the American march to extinction in credible terms. Indeed, in this document they do their best, arguing, for example, that although Trident will be a weapon with first-strike capability, it will not be used as such—at least, not by this country acting alone. Just suppose that the Soviet Union presented us with that argument in reverse. A horse-laugh would be the only reception that such a statement would receive, as, indeed, the noble and gallant Lord, Lord Carver, has already made abundantly clear—much clearer than I could make it.
The Government are always telling us—and they do so again in this document—that a nuclear exchange will not occur so long as they keep piling up the warheads. However, at the same time the Americans are developing first-strike techniques which include not only LUA (launch under attack) scenarios but even LOW (launch on warning)—plans which our Government appear to go along with when they talk in the statement about Trident:
"posing a credible threat to key aspects of Soviet state power".
Lord Carrington, quoted here, should understand, and the Government should understand, that, faced with that, the Soviet leadership cannot, as he says, indulge in wishful thinking by saying "Oh, but they wouldn't". That is Lord Carrington talking about what he cannot do. Equally, neither can the Soviets do that. The American Under-Secretary for Defence has even blurted out publicly what they have long been saying privately: that is, he has referred to Trident as having a "pre-emptive capability".
Would it be surprising if Soviet thoughts were moving in the same direction? If so, so far from making us safe, Trident could be our death warrant. In the light of that, the section on arms control in the statement is an amazing flight from reality. It fancifully contradicts the doom-laden verbiage in the Trident essay.
Weapons with the technical attributes of Trident D5 have the requirements of first-strike—that is to say, they have even the requirements of pre-emption; namely, accuracy, destructive power and speed. Trident D5 can carry out pin-point attacks that could destroy Soviet underground silos and command posts.

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They will present a temptation to be used in times of crisis before the Soviets give way under the strain and perhaps think that they have to use the SS18, which will be developed by then, to precipitate the nuclear exchange which may be the end of us all.
The policy of placing the anticipated adversary under increasing and ultimately irresistible pressure is incompatible with effective talks of arms control. It is sheer lunacy. As the American Paul Bracken puts it in his Yale University press paper:
"Political leaders on both sides may not want war but they may be unable to stop each other, or themselves, from pushing the button".
This Statement on the Defence Estimates is no more reassuring when it purports to show the balance of forces between East and West. Annex A is no more than a propaganda presentation designed to justify a still further increase in the massive nuclear armoury of the West. For example, in Figure 12 on page 54 the Government (who are always telling us, when it suits their case, that it is warheads and not delivery systems which count) present a diagram showing a Soviet preponderance of delivery systems, because in warheads the USA alone has 11,000 to the Soviet's 9,000. A diagram showing that would not fit the argument: therefore, we show the other argument. It is sufficient to show, of course, that both sides are grossly over-armed, and more over-armed than the dinosaurs, which are supposed to have died out as a result of being so heavily over-armed. Maybe that is the fate in store for us, too.
The American Congressional Study is much more informative, and deals with the crucial question of survivability. In The Nation earlier this year Howard Moorland argues that Soviet vulnerability is such that our own weapon-perfecting could lead to nuclear disaster. This is the argument which I have been trying to present to your Lordships.
I was glad to hear from the noble Baroness, Lady Cox, at Question Time today—and indeed, it was confirmed by the noble Lord, Lord Zuckerman—that we are shortly going to hear something authoritative about the question of the nuclear winter. It is about time. I was about to say that there was nothing in the statement about it, but I had that withdrawn from under me at Question Time today, and I am glad that it was. I look forward to hearing what is said.
My Lords, the course of action advocated in this statement leads straight to disaster. If it is persisted in it must surely put in danger the continued existence of our civilisation, and perhaps even of humanity itself. On this course our generation might even be the last, and we should then have failed to carry out the first duty of mankind—to hand on the planet in a survivable form. It would be shocking to give our successors the precious gift of life only to snatch it away from them before they had tasted it. We should then have committed the ultimate crime of bringing the human experiment to a miserable, premature, self-inflicted and entirely unnecessary end.
6.14 p.m.
Lord Home of the Hirsel: My Lords, it would be impossible to imagine two points of view on matters of national security and defence which are further apart
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than those of the noble Lord, Lord Jenkins, and myself. He has been consistent all the time—and I respect that—and so have I. Therefore I do not think that he will collapse with shock when I say that I am firmly in support of the Government's policy of retaining a British nuclear capacity.
I use the word "retaining" advisedly. One scarcely will have gathered from some of the speeches in this debate that we have had a nuclear arm, the Polaris submarine, ever since the early 1960s—over all the years, as a matter of interest, during which the noble and gallant Lord, Lord Carver, was pursuing his valuable and distinguished military career. The British Polaris submarine has been accepted by successive Governments, both socialist and Conservative, since the beginning, and also by the NATO Alliance. I am bound to say that I have never heard in alliance circles that they would be happy to see Britain withdraw that support.
My first reason for retaining a British nuclear arm is that until we can see much more clearly than we can today the future pattern of power relationships in the world, I do not believe that we should be justified in depriving ourselves of a defence option. I must remind your Lordships that the non-proliferation treaty has soon to be renegotiated. No one knows what the shape of armaments in the world will be after that. I want to see that shape before I take a decision as fundamental as that proposed of ridding ourselves of a nuclear arm.
More particularly if Britain is to have a nuclear capacity and a nuclear arm, let it be one that is credible, one for which the availability of spare parts is ensured for many years in the future. That would not be so if we were to try to spin out the life of Polaris. It would be so if, as we intend to do, we adopt Trident.
I have nothing but the friendliest feelings towards the French, but I would not be very happy if France was the only nuclear power left in Western Europe. I think too that it is possible that if we retain our nuclear deterrent Britain and France may in future years be able to co-operate more closely in that field, to the advantage of the defence of the European continent. I want to keep that option open. Then when the negotiations for a new balance of power at a lower level—as we all hope—come to the crunch (and they have already started in Geneva) I want Britain to be at the negotiating table. We would not be there if we had no nuclear weapon at all. With Trident we shall be there, and we shall have something of substance to contribute both to discussion and, we would hope, to solution.
Finally, there is a consideration which has been raised by the noble Viscount, Lord Mersey. The preferred popular picture of future defence seems to concentrate on the balance of conventional arms. We have to face the fact that the trouble in the past has been that all confrontations have been with conventional arms (many of them are going on now all over the world), and they have not ended war, for the reason that one contestant or the other has always calculated that it could win that war. I doubt if there is any security in a balance of conventional forces.
It so happens that we must not push too far the argument that where the nuclear weapons are there has not been war for a long time. That argument could

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be overdone. But the fact of nuclear stalemate, and the knowledge shared by the Soviet Union and the rest of us that no one can win a nuclear war, at least gives us a breathing space during which we can negotiate and hope to be able to lower the level of all arms. What, in short, I am saying is that I do not think that there is any case now for depriving ourselves of a nuclear capacity, and as far as Trident is concerned I am prepared to pay the insurance premium.
6.20 p.m.
Lord Moran: My Lords, many noble Lords who have taken part in this debate have spoken with great authority and experience, not least the noble Lord, Lord Home of the Hirsel, who as always has given us words of wisdom. They include a former Chief of the Defence Staff, my noble and gallant friend Lord Carver. Having myself spent part of my war as an ordinary seaman and part as a sub-lieutenant RNVR, I feel somewhat diffident at intervening in this debate. I said to myself, "Who am I to bandy words with a field marshal or indeed with an admiral of the fleet?" But I was concerned with defence questions on and off a good deal during my time in the Diplomatic Service and I think that ordinary people are very much concerned with these questions—they, after all, pay the bill—and that we should not leave it entirely to the experts or to those who look at the problem primarily through political spectacles.
Fundamental to everything, I believe, is the balance which in some form or other has kept the peace in Europe since 1945. It is that which allows us to go home to bed tonight and to expect to be here again in the morning. I agree very much with what was said tonight about the balance by my former chief, the noble Lord, Lord Stewart of Fulham. It is not only the overall balance which is supremely important; it is in my view important to have a balance in the main groups of weapons. It was that that got out of track with intermediate-range missiles and we found then in NATO that it is always painful and difficult to catch up. It was an agonising process to do so.
I hope that we have now learnt that lesson. But the problem is that the balance now has tilted quite a long way against us. This is brought out with admirable clarity in Annexe A of the White Paper, which shows that the West is heavily outnumbered, two to one or three to one in submarines, tanks, artillery, and tactical aircraft; and by no less than five to one in intermediate missiles. There is also the question of quality, on which the White Paper tells us that we can no longer count on having a substantial lead over the Soviet Union. Ten years ago, when I was in Hungary and watched amphibious tanks swimming up the Danube, I was impressed by the quality of the Soviet equipment that I saw and I think that they have made substantial strides since that time.
The Statement also reminded us that the Russians, unlike the West, have a massive chemical warfare capability and that the Soviet Union alone has an ABM system in place. Therefore from the point of view of the alliance, unless, as seems most unlikely, the Soviet Union decide to halt or reverse their enormous military build-up, the need clearly is to increase our effort and to try to rectify the balance or at least to prevent it from being tilted dangerously against us. I
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do not know, I am not qualified to judge, how far it can be tilted against us without serious risk. Those who have spent a lifetime studying these problems can tell that much better than I can.
In this context, I am myself inclined to believe that the SDI research is a sensible step to take. I made the point many times in public when I was in Canada about the need for the alliance to do more, and I am very glad that the new Government in Canada are now taking Western collective defence and NATO much more seriously. But I think that it is equally important that the burden—and it is a heavy burden—should be fairly distributed. At present, it is not. I cannot think that it is sensible that we should spend 5.3 per cent. of our GDP on defence while France and Germany spend 3.4 per cent. and 3.3 per cent. respectively and Italy, Denmark and Canada all under 3 per cent.—and some of them little more than 2 per cent.
I wonder whether we cannot tackle much more vigorously the problem of getting the burden more fairly shared between the NATO allies. So far, it seems that very little that is effective has been done in this field. The White Paper says that we spend more on defence in absolute terms per capita than any other ally except the United States. The Minister, in opening this debate, stressed that we are the only European nation to contribute to all three elements of NATO's forces. Well, that is a very good thing from one point of view but the question is whether we can afford it.
Total British defence expenditure, I see from the White Paper, has increased from £9 billion in 1979–80 to an estimated £18 billion in 1985–86—a doubling in six years. I wonder myself whether we can really continue much longer to carry this huge and disproportionate burden. We have been doing so, I know, in one way or another since 1945, with, for example, the Eden pledge to keep troops in Europe, but I wonder whether some of it is not inspired by our nostalgia for lost great-power status. Certainly I am absolutely convinced that we must do our share, but not, I think, year after year a great deal more than our share, while we struggle economically and others in Europe overtake us in national wealth.
I am not qualified to speak about Trident. I am myself disposed to accept the case for an independent deterrent, although I am given pause by the powerful speech made by my noble and gallant friend Lord Carver; but I must say that I am not happy about the degree of dependence on the United States that we propose to assume in respect of that system. I wonder too whether we have negotiated the best possible offset arrangements. If we must spend £9 billion on an independent deterrent, I would much rather see a far higher proportion of that money spent in the United Kingdom. Incidentally, I note that in the essay on Trident in the White paper, it says that,
"there is no realistic prospect that the Soviet Union will be able to destroy our submarines at a time of its own choosing in the foreseeable future".
In the light of the current anxieties about longstanding espionage in the United States Navy, I hope very much that this is still true.
To come back to the main question, if I am right and if we have eventually to reduce our expenditure, I believe that our priorities should be those that were shown to be essential between 1940 and 1943; the

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defence of the sea lanes to and around these islands and the defence of these islands themselves. If that is right, then I think that we must think first of the navy and, indeed, of the merchant navy, and of the air force. The navy has, I think, already been cut perilously near the bone and I share the concern expressed by some noble Lords about the decline of the merchant fleet. But if the time comes when we are compelled to make some cuts, then I think myself that we should look first at our 55,000 troops in Europe.
I believe that the White Paper tells a proud story and that our defence record is very good. All I am arguing is that the time may come when we can no longer afford to do everything and will have to think seriously about what is most essential and do that at the expense of some other things.
6.30 p.m.
Lord Mayhew: My Lords, a great deal has been said in this debate by several speakers which I know would be warmly supported by my noble friends on the Liberal and Social Democratic Benches. No speech would have commanded more warm-hearted support from us, apart from the speech of the noble Lord, Lord Kennet, than that of the noble and gallant Lord, Lord Carver.
I should like to ask the noble Viscount the Leader of the House about the contribution made by the noble Lord, Lord Carver. I think the House heard with the greatest possible interest his account of the report, published and reviewed, of defence experts of the highest standing, many of them, if not all, known to many of us in this House. It was a report that was unanimous, extremely well researched and well argued and which came down in favour of a series of specific recommendations for strengthening the conventional power of the NATO countries. Therefore I would ask the noble Viscount, as Leader of the House, to see that these specific recommendations are not just brushed aside by the Government. As we know, copies of the report have been sent to Ministers and officials in the Ministry of Defence. They have already had time to study them and make up their minds what attitude to take. Therefore I would ask the noble Viscount quite specifically if in the defence debate next week, we could have the Government's considered replies to the particular points made by the noble and gallant Lord, Lord Carver, in his speech. I believe that would be the wish of noble Lords on both sides of the House. I may add that it might be as well, if the Government are going to reject these suggestions, that they should make out their arguments now, because they will certainly hear about them again and again, including at the next general election.
A major part of the speech of the noble Lord, Lord Trefgarne, was taken up in attempting to defend the Government against the attacks of the House of Commons Select Committee on Defence. That was a devastating attack on the concept that the Government have planned for what they call "level funding" in real terms for the defence services in future years. With the utmost care, with elaborate calculations and taking the most expert evidence, the Select Committee came to the conclusion that if the Government pursue what they call "level funding" it
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will result in a shortfall of 6.1 per cent. of the defence budget; that is to say, £970 million a year. That is the conclusion of a Select Committee with, of course, a majority of Government Members of Parliament on it.
With respect to the noble Lord, Lord Trefgarne, in his informative speech he did not begin to answer that criticism of the Select Committee. He made three points in the Government's defence. He said that there had been a large increase in Government expenditure on defence in the past. Of course, that is true, and tribute is paid to it by the Select Committee. But it is irrelevant to the criticism made by the Select Committee about the future level of real expenditure on defence.
The noble Lord, Lord Trefgarne, went on to say that Trident takes only 3 per cent.; but that again was not part of the case put forward by the Select Committee. Indeed, the Select Committee conceded that there was unlikely to be any escalation in the costs of Trident. It simply did not enter their arguments.
Finally, in regard to the Committee's warning that defence expenditure on equipment would rise more quickly than the rise in the retail price index and that it would rise by an average of 2 per cent. per annum, the noble Lord, Lord Trefgarne, said, no, the Government were going to make economies—that is perhaps rather vague—so that it would not. But the points made by the Committee which the noble Lord did not answer at all were: first, the Government's estimates of the future pay of the armed services. In the White Paper there is an estimate of 3 per cent., but only last week it was announced as 7.3 per cent. And when the Prime Minister was asked in the other place how the money was to be found, she said that it must be found from other parts of the defence budget.
The Select Committee also said that the Government's estimates of real expenditure on defence allowed for an increase in prices in the retail price index of 5 per cent. Yet only a few weeks ago we were told that it is now 7 per cent. per annum. In adding up these discrepancies, the Select Committee comes to the conclusion, as I said, that there will be a shortfall of £970 million a year in the Government's defence budget. How is that deficit to be met? The noble Lord, Lord Moran, has set an example to the Government. He said that if we have to cut, let us have some priorities. But the Government refuse even to face the problem. They say there is not going to be a deficit; they are not going to cut any commitments; they are not going to cut BAOR, the frigate fleet or Trident—they are not going to cut anything.
What is going to happen? Again the Select Committee makes the point quite clearly: they are going to make both ends meet by postponing delivery dates of equipment. It is not difficult to do—I speak as an old service Minister who has had budget problems himself. It is quite easy to fake or to fudge it. All you do is to postpone for a year the delivery date of some expensive item of equipment or some ammunition. That means that there is an insidious hidden weakening of our defence services. It is a kind of defence review under cover and that is precisely what the Government are on course to do. I am afraid that nothing the noble Lord said in his speech could reassure us on that.

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I turn now to the admirable speech of the noble Lord, Lord Boston. As usual, he spoke with the utmost eloquence and set out far better than I could the defence policy of the Alliance parties. This has happened often before and it will happen often again, because of course he never mentioned for one moment the most distinctive and the most important part of the Labour Party's defence policy—the part that was moved in an amendment during the defence debate last week in another place, which, "called upon the Government to remove all nuclear bases from the United Kingdom". That is to say that Britain's cooperation in the NATO nuclear deterrent must be ended; Polaris, which is assigned to NATO, must be scrapped; the American submarines must leave Holy Loch; the F111s must be withdrawn and the cruise missiles must be sent hack. That is the official Labour Party policy and it is much the most distinctive part of Labour's defence strategy. Indeed, it has far wider implications than anything else. With great respect to the noble Lord, Lord Boston, what he said about the merchant fleet and so on was all very interesting and important but it had only a tiny fraction of the importance and the implications of what he did not mention.
The noble Lord, Lord Jenkins, as usual, helped us. He helped us to understand the Opposition's defence policy. He said in rather a wry manner that he was not speaking from the Front Bench. I thought I detected a slightly wistful note in his voice—and of course, if he is surprised, he has every right to be surprised because of course he ought to be speaking from the Front Bench and, with the greatest possible respect to the noble Lord. Lord Boston, he should be speaking from the Back-Benches.
Perhaps the most amusing remark made today during this debate was made by the noble Lord, Lord Stewart of Fulham. He made a brilliantly concise and persuasive speech about deterrence, which I think we on these Benches would feel much sympathy for. But then he astonished us by the remark that one of the advantages of speaking from the Back-Benches was that one did not have to follow Labour Party defence policy. But that is a privilege that is enjoyed on the Opposition Front Bench as well; it has been enjoyed for years. Of course it makes it very interesting, but it does make it a little misleading.
Lord Cledwyn of Penrhos: My Lords, before the noble Lord leaves the political knock-about, will he explain Liberal and Alliance defence policy? Will he tell us abut the events in the last Liberal conference when the conference rejected the advice of the leadership and so on?
Lord Mayhew: My Lords, perhaps I may say to begin with that we agree that while the Russians have a nuclear deterrent the West must have a nuclear deterrent too, and our parties both agree that Britain should be prepared to contribute to the Western nuclear deterrent. We shall hear very soon the noble Lord, Lord Cledwyn, answering this question. The noble Lord, Lord Cledwyn, will come to the Despatch Box and will answer this question: given that it is right for the West to have a nuclear deterrent, as the noble Lord, Lord Boston, has said, why is it wrong for
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Britain to help with it? That is the simple question. Given that the Labour Party believes that the West must have a nuclear deterrent, why is the Labour Party saying that it is wrong for Britain to have anything at all to do with it and that Britain should make no contribution to it? That is a simple question. I can answer that question easily on behalf of the Alliance parties. We think we need a deterrent in the West and we think that Britain should play its fair part in contributing towards it and should allow the American submarines in Holy Loch, and the F111s and the cruise missile, and therefore we say that we want an explanation from the Labour Party.
I was diverted by the noble Lord, Lord Cledwyn and I must hurry on, but only to say that of course this is the same flaw in Labour's defence policy as was exposed at the last general election and which was denounced by the Labour leader after the election results came out. I should like to read out what Mr. Hattersley said about this disastrous flaw in Labour's defence policy:
"The notion that we might give up our nuclear protection if others"—
he means the Russians—
"did not do the same was overwhelmingly rejected. Opposition to our policy was intensified by the confusion that surrounded our proposals. We said that NATO remained our protection hut we refused to accept our NATO obligations".
That was how Mr. Hattersley accounted fog the Labour disaster on defence at the last election. Well, it is not for the Alliance parties or the Conservative party to complain if the Labour party puts itself on the same electoral hook again ready for the next general election, but I think it is a matter which the Labour Front Bench should try to answer in this debate.
I must now hurry forward. There is another point that the noble Lord made which is of great importance and which requires careful thought. He said that the British Government supports the SDI, subject to the four conditions agreed between Mrs. Thatcher and President Reagan. On these Benches we feel that this is a disastrous policy line to take. It is not about research. The noble Lord erected an Aunt Sally when he said that there are those who think that research would be a breach of the ABM treaty. No, it would not. Indeed, I would say it is very hard to oppose the concept of the West going ahead with the research into space-based anti-ballistic missile defence, because it cannot be verified. That is agreed: we cannot verify space-based research. In addition, no doubt, the Russians are going ahead with it. If they have not gone very far with it yet, they probably will in the future. It is therefore surely wrong to expect the Americans to try to negotiate a ban on research into space-based ABMs.
But of course that is not the point. The point is that testing, development and deployment can be verified and would be a breach of the ABM treaty. The question is, why are the Americans not trying to reach agreement with the Russians not to test, develop or deploy them—that is to say, not to alter or amend or abrogate the ABM treaty? That is what they should be doing. That is what the Government should be urging them to do, and what they are manifestly refusing to do. Rather than negotiate with the Russians on this, they are putting at risk the arms control talks in Geneva. In regard to the language they used about

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SDI, they do not say, "This is something that we can negotiate", but, "This is a moral imperative and a political imperative". The way they talk about it makes it perfectly clear that they have no intention whatever of reaching agreement with the Russians on that point. Yet the impact of what the noble Lord was saying is this: "We have our four conditions and one of the four conditions is that there must be negotiations before deployment, before development and testing".
What is that assurance worth? It is worth nothing. It is quite plain that the Americans will go through the motions of negotiating and, when the talks have failed, they will go ahead with SDI. The so-called "fourth point" to which the noble Lord referred is frankly worthless. If the research is successful, how can one imagine President Reagan going to Congress, or to the hi-tech and aerospace interests that will have built up and saying, "Thank you very much. The research has been successful, and a lot of money has been spent on it, I agree, but now I've changed my mind. I don't think after all that there are advantages in going ahead with SDI. I think after all that the best hope is Mutually Assured Destruction." Of course it is inconceivable; it is not on the carpet. He will go ahead.
What will happen then? There will be an interim period of 10 or 20 years while, with enormous technological skill and at vast cost, the Americans build up a capacity for destroying a proportion of incoming ballistic missiles. It is only a proportion and no one suggests it is any more than that. No one suggests that they can protect the United States. And while they are doing that, what are the Russians doing? That is easy to predict. First, they will build up their offensive ballistic missiles in order to maintain their strike capacity against the United States. They will invent new decoys; they will invent new countermeasures, they will retarget the missiles so that they do not go for the silos, which are protected by the ABMs of the Americans, but they will go for the cities. That is the first thing they will do.
Secondly, they will redouble their fleets of submarines carrying cruise missiles, because against the cruise missile a whole new technology is needed. To defend against cruise missiles with the comparatively short range of submarines, they need technology that has not yet been developed or begun to be invented.
The third thing that the Russians will do is that they will no doubt develop their own anti-ballistic missile system. If they find, which is doubtful, that the American system is cost-effective, they will certainly do that themselves, and they will develop anti-satellite weapons to shoot down the American weapons and control satellites in space. At the end of all this, when the American ABM system is in position and when they are able to shoot down these missiles in the boost phase to start with—they have five minutes exactly in order to shoot down a missile in the boost phase, and that is what they will have laid on; they have to find a rocket, detect it, fire, hit and destroy it in five minutes—how much safer will the world be? It will not be any safer at all. This great escalation on two sides will have left the world in greater peril than before.
The duty of the Government is plain. With their colleagues and allies in Europe they must try to
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persuade the Americans now to start reaching agreement with the Russians for a mutual ban on the development and deployment of space-based ABMs, and meanwhile the Government and its allies in Europe should distance themselves from this disastrous project.
6.50 p.m.
Lord Cledwyn of Penrhos: My Lords, this has been an interesting debate. We heard a clear introduction to the White Paper from the noble Lord, Lord Trefgarne, and several knowledgeable speeches from noble Lords with great experience in the field of defence. We are of course to return to the subject next week, although I am not sure that this is the best way to arrange our affairs. I doubt whether a total of two days on defence in separate weeks is the most effective procedure; but we shall have to make a judgment on it again.
However, we are called upon to make infinitely more important judgments than that, because a debate about defence—its cost, its scope, its nature and our overall commitments—covers matters of the utmost complexity, upon which even the greatest experts disagree, as this debate has already shown. My noble friend Lord Boston has covered most of the ground in his able and comprehensive speech, and I shall refer to a few of the points which have been stressed in the debate thus far. We are all agreed on the essential need for an adequate defence within the context of NATO—an alliance which, as several noble Lords have said, has served us well for a period of 40 years and in the establishment of which the then leaders of the party, like Clement Attlee and Ernest Bevin, played a central role.
The Labour Party's policy on this—and here I deal with the point raised at considerable length by the noble Lord, Lord Mayhew—is clear, and I shall read it out so that he may comprehend it:
"We firmly support continuing British membership of the North Atlantic Treaty Organisation and the continuing alliance of the Western European democratic countries with North America within NATO."
I shall also seek to deal with Trident, which lies at the heart of the nuclear problem, a little later—
Lord Mayhew: My Lords, may I interrupt the noble Lord, as he mentioned me? Does not the policy as stated in the amendment in the other place last week also say:
"calls upon the Government to remove all nuclear bases from the United Kingdom"?
Lord Cledwyn of Penrhos: My Lords, I realise what was in the amendment moved in the other place. It was a matter for those who drafted that amendment. At this time I am dealing with the White Paper. I am not responsible for the amendment in the other place, but several of my noble friends and honourable and right honourable friends will share my view. Perhaps the noble Lord will be good enough to listen to my speech, as I listened to his.
I was saying before I was interrupted that I would deal later on with the question of Trident. I do regret however, that the noble Lord used this debate on the White Paper to try to win a few votes in the by-election in Brecon and Radnor. But let me say one thing which

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may comfort the noble Lord: if he continues to support this Front Bench, as he supported my noble friend Lord Boston's speech, we may in due course invite him back into the Labour Party.
NATO has seen its ups and downs and has suffered strains and stresses, including the withdrawal of France from the Military Committee in 1966. But NATO has survived and this country has played a leading role under successive governments in NATO committees and in the area of command. New developments, like the strategic defence initiative which many noble Lords have mentioned, are making it more difficult for us to see the future as clearly as we should like. Obviously, we should like to perceive a clear, long-term strategy where everything falls into place. Many noble Lords have dealt with this; but their speeches have illustrated the difficulties which exist.
One of these difficulties is the White Paper itself because it brings into focus once again the annual argument between the Treasury and the Ministry of Defence. It is a very old argument. It has been going on for decades. It is best illustrated by Winston Churchill himself. When he was Chancellor of the Exchequer in the 1920s, as the House recalls, he clamped down severely on naval expenditure. When he was First Lord he took a very different point of view! It is the battle between short-term political and financial constraints and long-term policies.
We are therefore fortunate to have the noble Viscount the Leader of the House to wind up our debate this evening, for as we know, he has been heavily engaged as chairman of a committee looking into the Government's expenditure. Last Sunday's Cabinet meeting will also be very much in his mind, as it is in ours. We understand that he cannot tell us the details of what took place there, but perhaps he can give us a hint of how things are going.
Furthermore, although we are formally looking at the Defence White Paper, as several noble Lords have pointed out we have two documents of which to take account; that is, the White Paper on the one hand, and the report of the Select Committee on Defence in another place on the other. The Secretary of State for Defence, in his speech in another place on 12th June, said that there was no big change in the White Paper. In one sense, I think this may be true, but in another sense it is not because forward financial projections in the White Paper are of profound significance.
It is stated that next year, 1985–86, the defence budget will be £18 billion, as we have just been reminded by the noble Lord, Lord Moran, and that constitutes the highest expenditure among the big European members of the Alliance. That has been the case indeed for the past 40 years. It seems to me to be ironic that, because of our comparative economic weakness in the EC, we are in annual budgetary difficulties there, but when we have our NATO hat on we are assumed to have a bottomless purse and are expected to make the biggest contribution of any country in NATO. France, on the other hand, enjoys the best of all possible worlds. Perhaps we should have a Minister for French Affairs, but he would need to be a pretty smart chap to deal with that portfolio.
In the Commons debate on 12th June, the Secretary of State said something which reflected the current
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expenditure argument. He said at cols. 913–4 of the Official Report:
"We now plan our programmes to live within the cash available to meet them. Just because a Department is large and its budget huge, there is no excuse for ignoring the basic rules of prudence that characterise the private sector but not public expenditure planning."
This is where realism walks onto the stage, for it is clear, both from the White Paper and from what Mr. Heseltine himself said, that from 1986 the defence budget is planned to reduce progressively. I shall be grateful if the noble Viscount will deal with that and confirm it when he replies.
There is no question in my view, having read the White Paper and the report, of reaching a plateau, as has been suggested, and then levelling off with stability as the objective. This is where the report of the all-party Select Committee is important. The conclusion of that report is that planned defence commitments cannot be achieved on the basis of projected levels of spending from 1986 onwards. This is where strategy comes in, for if that is true then our strategy must be planned to allow for the inevitable changes which follow. Where is the belt to be tightened? And we do not forget that we have not only home defence and NATO to finance; we also have the extra-NATO responsibilities of the Falklands, of Hong Kong, of Belize, of Gibraltar, and so on, and we know that the Falklands cost is especially significant in the context of the defence budget. The detailed consequences of the reduction in expenditure or, as it is called nowadays, the zero option, from next year onwards will no doubt be dealt with in next week's debate because the Army, the Navy and the Air Force will be affected.
But there is one crucial issue to which my noble friend referred and which I should also like to stress; namely, the decline in the merchant fleet. We have had a number of exchanges in the House about this recently. The White Paper suggests that if the reduction continues, it could endanger our ability to fulfil our NATO obligations. It further states that with the exception of deep sea trawlers:
"there are sufficient ships in each category to meet our defence needs."
In other words, the merchant fleet as it is is adequate. There are many noble Lords who are far more knowledgeable than I am about this matter of the merchant fleet and the dependence of the Navy upon the availability of merchant ships. But it is clear to the lay observer that the decline has been alarming, as my noble friend has said, from 1,600 ships in late 1975 to 686 last February. All this is of course reflected in the matching decline in trained officers and men. There were 160,000 men in the merchant fleet in 1939 at the outset of war; there are 40,000 today.
I have lived in a seafaring community all my life and I know that there is profound concern about these trends. Anglesey, which I had the privilege to represent for nearly 30 years, sent more men pro rata to the Royal Navy and the merchant fleet in the first world war and the last war than any other part of the United Kingdom. Given that Britain has been a great maritime nation, these experienced seamen see a change which is of the utmost significance, not only in terms of employment and commerce but in relation to the merchant fleet as an auxiliary to the Royal Navy. These trends are serious and their implcations for the

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nation gave. The three paragraphs which the White Paper devote to this subject are neither adequate nor clear. It is worth making the point that the Soviet Union has overtaken Britain and the United States as a merchant shipping power. I believe that Soviet merchant seamen are all naval reserves. That is also something to think about.
We were told last year—I think in November—that an inquiry was being conducted into the merchant service. Perhaps the noble Viscount can tell us when he replies when this inquiry will be completed. I also hope he can confirm that the report of the inquiry will be published so that we can debate the matter with all the facts and all the arguments before us.
My noble friend Lord Boston and other noble Lords have dealt with Trident in some detail. In the light of what has been said, perhaps I should say a word on the argument about total dependence on Trident, and its effect on other areas of defence. The question is whether this country with its present economic limitations can afford to put all our eggs in this basket. A man with a wife and six children and a mortgage and a modest income cannot afford a Rolls-Royce. The Secretary of State himself has admitted that the Trident missile programme will cost a lot of money, and as he said,
"money that will not therefore be available for other defence purposes".
That is the real worry and it must be one of the focal issues in this debate. For if, as Mr. Heseltine has said, other defence purposes are going to suffer because of the cost of Trident, and if also there is to be a decline in defence expenditure from next year onwards, what other aspects of defence are therefore going to be scaled down? We shall be most grateful if the noble Viscount will address himself to that central question when he replies. This was also the nub of the Select Committee report which spoke of substantial pressures on the defence budget and the need for hard decision making.
The cost of Trident at about £11 billion over 20 years is hard to justify. If the Government argue that there is no alternative then there are experts who take a different view. The Economist, for example, has said that if Trident is proceeded with the Government will be,
"condemning the conventional forces to damaging cuts in both numbers and effectiveness".
I acknowledge that the choices are not easy but to commit ourselves to an irreversible course in terms of resources and strategy is something which must cause the most acute concern. This has been reflected in several of the speeches that we have heard today. The key question is whether Britain can achieve adequate conventional weapons of the kind described by the noble and gallant Lord, Lord Carver, in a remarkable speech, if we proceed with Trident as it is.
The noble Lord, Lord Trefgarne, and others have also referred to the strategic defence initiative and to the four Camp David points, but I shall not go into those in detail. But in my experience in a short space this seems to have developed from being a figment of the imagination into a factor of the very first importance. At this stage the discussion centres around reseach. The noble Lord, Lord Gladwyn,
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made an interesting speech on this very point. The Foreign Secretary in his recent lecture also made some constructive comments about SDI. It is horrifying to contemplate an arms race in space following upon the present arms race on earth. SDI is very much in the future, beyond the life of the great majority, I think, of us in this Chamber, but its very inception has already created new tensions and strains in relationships, notably between the United States and Western Europe. The Government as I understand it have agreed to participation in this research. I think that we ought to be told a little bit more about it. What does the research involve? Are we to make financial contributions? If so, on what scale? We assume that we are keeping in close touch with our European allies on this subject, as the noble Lord, Lord Gladwyn, suggested. I also agree with him about the possible initiative by ourselves and our European allies on this matter. But all the implications have not been fully explained. For example, would we expect to be involved in the whole programme of research; or would we be operating on the fringe in a kind of presentational exercise? It is a question of high politics with long-term implications beyond our present perception.
My noble friend Lord Zuckerman, who always makes constructive and interesting speeches, referred to the brain drain, which is especially relevant to this huge project of SDI research involving, as it does, enormous costs, scientific resources and human talents. I thought that the figures that he had extracted from the Secretary of the Royal Society were extremely interesting; and there are further figures, as he said, still to come. I hope that the noble Viscount and his colleagues will look very carefully at what the noble Lord, Lord Zuckerman, has said.
I believe that our primary role—the role to which Britain is now suited—should be in NATO, working in the closest co-operation with our European allies and making a continuing and more effective contribution to the conventional defence of Western Europe. I believe that that should be our policy. The noble and gallant Lord, Lord Carver, gave us some very good advice on this to which the Government should listen. Some distinguished scientists think star wars is a practical possibility. Other equally clever American physicists believe otherwise. The costs are estimated to be astronomical—to use the appropriate word—anything up to £1,000 billion or more spent on research alone, has been quoted as a possible figure. The Prime Minister herself about 12 months ago said some sensible things about this when she called for "mutual restraint and negotiation". I agree with her entirely on that. I hope that she did not change her mind after she visited President Reagan. Perhaps the noble Viscount will tell us what is her present attitude.
Finally, let me make it plain that I have no illusions about Soviet attitudes to arms and defence. As the late Mr. Andropov said, "We are not naïve". And it is as well to remember that. The USSR do not discuss their military strategy in public. There is no annual debate on the Russian White Paper in the Praesidium with arguments about costs; about whether they can afford their vast arms expenditure. I did however read in the Observer that Marshal Nikolai Ogarkov, who has

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come back into prominence in the Soviet military field, has said some interesting things publically. According to the Observer:
"Ogarkov argues, as he has for several years, that the number of strategic nuclear weapons is so great that 'You don't have to be a military specialist to see that their further accumulation … becomes simply pointless'".
That was a very sensible statement made by the greatest Russian military expert today. I only hope it reflects a change in the views of the Soviet leadership.
We are reliably informed also that Mr. Gorbachev is concerned about the Soviet economy and about expenditure in the Soviet generally. I hope this will create a desire to make real progress in Geneva to achieve the balance, at much lower levels, to which my noble friend Lord Stewart of Fulham referred. For it is there in Geneva that sanity is needed if we are to bring some hope to a bewildered world.
Lord Harmar-Nicholls: My Lords, before the noble Lord sits down, I should be grateful if he would clear up one point which puzzles me. In the noble Lord's exchange with the noble Lord, Lord Mayhew, at the beginning of his speech, he seemed to be distancing himself from the official amendment proposed in another place by his party. Was he then speaking as a Peer in his own right, or was he speaking as Leader of the Labour Opposition, which would make his statement official? It would be helpful to know exactly what the situation is.
Lord Cledwyn of Penrhos: My Lords, the noble Lord, Lord Harmar-Nicholls, is, as always, running true to form in his intervention. Had he been in the Chamber during the whole debate he might have understood the position. I explained it fully and clearly in my speech, and I hope that the noble Lord will be good enough to read it in Hansard tomorrow morning.
7.11 p.m.
Viscount Whitelaw: My Lords, this year, in response to representations, we have instituted a two-day defence debate. As Leader of your Lordships' House I will be only too ready, after the debate next week, to consider through the usual channels future arrangements based on our experience of this year. That is one of the reasons why I thought it right to wind up what was to be this broad debate today. I wanted, through personal participation in the debate, to gain experience myself on the best way for this House to proceed.
I have to say that, so far, I have some anxieties. The noble Lord, Lord Mayhew, for example, said to me that he hoped that a full answer would be given to the noble and gallant Lord, Lord Carver, in next week's debate. It may very well be that other noble Lords will speak about Trident next week and that my noble friend the Under-Secretary of State will reply to them at the end of that debate. But that was not the intention of the two debates and I have to make that perfectly clear.
This debate was to be the broad, strategic debate. Next week's debate is meant to concern itself with manpower and various armed forces matters. We shall not have succeeded in having two separate debates if we go down the road which the noble Lord, Lord Mayhew—and, I suspect, other noble Lords—may
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follow next week. If we do go down that road, then I shall be interested to see whether this effort to divide the two days will succeed.
Frankly, I rather doubt that it will. I also have some reservations, as has the noble Lord, Lord Cledwyn, about there being a week between the two debates. There were specific reasons of programme management why that had to happen this year but, again, I doubt whether it is terribly wise to do that in the long term.
Secondly, I wanted to speak because, with the immense defence knowledge vested in your Lordships' House, I consider it my duty to listen to, and seek to respond to, views which are of great importance to our nation. Before I do so I should like to say a few words as a background about the Government's general approach. We have been taken to task by some commentators—notably the Defence Committee in another place, to which I shall return later—for wilfully adhering to present policies, and for failing to analyse long-term, political and strategic prospects in the White Paper.
If consistency is a crime then the Government must plead guilty to it. Equally, I would answer those who criticise the Government for consistency by saying that the NATO strategy which has been supported fairly widely in this House this afternoon has been to pursue a consistent line. That consistent line, working with our allies, has helped us for 40 years—and this is surely a reasonable claim—to maintain the peace. If consistency has done that, then there seems to be some value in consistency.
My noble friend Lord Trefgarne has already explained that we are committed to maintaining our contribution to NATO's military posture; that we are implacable in our pursuit of better value for money in our defence budget (and I shall return to what the noble Lord, Lord Gladwyn, and other noble Lords had to say about that point); and that there can he no question of our embarking on a defence review on resource grounds. I want to reinforce what my noble friend said about those matters.
The essential starting point must be the adequacy or otherwise of NATO's strategy of forward defence and flexible response. The White Paper sets out in detail the reasons why the Government believe that the strategy has worked and why we believe it remains appropriate in today's circumstances. I was grateful for the support given to this view by the noble Lord, Lord Cledwyn, and by many other noble Lords. As this is the first time that we have had a defence debate since the noble Lord, Lord Carrington, took up his new post, I should like to say how much I personally, and, I am sure, the whole of your Lordships' House, welcome the fact that he is now the Secretary General of NATO and how much we believe he will contribute to that organisation.
I turn to some of the speeches made in this debate. The noble Lord, Lord Boston of Faversham, paid a very well-deserved tribute, as I see it, to all our forces. He mentioned, as did my noble friend, the particular problem of the rescue off the coast of Ireland earlier this week and I was most grateful to him for associating himself and his noble friends with praise for that effort. The noble Lord made a very clear and

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concise review of the whole position of the White Paper, and he voiced many different criticisms. I shall come to them when I deal with other speeches. It is perhaps a tribute to the noble Lord, Lord Boston of Faversham, that I may deal with his points that way, because in opening the debate he covered so much ground.
I should like to answer the noble Lord in one particular respect, when he questioned what had happened to the defence reorganisation. He sought to make some amusement at the expense of my right honourable friend the Secretary for Defence. It behoves me, as one of my right honourable friend's Cabinet colleagues, to come resolutely to his defence, and I intend to do so. After all, the principles of the organisation were explained at great length in Command Paper 9315 and in the defence open government document OGD 84/03. There would have been little point in publishing those documents all over again in the Statement.
It is also fair to say that to offer detailed comment now would be too soon. If my right honourable friend had claimed in the Statement great success already after such a short time, the noble Lord would have been on his feet very quickly to ask how on earth could the Secretary of State declare a triumph so soon—suggesting that the Secretary of State was trying to claim success that did not yet exist. So I am being very cautious on behalf of my right honourable friend. I will say that the indications are that the new arrangements are settling down very well, but I give an undertaking that they will be appraised and reviewed at the end of the year. If the noble Lord and I are still a going concern at that time, then no doubt we shall both be able to consider those matters once more.
Lord Boston of Faversham: I am most grateful, my Lords.
Viscount Whitelaw: My Lords, the noble Lords, Lord Boston, Lord Kennet and Lord Cledwyn, all referred to the question of the merchant fleet. Like all noble Lords who have spoken on this matter, the Government are most concerned about the position of our merchant fleet. The result of that concern is a study which has just been received by the Department of Transport and will be most carefully considered by both departments.
It is too early for me to say at this stage exactly what will happen to the study and whether or not it will be published. Perhaps I may say to the noble Lord, Lord Cledwyn, that I will take very careful note of his remarks and make representations to my right honourable friend the Secretary of State for Transport, who is probably the Minister most closely concerned.
The noble Lord, Lord Kennet, asked some specific questions to which, as I believe they are important, I have been able to obtain suitable answers. I do not think the noble Lord would expect me to have known them otherwise. He asked if there were any up-to-date figures on the average number of Soviet ships in our ports. I understand that there were 1,492 ship visits during 1984. In May 1985 there was an average of 18 visits. Equally, I am informed that the numbers fluctuate substantially.
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The noble Lord also asked how many Soviet seamen wander freely around the country without visas. Operational crews of aircraft arriving in the United Kingdom and leaving within seven days do not require visas, so it is clearly impossible to give an exact figure. Operational crews of ships arriving in the United Kingdom are permitted to stay in the United Kingdom without a visa for as long as the ship is in port. That may be more or less than seven days, but so long as the ship is in port that is what the crew are allowed to do. Soviet seamen arriving in the United Kingdom to join their ships are permitted in without a visa provided they have a valid contract and an up-to-date seaman's book. I understand that there are at least 35,000 such visits each year. Those are the figures for which the noble Lord asked, and I hope they are of help to him.
I now come to one of the central parts of the debate—the speech by the noble and gallant Lord, Lord Carver. My problem is that I have so much respect in so many ways for the noble and gallant Lord that if I am trying to disagree with him I almost have to shut my ears while he is making his speech in case he converts me during it. I managed on this occasion to listen very carefully, and I will, with some trepidation, seek to answer some of the points that he made, because I think they are central to the debate.
I am encouraged to do so because I have received very powerful support from my noble friend Lord Home of the Hirsel, who strongly, and very plainly and clearly, believes with his great knowledge that Britain should retain its nuclear capacity. We have had Polaris since the 1960s but—I think there is general agreement on this, and, if not complete agreement, agreement in many circles—Polaris would not be a credible deterrent in the 1990s and beyond, whereas, as my noble friend Lord Home says, Trident would be. My noble friend also feels that he would not like to see France as the only nuclear power in Europe, and, I am bound to say, nor would I. For all those reasons I strongly agree with my noble friend Lord Home of the Hirsel. I have never found myself likely to disagree with him on almost any matter that I can imagine, and certainly not on this one.
However, that means that I have to give some answer to the noble and gallant Lord, Lord Carver, even if I take that very plain view on the importance of the insurance of our own nuclear deterrent. I think I would say this to him. I accept that the report was drawn up, as the noble Lords, Lord Cledwyn and Lord Mayhew, said, by some very important and knowledgeable people, but I wonder whether it fairly reflects what might be the cost of trying to do what they want, which is to improve our conventional forces on a technological basis and in line with the Soviet Union. Would I not be right in thinking that the more we did that the more certainly the Soviet Union would seek to preserve what I understand is about a two-to-one superiority? If that was the case, would we not soon find that the cost of going down the route proposed by the noble and gallant Lord, Lord Carver, and seeking to maintain conventional forces of the necessary size would be every bit as much as the cost of the Trident programme? At least, it would not be as different as the noble Lord and those who prepared the report sought to put out. I think that aspect ought to be considered.

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It is also fair to say that while, of course, very knowledgeable people are associated with the noble and gallant Lord, Lord Carver, they are not absolutely agreed with by all those in similar positions in many different capacities. As I understand it, and from what I have heard them say in the past, some of the noble and gallant Lord's other colleagues who have been chiefs of the defence staff do not happen to agree with him. I do not make too much of that because, after all, it is very rare in any profession that everyone agrees on everything. If I was asked whether I agree with my Cabinet colleagues on everything that arises in Cabinet I would not be able to say that I do. It would not surprise me if the noble and gallant Lord, Lord Carver, was not able to say that all the other chiefs of defence staff agree with him. I do not think they do. Therefore, one has to say that the report, while very important, does not necessarily carry all the experts with it, and it would be very surprising if it did.
Those are the answers that I seek to give. I do not believe that the cost of maintaining the conventional forces that would be required to take the place of Trident would be ("nearly as cheap" is the wrong expression) less expensive than Trident, as some, including the noble and gallant Lord, sought to argue.
I turn from that subject to my noble friend Lord Eccles, who, on a totally different front, spoke about winning friends in the world outside NATO and the importance of what he described as the defence discussion outside pure defence matters: the need for communication; the value of the English language; and the importance of the BBC's reputation for telling the truth. That reputation, I always think, rather amusingly, is very much more accepted abroad than it is in this country; but that, perhaps, is our own capacity to have a problem about balance. Indeed, those who feel they are discriminated against should consider that balance is frequently in the eye of the beholder. Therefore, as one sees and hears more of what they do both at home and abroad, it perhaps explains our own feelings on that subject. But certainly my noble friend is perfectly right about the BBC's reputation abroad. With all these attributes, my noble friend says—and I thought the House seemed to agree with him—we ought to be doing more towards winning the support and, therefore, the encouragement of benevolent neutrals. That, after all, is vitally important for our defence forces in various parts of the world.
The noble Lord, Lord Shinwell, is a great encouragement for me. Whenever I begin to think that possibly I am getting rather old, I get a new lease of life. If one can remember well the Boer War, as well as the First World War, you put those who can claim only that they fought in the Second World War a good deal in the shade; and that is where he puts a great many people in this House. Nevertheless, his robust belief in the need to stand against the Soviet Union and against the Soviet threat, which he believes strongly continues, is very important and gives considerable pleasure to many people who believe that the need of our defence policy is, indeed, to stand up for our own position in the world.
The noble Lord, Lord Reay, spoke about the strategic defence initiative from the standpoint of having been recently in the United States. I thought
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the noble Lord made a most interesting and valuable speech. He declared that if Europe were to dissociate itself from the American initiative—and I think there are those who are possibly rather too quick to think that we should consider that move—then he believes we would be in danger (and it is a thought we should all carefully consider) of the Americans saying, "If they are going to dissociate themselves from us, we might dissociate ourselves from them". It has always been one of my great fears that the Americans would feel like that at some stage, because if they ever withdraw from NATO or withdraw their troops from Europe that would be a catastrophe for this country. It is worth remembering that.
The noble Lord also asked about European collaboration on various weapons and projects. I do not think that such collaboration between nations all seeking jobs for their people in many different defence industries has ever been a particularly easy matter, and I do not think that it is any easier today. It is not the less important for that. I hope very much that we shall get further results from what we are seeking through that collaboration at the present time.
The noble Lord also raised the question of chemical weapons. We have no intention of changing our present policies. There are very grave risks of the proliferation of chemical weapons. Indeed there is a threat posed to NATO by the massive Soviet chemical warfare capability. But we are convinced, as are our allies, that in what is a highly emotional field the right answer is to do everything that we can to gain a comprehensive and verifiable ban upon those weapons, and that is the policy which we and our allies are pursuing at the present time.
The noble Lord, Lord Gladwyn, raised the question as to whether the Soviet Union is working on ballistic missile defence.
Lord Gladwyn: I asked what the evidence was, my Lords.
Viscount Whitelaw: The evidence seemed to come, my Lords, from the noble Lord's noble friend Lord Mayhew, who was quite clear that this was taking place. In view of the exchanges that have continued among various noble Lords about different aspects of defence policy, I was hoping that possibly both noble Lords might get together. I heard the noble Lord. Lord Mayhew, declaring quite plainly that he believed that that was certainly happening, and so I was delighted to quote him in aid.
Lord Mayhew: My Lords, the worst possible thing would be for any suggestion to arise that I differ in any respect from my noble friend Lord Gladwyn. My point was, I think, that we have to distinguish between ground-based research, in which the Russians are world leaders, and space-based research; and I said that if they had not started that they would start it soon. That is all.
Viscount Whitelaw: My Lords, I think that that in certain ways reinforces what I said. It is understood that the Russians have started. They have the world's only deployed ballistic missile defence system around Moscow and they have an extensive and long

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established research programme into ballistic missile defence. The noble Lord, Lord Mayhew, says that they certainly would start it. He is possibly behind events. They have already done so. Possibly that will now satisfy the noble Lord, Lord Gladwyn. First of all, his noble friend believes that the Russians are likely to start it; then indeed I have been able to confirm from the information given to me that they actually have.
Lord Gladwyn: My Lords, I do not want to disagree with my noble friend at all. But it seems to me unlikely that the Soviet Union has embarked on enormous preparations in the same way as the Americans have for a space-based ABM system. Is there any direct evidence that it has? It seems to me unlikely that it will, given the immense size of the project and the immensity of the expense involved. It seems to me highly unlikely. Unless there is proof that it has done so, the assumption must be that it will not do so.
Viscount Whitelaw: It is too much for me, my Lords! I was asked a question; I gave the answer that I was given. I hope that I have fulfilled my position. To go further would get me into water in which I do not think I am capable of swimming.
I therefore turn to the noble Lord, Lord Zuckerman, who, as he would with his special knowledge, made a point of great seriousness and of great importance—the danger of a brain drain in scientists. It is important that the research conducted into the strategic defence initiative should be two-way. We should be able to negotiate that, and we must be careful to make sure that we do not lose scientists as a result, particularly if, as the noble Lord said, we are already experiencing shortages in recruiting scientists. I shall certainly pass all those points to those of my right honourable friends who are most closely concerned.
For me, the noble Lord, Lord Stewart of Fulham, has two attributes. When he agrees with me, or, to put it more properly, I agree with him, I am simply delighted, because he puts it all so plainly and clearly and so much better than I can that I rest happy and satisfied thereafter. When he disagrees with me, alas, it is very much on the other side. Again he puts the points with which I disagree so trenchantly that I find it difficult to rebut them. I was delighted by what he said about the power of mutual deterrence of nuclear weapons and their importance. Perhaps your Lordships should notice that that view came from two noble Lords, both of whom have been Foreign Secretary of this country at a very important time. That of itself must have considerable importance.
On the other side and against me, the noble Lord questioned the whole position of the Government's economic policy on taxes and benefits. I shall run for cover immediately and suggest that your Lordships may feel that, although I am coming to the costs of the defence programme, if I entered into a discussion of the Government's economic policy I should be going rather far from the discussion we are having tonight and perhaps delaying the next part of our business. I have noted carefully what the noble Lord said.
My noble friend Lord Mersey spoke of the importance of remembering that a conventional war is
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in itself a very nasty business and should not be written off as if we could abandon nuclear weapons and settle down to an afternoon garden party with conventional weapons. Anyone who has had experience of fighting with conventional weapons knows that it is far from being attractive. Though I cannot do the Boer War or the first world war, at least I have some experience of the second world war.
I hope that the noble Lord, Lord Jenkins of Putney, will not think that I am rude, but against his name I have written down in my note, "Usual speech". I hope that he will accept that that is a perfectly fair description of what he said. My noble friend Lord Home of the Hirsel said that the noble Lord is always consistent. Indeed he is. He and I hold totally different views. I hope that we shall both live long enough not to be able to prove that either of us is right. One thing is quite certain. If we both live to about the same time, at that moment I shall be right, provided that there has been no war, and he will not be able to prove his assertion! Therefore on the whole I shall have done better than he has at that stage. I am still hopeful that that will be the case.
Lord Jenkins of Putney: My Lords, the noble Viscount, too, has made his usual speech. It is as full of charm as ever and as wrong as ever.
Viscount Whitelaw: My Lords, I can only say that I have to reciprocate, do I not? We shall be able to remain in that position for years to come, let us hope.
The noble Lord, Lord Moran, properly raised the point that we should bear our fair share of the costs in NATO but that we should not be burdened with more than our fair share. That comes to the question of costs, which the noble Lords. Lord Mayhew and Lord Cledwyn, also dealt with. One or other of them said that at one time when it came to European matters we were regarded as not being in a very strong position but when it came to NATO everybody immediately suggested that we had a bottomless purse. I think that there is a danger of that, and a very fair point was made.
The noble Lord, Lord Cledwyn, asked me about plans for the future of the defence budget. As it was foreshadowed in the 1981 White Paper, the Government's commitment to 3 per cent. real growth in the defence budget will not, as noble Lords have said, be continued beyond the current year, although the benefits of the steep increase—and I emphasise that—achieved since 1978–79 will continue to be felt by the services in the years to come. The task now is to make better use of the significant extra funds which the Government have made available through a vigorous pursuit of the efficiency programme which is outlined in Chapter Five of the Statement on the Defence Estimates.
I should say that I think the noble Lord, Lord Mayhew, was somewhat unfair to my noble friend's opening speech. In fact, for just a moment I wondered whether he had written his speech before he heard what my noble friend said. That was because my noble friend went to considerable lengths, first of all to set out the Government's case against some of the criticisms of the House of Commons Select Committee on Defence. Indeed he also sought to make

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the point very strongly about the need to get value for money out of our defence programme, and spoke of the very great determination of my right honourable friend the Secretary of State for Defence to make sure that that was what has happened.
I think I have spoken for long enough. I hope I have answered many of the points which were made in the debate. I feel that today we have had a constructive and very important debate. I am very grateful to all the noble Lords who have taken part in it.
The Earl of Cork and Orrery: My Lords, I beg to move that the debate be now adjourned until Wednesday next, 3rd July.
Moved, That the debate be now adjourned until Wednesday next, 3rd July.—(The Earl of Cork and Orrery.)
On Question, Motion agreed to, and debate adjourned accordingly.

Financial Services: Small Shareholders' Interests
7.41 p.m.
Lord Grimond Lord Grimond rose to ask Her Majesty's Government whether they are satisfied that the new proposals for the control and management of financial and investment services in the City of London, set out in their White Paper (Cmnd. 9432), will promote the interests of individual small shareholders.
The noble Lord said: My Lords, I rise to ask the Question which stands in my name on the Order Paper. Before doing so, I should like to thank the noble Lords who have indicated that they may take part in this debate. They know a great deal more about the subject than I do. I should also like to thank various people in the City who have been kind enough to answer some of my very elementary questions, in particular Mr. Nicholas Baring. However, I want to make it clear that they are in no way responsible for the opinions which I express.
The City of London is possibly the only British institution which has actually improved its international standing over the last 50 years. It earns us a great deal of money and its financial services are of great and increasing importance to the economy. Of course it has its critics. It has been argued that it has done better in making money for itself than in financing industry. Some people say that Germany and Japan seem to get on well without its equivalent.
However one views it, the City and the changes within the City must be of prime importance to us all. These changes deserve your Lordships' consideration from many angles. Tonight I am asking about their effect on the individual investor and to some extent on the small business. I speak as a long-time advocate of spreading wealth. I do not believe that we shall achieve the most satisfactory and prosperous country possible until there is far more direct, personal ownership of wealth. One way of achieving this is clearly through a wider ownership of shares.
Will the Big Bang, as it is called, achieve this wider ownership? I know the City is determined to look after the small investor. It has been said that by increasing
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competition and removing certain restrictions, especially on some forms of trust, the small, individual shareholder will benefit. But I think we must accept, as is made clear in certain documents from the City itself, that the changes in the City are not being brought about primarily by a desire to help the small investor. They are coming about to meet the demands of financial institutions frightened of losing out in a world where finance is becoming more and more large scale, international, and dependent upon information technology.
Two very important considerations have been the abolition of the minimum commission and the lack of capital among jobbers. As your Lordships know, when the Big Bang is finally over, many of the traditional divisions in the City will have vanished. Brokers, jobbers, investment advisers and investment managers of all kinds will become part of conglomerates in which banks—and not necessarily British banks—will play a leading role. Conflicts of interest, opportunities for insider dealing and fraud could greatly increase.
By the very title of their White Paper Cmnd. 9432, the Government accept that all this is of great concern to them. They hope to rely on self-regulation as far as possible but they are ultimately responsible and it is under their aegis that a tribunal and two boards to supervise the new framework in the City are being established.
I am afraid that I have a great many supplementary questions to ask in addition to my main Question. I have no less than four questions in relation to these boards. I refer to the Securities and Investment Board and the Marketing of Investment Board.
First, I am not entirely clear what sanctions other than a reprimand or withdrawal of a licence to trade will be available to these boards. I should have thought that some intermediate sanctions may well be needed. I should have thought, for instance, that it may well be that they will need to levy fines, but the fines will probably have to be of a large amount. I am not quite clear from the White Paper whether it is contemplated that they will have power to do this.
Secondly, I am not quite clear whether there will be any appeal from these boards to the ordinary courts of law. I suppose one cannot prevent people from going to law, but I do not know whether it is contemplated that they will. Thirdly, I take it that the boards will have no say over financial journalists, who are extremely influential in persuading people to invest money.
Fourthly, and most important of all, can we be assured that the sole responsibility of the board is to protect investors, that it owes a duty to the investor and to no one else? From the point of view of the small investor, one of the dangers in the new set-up is clearly fraud, insider dealing and improper influence. However, I think there is also another danger and that is the danger of bad service and bad results from the investment which he makes.
The most telling deterrent, to my mind, to individual investment in equities, and indeed in the Stock Exchange generally, is that since the war it has not paid off very well. Of course it depends what base date one takes and it depends what income one may receive. However, I believe that the Financial Times index

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would have to be about 50 per cent. higher than it is now to make good the inflation if one starts from 1960 to 1970. If anyone doubts that he can look at the Financial Times for 19th January this year, which points out how the index has fallen behind inflation.
It may well be that property and objects have proved a better investment. The pension fund which bought a mediaeval candlestick base, and which I see today has bought a fragment of a mediaeval manuscript, may very well know what it is doing. On top of inflation you have the incentives to other forms of investment and you have the tax, and in particular the disincentive of the capital gains tax.
It seems to me that in this situation the best friend of the small, independent investor is a stockbroker in an independent reputable firm, whom he trusts and who will take a personal interest in his affairs. In my experience stockbrokers are willing to take an interest in quite small portfolios and to give of their very best to very humble clients. I do not suggest that the stockbroker will make such an investor a millionaire but I think he will be his best protection against fraud. He will give free and independent advice and allow the client to do better than he would on his own.
Am I right in thinking that such stockbrokers may be seriously reduced in number after the Big Bang has taken place? Three questions arise in regard to the Big Bang. First, is it healthy for either the small investor or for the small British business that the City should be dominated by large conglomerates, some of which will be foreign owned? I find it hard to believe that such conglomerates will take as much trouble with small clients as do brokers today. I am apprehensive about what will happen to provincial brokers. I know it is said that there may be an extension of branch offices from London, but I am not at all clear that that is going to happen.
I ask the Government whether they expect the Big Bang and its aftermath to bring capital to this country or to drain it off. I am not convinced that a conglomerate owned, say, in Japan or Saudi Arabia and dealing in millions of pounds will necessarily increase the capital available to British industry, at least to small British industry. I hope I am wrong. Of course it may be that the Government are going to rely upon other sources such as investment in industry.
My second major question relates to conflicts of interest. It is accepted, for instance, in the admirable report by the City itself, "Comments on the Financial Services White Paper", produced by a committee presided over by Mr. Baring, that such conflicts will arise. Indeed, they arise to some extent already. But the argument in that committee report is that although they will arise, they need not lead to any malpractice. Nevertheless, I believe that the single capacity broker had his advantages. I would not personally employ, for instance, an insurance broker who was wholly owned by an insurance company. But the Government tell us in paragraph 7.4 of the White Paper that they themselves are not convinced that total reliance can be placed on Chinese Walls. Nor am I convinced that Chinese Walls will necessarily be totally effective.
I do not think that I am impressed either by the Government's further suggestions, one of which is
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disclosure. Disclosure is very necessary; but by declaring an interest you do not necessarily purge yourself of all sin. As for monitoring, that, again, is very necessary. But do the Government really believe that these boards, even with all modern equipment, can monitor the countless transactions that take place every day in the City of London? According to paragraph 6.1 of the White Paper:
"The key safeguard … will be the application of a 'fit and proper' test to all investment businesses".
But can this mean anything more than that a licence will not be given to an investment business if it has already been in trouble? Should not investors be warned that because some firm passes this test it is not necessarily a wise counsellor? Presumably, it will not undergo the sort of period of examination that precedes, say, entry into the Catholic priesthood. It is merely a guarantee, I understand, that it has not so far been caught out. I must mention, in passing, that I seem to remember a Stock Exchange joke about how no one who was a fit and proper person could possibly be a stockbroker. As it is their own joke, I feel able to repeat it.
The real protection will surely be the internal procedures and monitoring enforced by senior partners or directors in each firm. That, again, is going to become difficult as firms become very large. In the light of what has been going on at Lloyd's, there must surely be some doubt over self-regulation. Those doubts must have increased since the Secretary of State for Industry spoke in the Commons on the 24th April. Therefore, I ask again and emphasise the question that I have already put. Is it quite clear that these boards and the tribunal will really be responsible to the investors? It seems to me that part of the trouble at Lloyd's is that there is a dual responsibility and some conflict of responsibility between the names, the brokers, and the other departments of Lloyd's.
I come now to the third question, commissions. The Chancellor told us in his Macmillan lecture that to judge from American experience small investors will gain, and commissions will fall. He also spoke of cheaper, no-frills deals. The noble Lord, Lord Terrington, has drawn my attention to two articles in the Financial Times which categorically contradict this. They say that some banks have already increased their commissions and that there is no reason from American experience to believe that they will fall. I therefore ask the Government whether they still believe that they will fall so far as the small investor is concerned. Personally, I have some doubt whether he is going to gain very much from modern technology. He is not the kind of man who dodges in and out of the market.
I come now to the last and fundamental question. The Government have told us that they want to encourage direct investment by small investors in equities. Are they sure that they are going the right way to get it? I hope very much that they are. There was the Telecom issue but there are still great tax advantages in corporate investment. Years ago, I seem to remember that the stockbrokers Rowe Swann published a circular called, I think, "The Euthanasia of the Small Investor". And, sure enough, before the Telecom issue, small investors had been reduced to 4 per cent. of the adult population. Perhaps we have to look more

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and more to pension funds, trusts and suchlike. But if the Government are attracted by that road, I hope that they will look at John Plender's "That's the way the money goes" which deals with the performance of investment funds. As for trusts, the trust movement seems to have done a great deal of good. But unit trusts are now proliferating at a rate that makes one think that some of them must be set up chiefly for the benefit of those who have floated them. Investment trusts frequently stand so far below their asset value that it might be in the interests of the shareholders to break them up. I, for my part, still believe that direct investment by individuals is valuable. I still believe that the small investor needs a stockbroker who will take an interest in his affairs and if possible from an independent standpoint.
I accept that the Big Bang is upon us. I accept that it will do great good. I accept that the City wants to protect and encourage individual investors. I hope very much that it will improve even further its international standing. I hope that the Government, for their part, will examine again their proposals in the White Paper to make sure that the framework outlined there and being put into operation is effective particularly in the light of Lloyd's. I hope that they will keep an eye on commissions. I hope that they will put direct investment on a par with corporate investment and that they will encourage such single capacity brokers as may stay in the business.
7.57 p.m.
Lord Bruce-Gardyne: My Lords, I should like to congratulate the noble Lord, Lord Grimond, for raising what I entirely agree with him is a matter of great importance. I am sure that all your Lordships will agree with what he had to say about the achievements of the City of London over the years and the vital importance of the role that the City has played and should play in the future as an attractor of resources for this country. I am sure therefore that all your Lordships must be grateful to the noble Lord for raising this matter and the Government's White Paper tonight.
I should perhaps declare an interest of sorts in the sense that I scribble in the City pages of a national Sunday newspaper although I hasten to assure your Lordships that I would never dare to have the cheek to try to advise readers into which particular equities they should put their savings. Nevertheless, I suppose, in theory, the place in which I write at any rate could come within the ambit of the White Paper. I am in a good deal of agreement with the measured scepticism expressed by the noble Lord about the prospects for the small investor after the Big Bang. I was told some months ago that my right honourable friend the Chancellor was planning to comment to the City, at some function he was addressing, that the trouble with Chinese Walls was that they were full of chinks, but that the Foreign Office advised that this phrase should be deleted in order not to damage international relations. I am bound to say that the Chancellor assures me that this is not true. Nevertheless, I believe that that degree of scepticism is eminently understandable. I am afraid that it seems to me to be highly probable, to put it mildly, that the legendary Aunt
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Ednas of Plymouth are likely to have to pay more, not less, for the services of their stockbroker after the Big Bang than they have paid up to now. In all honesty one must recognise that the possibility of them being taken for a ride is also likely to increase.
I question whether any great material purpose is served by lamenting that this change should come upon us. To my mind it is rather like lamenting the passing of the chaperon and the arrival of the permissive age. There is no doubt that life was a great deal more ordered, discreet and, perhaps, sweeter-smelling in the days of the chaperon. However, the chaperon has gone and will not return. The fact is that unless the City had moved to negotiated commissions and, as I see it, inevitably to the ending of single capacity, the business would simply have passed it by. Indeed, it was already doing so. We are watching the internationalisation of the market. It is no good lamenting it: it is a fact of life.
We must also bear in mind that surely the essential purpose of the financial market is not to provide a casino in which the Aunt Ednas can try a flutter on their fancy or even invest their bottom drawer. The essential purpose of the market is to enable quoted businesses, both domestic and international, and also sovereign Governments, not least our own, to raise capital and to borrow on the most competitive terms to which their records and performance entitle them. It is essentially from that angle that one must look at what the Big Bang might portend.
It is slightly in that respect that I believe that there are some grounds, at any rate, for concern in two areas. First, there is the question, which the noble Lord touched upon, of the medium-size business—the quoted company with a successful track record, making good profits and with good performance, but not the type of company which has a cat's chance in hell of being quoted on the big board in New York or in Tokyo. No one would dispute that the ICIs of this world will enjoy the benefits of much more competitive commission rates and a much more highly competitive environment for their capital-raising operations and for the trading of their shares. The real question is what will happen to the medium-size equity which cannot hope to achieve that kind of multi-national status. In this connection I must say that I have been told by all my eminent stockbroking friends that there is no need to worry and that there will be plenty of market-makers in these companies. I hope that is the case, because it would be greatly to the disadvantage of the British commercial and industrial environment if such firms were to encounter considerable difficulty in capital raising.
My second anxiety is perhaps rather more fundamental. It concerns the Government's ability to borrow. We now have the spectacle of 29 recognised primary dealers dealing in the gilt-edged market in place of two. I am bound to say that in my view there will be a certain amount of blood on the floor. When the carnage clears, what will be left? Is it not possible that what will be left will be some of the giant players from the other side of the Atlantic and precious little else? What would happen if those giant players from the other side of the Atlantic were to wake up one day and read an opinion poll which suggested that there was at least a chance of the Labour Party coming to

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power committed to the immediate reintroduction of exchange controls and perhaps measures for the repatriation of capital? Are we absolutely satisfied that, under those circumstances, the distinguished, new American punters in the gilt-edged market would not pick up their coats and run for the exit? If they did so, are we certain that the Government broker would still find willing takers for his paper around the market-place? If we are not certain, then we could face a gilt-edged strike to end all strikes. Those, to my mind, are the two biggest concerns which arise from the prospect of the Big Bang and what lies thereafter.
As for the position of the small shareholder, I must say that I share wholeheartedly the noble Lord's enthusiasm for an individual shareholding democracy. However, I doubt whether we can do a great deal to achieve that or to safeguard progress in that direction by a more vigorous and effective policing of the new type of marketplace. We must look at great new privatisation issues, like British Telecom or British Gas for that matter, or the TSBs (in which I am involved), and even possibly face some of the consequences of monopoly which in certain cases might flow therefrom, rather than believe that we can somehow in the new environment guarantee that there will be equal treatment and a fair place for the individual shareholders.
I note what the White Paper says about the importance of information. You can sometimes have too much information. I do not know whether my noble friend has ever studied a prospectus submitted to the SEC in the United States. When I was investigating the affairs of that great entrepreneur, Mr. De Lorean, I came upon a draft prospectus which he had produced for the SEC. I said to my chums, "One thing is certain: nobody but nobody would dream of investing in that"; because it was not covered in health warnings, it was covered in death warnings. Then, a little while later, I saw a prospectus which was being submitted to the SEC for an absolutely blue-chip American company. The death warnings were just as strong as they had been in the case of De Lorean. The Americans have achieved a situation in which the lawyers insist that every potential shareholder is inundated with information, and so the consequence is that they all ignore it. One can actually have too much of a good thing in that respect.
The noble Lord, Lord Grimond, commented on the question of the sanctions which these self-regulatory bodies would be able to apply. I comment in passing that it is perhaps not only a question of sanctions; it is also a question of what happens when it is apparent that the law has been breached. It is a question of what follow-up occurs. It is not a very good example to learn that, in the case of some of the little problems that have arisen in the Lloyd's market, the DPP has apparently been unable to come up with a single prosecution as regards matters which have been before it for anything up to seven years. It is all very well to have fine new laws, but if, apparently, the DPP is unable to advance prosecutions in cases where it is reasonably apparent that there are prima facie reasons for believing that the law has been severely breached and fraud committed, the statute book serves only a limited purpose.
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In conclusion, I hope that we shall bear in mind that we must tread a tightrope (as I think, on balance, this White Paper does) between, on the one hand, the danger of strangling the market through excessive regulation, in the belief that we can somehow achieve the perfect elimination of the obligation upon the buyer, the investor, to show some common sense occasionally, and, on the other hand, allowing a market to be created which, frankly, frightens the horses. That, to my mind, is the side we have to watch.
I think there have been occasions in the past, perhaps, where the Lloyd's market has almost begun to scare away the international investor. It would be disastrous if we allowed that to occur in the City of London. On the other hand, we must not overwhelm the market—the brave new market—in a cocoon of legislation. Perhaps we should also reflect that legislation is not always the perfect answer to human unwisdom. I am bound to conclude by wondering whether we are really wise to believe that by passing another banking Act we shall avoid having another Johnson Matthey.
8.11 p.m.
Lord Ezra: My Lords, my noble friend Lord Grimond has given us the opportunity of discussing an important White Paper issued at a time of momentous change in the nature of the financial services of this country. I am glad that time has been provided for consideration of this document. I am glad too that the Government, in introducing their proposals, have made it clear that they recognise that this is a subject for careful study, and that they have also recognised that the old provisions of caveat emptor are not enough in these new circumstances, and that, as they write on page 7 of the White Paper:
"For investors to have the confidence to venture into the market, measures are needed to reduce the likelihood of fraud and to encourage high standards in the conduct of investment business."
This White Paper attempts to do something that has never been attempted before; namely, to provide regulation for the whole of the investment industry, which is now a widespread and sophisticated industry and which is also going to become much more comprehensive as time goes on. Hitherto I suppose that the greatest degree of self-regulation has been within the Stock Exchange, but there are many other ways in which people can invest, and it is to cover all these ways that I take it that this White Paper has been drafted.
What we therefore have to consider before coming to the specific point about the small investor raised by my noble friend is whether the proposals made fit in with the requirements indicated in the beginning of the White Paper. The major proposal of course is the creation of the two boards which will be self-regulatory within a statutory framework, as is stated in the White Paper.
This is a new device. It is a combination of a self-regulatory body in the sense that those who are in membership of it are practitioners, or drawn from the ranks of the practitioners, but it will have the force of law in its operations. Therefore it is something which is a halfway house and which will need to be considered carefully in its operations.

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The question that immediately arises, and has been stated in the White Paper itself, is whether two bodies are required. I should like to ask the noble Lord, Lord Lucas, when he responds what has been the temperature of the water on this point. Those to whom I have spoken in the City and in industry have been almost unanimously of the view that there should be only one body.
Many of the newer financial organisations which will have to turn to these boards for authorisation of their operations will in fact have to turn to both of them. It therefore seems that before long there could well be some confusion or duplication in their operations. It might be worth while sorting this out before they are brought into operation rather than after a trial period.
The question of conflict of interest is bound to arise more strongly now that the Stock Exchange have changed their rules. However, as the noble Lord, Lord Bruce-Gardyne, and also my noble friend Lord Grimond said, this is not a new subject. Under existing financial practices there already is this problem of financial institutions which both handle corporate finance—mergers, take-overs, and so on—and have a separate department dealing with investment. Obviously the knowledge of any impending takeover will put the investment department in possession of important information.
But here we can see self-regulation as a matter of self interest. Any firm that was known to have done that—and it would obviously become evident very quickly that it had—would no longer command the support of its clients. Although I must say that it has not been a deep-seated inquiry, I have asked a number of representatives of City institutions whether they are aware of any cases where this has arisen: I have not been told of any, and for obvious reasons, as I have indicated.
I do not believe that the conflict of interest, even though the range of possible conflict has now been widened, is necessarily one that will not be overcome in practice, although I think it absolutely right that the White Paper draws attention to this and that the Government consider that this situation will have to be carefully watched. On a smaller point I should like to refer to what is said about life assurance on page 29 of the White Paper, where it is stated:
"The Government welcome the view expressed … that businesses authorised by the Marketing of Investments Board should be required to take total responsibility for sales by tied agents as well as their employees".
This only applies to life policies, but it seems to me that it ought really to apply across the whole range of insurance activities. All forms of insurance, in a sense, are a form of investment, and therefore I wonder what the Government's response would be to that.
As to the small investor, who was the raison d'être of the Question put down by my noble friend, it is quite possible that with a freer market and no limits on commissions the smaller investor, simply because he is dealing in smaller quantities, will tend to pay higher commissions, and that the larger investor, because he is dealing in larger quantities—and investment is a commodity like any other—will tend to pay smaller commissions.
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On the other hand, for the small investor who simply wants to buy or sell a share and has made up his mind what he wants and does not need any advice, it would seem desirable that the over-the-counter operation should be encouraged and further facilitated. For a simple service such as buying or selling a share there should be, in my opinion, a very small fee. If the investor requires advice, then obviously a fee should be charged for that consultation.
As to the ways in which the small investor can be protected against fraud and being misled, I should like to ask, how is he in fact going to be made aware of these new City institutions? Those of us who have some connection with the City are of course aware of what is going on, but are these new bodies going to be available for the small investor to turn to? Or who should he turn to if he feels that his situation has been prejudiced by suspected malpractice (apart, of course, from going to law, which is always available)? Is something to be done to make the small investor more aware of what is being provided in his interest other than the publication of this White Paper, which I believe is more for the expert than for the general reader?
8.20 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House are grateful to the noble Lord, Lord Grimond, for having given us the opportunity of discussing this Motion tonight, which is essentially concerned, as the Unstarred Question on the Order Paper makes quite clear, with the promotion of the interests of the individual shareholders and, by implication—and I think that the noble Lord. Lord Bruce-Gardyne, will agree—that means, in common sense terms, shareholders in equities. Therefore, the narrow terms of the Unstarred Question on the Order Paper make it quite unnecessary—indeed, I would not wish to do so—to enlarge on the economic significance of the big City institutions, the way they benefit the country, the way that they operate, the degree of essentiality that they have to the economy as a whole. The comprehensive nature of the speech of the noble Lord, Lord Grimond, with which I very largely agree, enables me to avoid if only in the interests of time dealing with the matters with which he dealt so very clearly.
The noble Lord, Lord Bruce-Gardyne, if he will forgive me saying so, seemed to be full of gloom and doom this afternoon. He did not see very much hope for the individual equity shareholder at any rate. He seemed to be very apprehensive about the consequences of the Big Bang, and he uttered strong warnings (with which I am bound to say I heartily agree) about the control of the capital market as such passing largely into what he termed the very large conglomerates. With all these things, I am bound to say that I agree with him. I share his apprehensions. But of course a broader debate on this whole aspect of the matter as to what is going to happen to the structure and effect of the whole City of London institutions and their significance in the world, I think, ought to await the publication of the Government's Bill and the completion of the various arrangements upon which the Stock Exchange and the various other

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institutions are still apparently locked in deep discussion, if not deep disagreement.
With your permission, my Lords, I will come back to the interests of the individual shareholders. Who are they? The number of individual shareholders in equities in this country are somewhere—as the noble Lord, Lord Grimond, put it—in the region of 4 per cent. of the adult population. That is not very big. It may well be that, owing to the privatisation measures that have taken place in recent years and upon which I have already commented and upon which I shall not enlarge, the number of shareholders in the country may have increased but slightly; bearing in mind the fact that those that have gone in for stagging purposes and have gone out with a quick profit are unlikely to re-enter the market, and also a good number of those who took up shares in these newly-privatised organisations were probably already individual shareholders in their own right.
Lord Bruce-Gardyne: My Lords, I apologise for interrupting the noble Lord but; in what he has just been saying, is he really allowing for the effect of British Telecom privatisation? The best estimates were that there were about 1.8 million individual shareholders who took up shares in British Telecom. Even if one accepts that there was an element of overlap with those who were already shareholders, and that some may have gone in for stagging purposes, the increase in the immediate shareholding population must have been very large in any case.
Lord Bruce of Donington: My Lords, yes, I accept the point which the noble Lord has made. We shall have to wait until the figures are available to show the degree of stagging that has taken place. But the noble Lord will be well aware that in previous privatisation issues, the stagging rate has been roughly 70 per cent. of the original applications. I do not know what is the stagging rate in the case of British Telecom, but I should imagine, in view of the very lush profits that became immediately available, there would be quite large numbers of investors who would be only too happy to get a profit. But even so, even on the assumption that they are all new shareholders, it is quite clear that the individual investor in this country, the individual shareholder, is a minority of the population—not that they are not important, as I shall endeavour to show.
But the fact of the matter is that some 96 per cent. of the disposable wealth of the country is owned by 50 per cent. of the country; some 4 per cent. by the remaining 50 per cent.; and it is fairly clear that even on the basis of 4 per cent. or 5 per cent. of the adult population being shareholders, they are going to belong to those in the main—not always—who have incomes above some £15,000 a year. I rely for these figures, I am happy to say, on the journals of my own bank, the National Westminster Bank, which they are pleased to send me every month or so; and I have the figures in front of me.
Certainly they do not justify the remarks of the noble Earl, Lord Gowrie, in the course of the debate on 5th June, when talking of privatisation, that it gives everyone—everyone!—an opportunity to own a real share in the nation's assets. That, to describe it in the
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most polite terms—and I shall repeat it when next I have the opportunity of confronting the noble Earl, Lord Gowrie—is a lot of poppycock. The fact of the matter is that the shareholding population is a very small one and it cannot be assumed that we are even bordering upon that heaven of all heavens which is so frequently enlarged upon, with the euphoria of the Government Benches, as what they describe as a property-owning democracy. The bulk of the people of the country have no disposable property in the sense that gives them any sense of identity with the capital structure in the United Kingdom. The fact of the matter is that citizens of our country who are fortunate enough to be able to have the resources (after mortgage payments, not taking into account the amounts that they have on deposit with their building societies or elsewhere) are able to make investment in equities. And it is quite right and quite proper that these should be protected. We have to judge the Government's proposals within this rather narrow context as to how likely they are able to give the investors, albeit a restricted number of citizens of our country, that degree of protection to which they feel entitled.
Perhaps I ought to say too that, by and large, in the same way as the bulk of the citizens of the United Kingdom are decent, law-abiding people, so those that conduct our City institutions, the banks, the insurance companies, the investment trusts and so on, are honourable men. It is only a minority against which protection has to be afforded. I am bound to say that if a small investor wants to choose a stockbroker—if he is in that happy position and is not what we would call, rather loosely, the "professional amateur" with larger resources who can employ the services of his own accountant, his own lawyers, his own bankers, as the case may be—then the best thing to do is to get somebody who has been recommended to him. If one operates on the recommendation of an individual who has already had experience of a stockbroker, by and large that is likely to be the most effective way of choosing a stockbroker.
There are two aspects regarding the individual shareholder which need to be taken into account. First, he needs to have reliable information on which to base his judgment. Advice from friends in that connection is not always advice that one can take much account of. I personally make it a rule never to give a person a tip about a horse or an investment: that is the finest way of losing friends.
But information there has to be. I observed with some pleasure that the Government intend to take action in regard to tip sheets. Tip sheets tend to be very persuasive. They come through the post to a selected number of individuals, and occasionally I get one myself. I am bound to say that very often their accuracy can be called into question. I am quite sure that a large number of people may well place undue reliance on them. So I welcome the intention of the Government, when it comes to legislation—at least, that is what is put forward in the White Paper—that the publishers of tip sheets will have to be authorised. In that connection, I should like to ask the noble Lord what will be the criteria by which such approvals will be authorised and under what conditions.
I am a little worried about the exclusion of newspapers and periodicals from this form of control

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which the Government propose to take. There have been many cases in the past where very persuasive articles have appeared in newspapers, advocating the purchase of this or that share which has not proved all that reliable. There have been cases, which I think may be within the recollection of those of your Lordships who have studied this subject in the press during the last 10 years or so, where subsequently a rather strong connection has been found between the author, the tipster in the newspaper, and the company concerned or some of the leading investors involved. Therefore I would suggest to the noble Lord that the Government should take another look at this.
In regard to the professional advice that is given, I welcome also the Government's intention to do something about the licensing of those who are entitled to enter into what they call the investment business. They include people such as lawyers, professional accountants and so on. I gather that certain rules are going to be made, for example, in the case of a firm of practising accountants. If a large part of their business consists of investment advice, there are going to be certain special procedures, special undertakings and certain special steps that will have to be taken.
I could not agree more with the noble Lord, Lord Bruce-Gardyne, who referred to published prospectuses in the United States. I am bound to say that complete compliance with the Stock Exchange regulations has produced a form of prospectus which contains, for reasons of space, some very small type, which makes very tedious reading, and a person is supposed to read that before making up his mind on an investment. One has a suspicion that this small type is less for the information of the prospective investor, who in the end will rely on his own hunch, than to be in strict compliance with the Stock Exchange regulations.
However, that must not be taken as being any criticism of the Stock Exchange regulations. If all companies, whether the placing were private or public—and I am talking now particularly of private places—were to adhere in their presentation to the requirements of the Stock Exchange, there would be far less fraud and far less violence done to the interests of individual investors. Information, therefore, has to be accurate and there must be some way in which the Government can protect the ordinary citizens, or those 3 million or so who feel inclined to invest or who can afford to do so, by keeping the particulars accurate.
One way of investing, as I have said before, is to choose a stockbroker on a personal recommendation, because that normally means that they have had a good experience. I shall not deal with the whole question of Chinese Walls, which was touched upon by the noble Lord, Lord Grimond, save only to say that I agree with him. The Government have themselves, quite rightly, cast some doubt in their report upon the ultimate effectiveness here. However, I am not sure whether their own way of going about it will be very much better, because they have enunciated certain principles which they regard as being absolutely cardinal to any regulation which is ultimately agreed by the Stock Exchange and by the City generally. The principles which have been
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outlined are very admirable but, with the noble Lord, Lord Grimond, I am bothered about the enforcement. I hope that in the wider interests of the City—and of course that goes far beyond the question of the small individual investor to which, quite rightly, the noble Lord, Lord Grimond, has given such emphasis—the regulations which are published will be effective.
May I also underline again the point that if there is to be a law governing this and governing the framework, then it is no good, as in the case of the insurance Act of 1982, publishing the law but not making it an offence to break it. That is one of the things that may have lain behind a good deal of what has happened at Lloyd's recently.
I am hopeful that as a result of all the discussions taking place much good will come out of this. However, I should like to disabuse the noble Lord, Lord Bruce-Gardyne, of one of his beliefs, if he will forgive me. In the only party political observation that he was kind enough to make, he envisaged a kind of flight from the pound if there was a change of Government. There will undoubtedly be a change of Government, but I can assure your Lordships that the world at large will have far greater confidence in a Government who take steps to ensure that all the factors of production, human and mechanical, are used than in a Government who have promoted a situation where there are 4 million unemployed and where a vast amount of equipment is left idle and rotting.
8.39 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I really am most grateful to the noble Lord, Lord Grimond, for providing us with the first opportunity we have had of discussing in your Lordships' House this White Paper. Perhaps I could also say that I am personally grateful to him because when we discussed this matter shortly after the publication of the White Paper, it was his intention to put down a Question at that time. I asked him if he would be kind enough to delay it because I felt that we would have a better response generally throughout the country if it were delayed. So I am doubly indebted to him for this opportunity. It does of course also give me the opportunity at the same time to pay tribute to the work of Professor Gower, upon whose report so much of the White Paper is based.
The modernisation of the law on investor protection, and more effective enforcement, has become more important in the face of the many new and major changes that are taking place in the City. I believe that these changes will help to ensure that Britain remains one of the main financial centres of the world, and that British firms can compete effectively internationally.
All the noble Lords who have made their contributions this evening have paid tribute, I think quite properly, to the City in general terms; to the way they conduct their business and the value to our nation of the work that is done. Nevertheless, the changes that are occurring will create new problems and certainly new conflicts of interest, so that there will have to be new rules and methods of regulation to ensure that these changes are dealt with properly and that

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investors' interests, whether they be large or small, are properly protected.
The proposals in the White Paper for a new framework for investor protection have been generally welcomed. I have pages and pages of notations from interested parties who have responded to our invitation to consult. In the main, I can tell your Lordships that they are favourable comments. Certainly all those comments—and indeed all the comments that have been made tonight by noble Lords—will be taken into account in drafting the legislation, which my right honourable friend the Secretary of State for Industry hopes to be able to introduce in the next Session. Then no doubt we shall return to some of the more detailed points that have been made tonight.
The noble Lord, Lord Grimond, asks in his Question whether the Government are satisfied that the proposals in the White Paper will promote the interests of individual small shareholders. I take this opportunity to assure him that it is their interests that were very much in mind when the proposals were prepared.
The promotion of wider share ownership, about which the noble Lord, Lord Bruce of Donington, was somewhat sceptical, is a cause which the Government warmly support, as I know does the noble Lord, Lord Grimond. As my noble friend Lord Brabazon of Tara said in February of this year when he was responding to a debate on wider share ownership:
"The Government hope that the extension of private property ownership will enhance and emphasise the responsibility of the individual for both his own welfare and the welfare of his fellow citizens. It is part of the process of shifting power and responsibility from the State to the individual and, as such, is fundamental to the Government's basic philosophical approach to the job of government".
In particular, my noble friend went on to say,
"a wider spread of share ownership develops a community of interest in economic matters".—[Official Report, 20/2/85; col. 660.]
I do not dissent from what my noble friend said on that day and I shall repeat it in answer to the remarks that the noble Lord, Lord Bruce of Donington, made with regard to a democracy which has a share in the wealth of the country. It is this Government's policies that have enabled this to move somewhat faster in recent years than in previous years.
But of course individuals will not invest unless they are quite confident that they will get a fair deal. This is particularly important for a small investor with limited financial resources who may himself not be an expert. I may say also that the National Westminster Bank look after a small portion of my small amounts of money. I think that I might probably argue with their base figure of £15,000 because I do know people who have subscribed—notably to the National Freight Corporation, to British Telecom and to others—who have considerably less earning power than that. So I do not think it is a point on which to take great issue. Nevertheless it is people with such limited incomes who need the greater help.
Certainly one of the Government's principal objectives is to devise a regulatory system which ensures that the financial services sector in the United
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Kingdom is a fair place in which to do business, and where the small investor can confidently expect that his business will be handled with competence, honesty and regard for his individual circumstances.
However, I would underline that, as the White Paper emphasises, no regulatory system can, or indeed I think should, relieve the investor from exercising his own judgment and care in deciding how to invest his money. The Government's proposals are not intended as a substitute for the exercise of proper judgment and responsibility by the investor. The proposals are, however, to ensure that that judgment is reasonably and properly informed. If he makes a foolish decision on the basis of adequate disclosure, venturing all his savings in a high-risk proposition which fails for straightforward commercial reasons, he should certainly not look to any agency or Government department to make good the losses.
The central provision of the legislation will be a new and comprehensive definition of what constitutes investment and investment business. It will be an offence to carry on such business without authorisation, so that the investor who is dealing with an authorised business will know that that business is regarded as being "fit and proper" to undertake investment activities and will be subject to rules designed to ensure the proper conduct of those activities. There will be rules requiring disclosure of the information that an investor will need to make a decision, and the definition of investment business will include the giving of investment advice. In the proposed legislation, advisers will be under a duty of skill and care. They will also be under a duty to take account of the circumstances of each client and to dislose their own interests.
The principles governing the conduct of business rules will ensure that the boards make rules requiring investment business to segregate funds belonging to their clients and to have adequate compensation arrangements in the event of loss arising from fraud, negligence or failure to comply with the requirements for the protection of clients' assets.
Some of the comments that we have received on the White Paper suggest that our proposals on these points go too far and will be unduly costly. All I can say at this stage is that of course we will have to consider those comments; but it remains our objective that there will be full segregation and full compensation for private investors in the circumstances which I have just described. It will be for the Boards to work out the details of the segregation and compensation arrangements; but the Government will be required to be satisfied that those arrangements provide the kind of protection that I have just described. The new bodies—the Securities and Investment Board and the Marketing of Investments Board—have a key role to play in the new arrangements. It is for them to draw up rules for the authorisation of investment businesses and the conduct of business. The business rules will have to cater satisfactorily for the principles described in the White Paper which cover the subject of safeguards against conflicts of interests, compensation, and, as I say, protection of clients' assets. The boards will have to convince the Secretary of State that their proposed rules provide adequate investor protection before they receive delegated powers from the

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Secretary of State. The boards will then—and I think that this is the point which the noble Lord, Lord Grimond, asked me about—have a duty to monitor and enforce those rules and, if necessary, to update them.
One of the main advantages of the system of self-regulation within a statutory framework is that the regulation will be undertaken by bodies on which both practitioners and users of financial services are represented, and which can identify and respond quickly to any changes. I should perhaps say, because I think that the noble Lord, Lord Ezra, is particularly concerned with consumer matters—I am sure he will know, but it is worth while underlining it—that the chairman of the Consumers' Association is a member of both boards, so there is a consumer representation. This has been raised in a number of comments which we have received.
I want to turn now to some of the main questions that have arisen and I should like to begin with the question of the noble Lord, Lord Grimond, on sanctions. The boards will be able to reprimand, to impose conditions on doing business, to prevent the taking on of new business and to take other measures to protect investors in the event of a company being unfit or not proper. They will also have the power to withdraw authorisation to practice. That is, in itself, a fairly heavy sanction. That duty is commensurate with their overriding duty to protect investors, but, at the same time, they, have to ensure, alongside that responsibility, that an efficient United Kingdom financial services industry is sustained.
The noble Lord asked me, as did the noble Lord, Lord Ezra, about the matter of conflicts of interest. We recognise that there may well be more conflicts of interest and it will be the boards' duty to devise rules which prevent abuse in such conflicts, and the Government will have to be quite satisfied that those rules are adequate. Until the Secretary of State is satisfied, his powers will not be delegated to the boards.
We believe that there will be a continuing role for brokers providing personal service for individual small investors. Provided that that service is efficiently run, I am quite sure that there will be people willing and able to meet the demand of the smaller investor. Those companies will enjoy, and be able to pass on, the benefits of the advance of IT and modern technology and communications systems. It will probably be competition which will, at the end of the day, determine the level of commission chargeable to small investors.
I cannot predict whether commissions will rise or fall, but I would certainly expect a service enabling investors to choose between paying for a package of advice and dealing services, or as now paying rather less for a deal-only service. The Stock Exchange itself has set up an advisory committee to consider how to assist its members to be more accessible to the small investor and how to handle small commissions.
The noble Lords, Lord Grimond and Lord Bruce of Donington, as well as my noble friend Lord BruceGardyne, spoke about tip sheets. Certainly, tip sheets will be required to be authorised, and I would expect the SIB to draw up a code of practice for share tipsters
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which will need to make provision for adequate disclosure of interest in any share recommendation. The bona fide newspaper or magazine will not—certainly on current thinking—be required to be authorised, but we would expect that on a voluntary basis they will insist on their financial journalists observing the same code.
The noble Lord, Lord Bruce of Donington, raised in this context a number of points with regard to financial correspondents and the advice that they give. I should like to look further into that matter, rather than respond tonight. I feel sure that when we come to deal with the Bill he will want some detailed answers, if we have not already provided them, but I should like to do it then.
The noble Lord, Lord Ezra, spoke about life assurance. The White Paper states:
"Non-life insurance policies are not commonly regarded as investments and would not be treated as such in the proposed legislation."
I take note of what he says, and of course, we will consider that. I should also want to consider further the general position that is now obtaining, since the life assurance industry is developing licensing and, to some extent, those proposals were drawn up to deal with marketing issues to which the White Paper is addressed. It is largely a matter for the industry and the organising committees to decide how best to restructure those proposed licensing arrangements in the light of the White Paper.
My noble friend Lord Bruce-Gardyne and the noble Lord, Lord Ezra, both asked how complaints were to be dealt with. It is proposed that the boards will be responsible for investigating complaints about authorised business. The Department of Trade and Industry will be responsible for enforcing the criminal law; but, essentially, it is for the boards to work out sensible procedures for handling complaints. We shall have to see exactly what their proposals are in that direction—
Lord Ezra: My Lords, may I ask on that point whether the smaller shareholders spread around the country will be advised in some way of this complaints service when it is set up?
Lord Lucas of Chilworth: My Lords, I think that I can give the noble Lord, Lord Ezra, an assurance that those dealing on behalf of the small investor will be under an obligation to point out his rights. Exactly how it will be done I do not know, but I think that the noble Lord may rest assured on that point.
The noble Lord, Lord Bruce of Donington, touched upon the accounting profession. I know that it is so very near and dear to his heart, and I should like to say this to him. The importance of the auditors' watchdog role in the new system to be set up under the proposed Financial Services Bill cannot be over-emphasised. Legislation to strengthen their position might very well be included in the Bill if we thought it was necessary, and we are, of course, talking with them as to the necessity of that.
My noble friend Lord Bruce-Gardyne expressed some little scepticism in his opening remarks, and I shall not join him and the noble Lord, Lord Bruce of

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Donington, with regard to the flight of the pound in the event of certain totally hypothetical circumstances occurring. I myself cannot foresee them. But what I would say to my noble friend is, yes, there are moneymakers for raising capital, and I would point to the huge success of, for example, the unlisted market. I should not particulary want to quarrel with the figures that the noble Lord, Lord Bruce of Donington, mentioned with regard to the proportion of people being share owners. What I would say is that a very large number of initial shareholders in BT are still shareholders today. We shall see what the proportions are in two years' time. But let us not forget that more than 90 per cent. of the original shareholders in the National Freight Corporation still have shares. I believe that as people understand more about share owning, its risks as well as its advantages, more people will buy shares. More people will therefore need the services that are outlined in the White Paper.
The proposals are of particular benefit to the small investor. The institutional investor, the professional investor and the rich normally have either their own knowledge or their own expertise, but certainly they have the ability to buy the best advice. It is the small investor, the person thinking of investing in securities perhaps for the first time, who may need more guidance. The proposed legislation as outlined in the White Paper which we have been discussing this evening will help in this respect. It will give them the confidence that they will not suffer unfairly from their relative inexperience. They will be able to obtain the information and advice they need, and that will encourage them to invest more widely.
Finally, and perhaps at the risk of repetition, I emphasise that we in the Government recognise that it is the first-time and smaller investors who are most vulnerable in this field. It is their interests that the proposals in the White Paper are designed to protect.
Lord Ezra: My Lords, before the noble Lord sits down, may I ask him what the response of the people consulted by the Government has been as to whether there should be one or two boards? That was the question I put to the noble Lord.
Lord Lucas of Chilworth: My Lords, the Government have a fairly open mind still as to whether there should be one or two. One has to remember—this is not to prejudge any issue—that the chairman of SIB is on the MIBOC, and vice versa. There is a lot of cross-fertilisation. The chief executive and the secretariat serve both boards. In effect, one might say there is one. If, as we go along in these next few months, both boards decide that the functions could better be arranged and undertaken under a single named board, the Government would be quite sympathetic to any suggestion put to them.

Streatham Park Cemetery Bill
Reported from the Unopposed Bill Committee without amendment.

Representation of the People Bill
Returned from the Commons with certain of the amendments agreed to and the remaining amendments disagreed to with a Reason for such disagreement; the Reason ordered to be printed.
Housing Bill [H.L.]
Housing Associations Bill [H.L.]
Landlord and Tenant Bill [H.L.]
Housing (Consequential Provisions) Bill [H.L.]
Reported from the Joint Committee with amendments and recommitted to a Committee of the Whole House; the amendments ordered to be printed.
House adjourned at three minutes past nine o'clock.