Lords Sitting of 24 March 2004

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

Boys and Girls: Academic Achievement Gap
Lord Northbourne Lord Northbourne asked Her Majesty's Government:
What actions they are taking to close the academic achievement gap between boys and girls at school, given that in 2002 44 per cent of boys compared with 55 per cent of girls achieved five or more GCSE/ GNVQ passes at grades A to C.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland): My Lords, narrowing the gap in achievement is a key objective of our national strategies, which are designed to improve teaching and learning through from the foundation stage to GCSE. They emphasise engaging, interactive teaching. We are also identifying good practice through innovative school collaborative projects such as the Breakthrough Programme for Raising Boys' Achievement or the Playing for Success Centres, which harness the power of sport to boost skills and motivate boys.
Lord Northbourne: My Lords, I am most grateful to the noble Baroness for that encouraging Answer. Given that some schools, such as Kirklees School in Yorkshire and Notley High School in Braintree, have shown that the achievement gap between girls and boys can be narrowed quite dramatically—in the former case from 17 per cent to 3 per cent and in the latter by two-thirds—and that this is a matter of teaching, organisation and school ethos, is it not right that pressure should be brought to bear on all schools, or at least encouragement should be given to them, to follow practices that will give a fair opportunity for boys to achieve the education that they need and employability in the world in which they will have to grow up?
Baroness Ashton of Upholland: My Lords, I am grateful to the noble Lord for replacing the word "pressure" with "encouragement"; that is important. In particular, the Raising Boys' Achievement project, which is building on the work of 60 schools that have been innovative in this area, is designed to do what I believe the noble Lord, Lord Northbourne, seeks: to spread good practice, look at what has been successful in those schools and enable us to achieve that. We have also developed a network of collaboration between 23 schools that have shown outstanding achievement in this field in order to ensure that we learn the lessons and can spread that practice to all schools.
Lord Quirk: My Lords, does the Minister accept that the achievement gap at GCSE is related to a literacy gap which is already significant at the age of nine and which is as internationally widespread as it is puzzlingly recent? The noble Baroness will of course be familiar with research at the universities of Hull and St Andrews by Rhona Johnston and Joyce Watson, and elsewhere by Marlynne Grant, showing that this literacy gap can be entirely closed by a switch of teaching method. Will the Minister therefore consult with experts such as Jennifer Chew and Bonnie Macmillan about evidence that the gap is worst in countries that have neglected phonics teaching over recent years?
Baroness Ashton of Upholland: My Lords, as the noble Lord will be aware, we have emphasised phonics teaching in the early stages, particularly key stage 1 and the early years, for precisely the reasons that he has identified. As regards international comparisons, it is worth saying that the gender gap in England is significantly smaller than in most other OECD countries. I do not say that because we do not have much work to do, but it is none the less interesting. We are working with a number of different researchers in the field to see what we can do to enhance teaching and learning experiences. It was pleasing to see that at key stage 3 the gap between girls and boys is beginning to close.
The Lord Bishop of Portsmouth: My Lords, does the Minister plan to use the eight outcomes for children known in Portsmouth, where traditionally girls have outstripped boys, which identify the importance of positive role models, support at home and aspirations for achievement, in reversing the statistics outlined in the noble Lord's Question?
Baroness Ashton of Upholland: My Lords, it is important to look at the significant factors that affect achievement more generally. We know that gender is one of them, but, as I believe the right reverend Prelate was saying, other issues concerning social class, ethnic origin and the local context, for example, have a bearing on the achievement of children. It is important that we keep those factors in mind also.
Baroness Lockwood: My Lords, is it not a fact that we are now seeing a reversal of the traditional picture of boys beating girls at GCSE and A-level? The picture has been reversed by the kind of programmes put into operation in schools to bring up girls' performance and to even out the difficulties. I hope that the Minister will agree that the question of culture and ethos, and what we must aim at, is a balance between what is attractive to young women and what is attractive to young men, so that we do not have one soaring far above the other but rather we try to bring them along together.
Baroness Ashton of Upholland: My Lords, my ambition is that they should soar together. In the 1970s, in particular, work was focused on girls' attainment and, more particularly, their participation. Noble Lords will remember that girls' participation in maths, science, technology and such subjects was an issue in the 1970s.

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That has been addressed through the national curriculum and other work. As always, the critical factor is to look at what is happening in children's achievement to identify whether there are issues of gender, socio-economic grouping and so on, and to find strategies to enhance their ability to achieve.
Baroness Sharp of Guildford: My Lords, does the Minister agree that one of the changes that has taken place since the time when we were worrying about girls underachieving is the introduction of continuous assessment in GCSE examinations, with the shift away from the one-off, two or three hour examination? Has she any evidence to suggest that this may have had some effect on the achievement of boys and girls?
Baroness Ashton of Upholland: My Lords, it is not that girls were underachieving, it is that girls were not participating. They achieved very well in the subjects that they took. It was obvious that it was being suggested to girls that there were certain subjects that might be more appropriate for them. We should be clear about that. I do not have any evidence specifically about what the noble Baroness was asking. We know that the structure of the literacy hour—with clear outcomes and the way that it is focused around achievement—is having some impact on boys' attainment. There may be lessons that we can draw from that, which fits in a sense with what the noble Baroness was saying about the way in which boys learn, which we need to do more to understand.
Baroness Seccombe: My Lords, I hear what the Minister is saying, but does she agree that statistics show that girls do better in single-sex schools?
Baroness Ashton of Upholland: My Lords, I asked a specific question this morning about whether there was such an effect with single-sex schools. It is incredibly difficult to isolate that as an issue. There is conflicting evidence over whether examination results are better for pupils taught in single-sex schools. It is clear that where staff are fully committed to single sex education, where there is extensive preparation of staff and students, and where there are gender-specific teaching strategies, the outcomes can be greater.

Constitutional Reform: Ministerial Responsibilities
2.44 p.m.
Lord Peyton of Yeovil asked Her Majesty's Government:
Whether they believe that the office of Secretary of State for Constitutional Affairs will command the same degree of public respect as that of Lord Chancellor; and, if so, what grounds they have for so believing.
The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, the office of Lord Chancellor combines ministerial and judicial functions and the role of the Speaker of this House. The Secretary of State for Constitutional Affairs performs ministerial functions, will not be head of the judiciary, and will not be Speaker of this House. The offices will therefore be different. The office of Secretary of State for Constitutional Affairs will be entitled to, and will receive, respect.
Lord Peyton of Yeovil: My Lords, I see awfully little to be grateful for in that. Now that the noble and learned Lord gives the impression of being less insistent on the notion that a promise that has become inconvenient in performance can be regarded as time-expired, has he given any thought to some of the other measures that he has brought forward, particularly the abolition of the office that he now holds, the Lord Chancellorship? Is he not a little concerned that when he finds himself as a mere Secretary of State for Constitutional Affairs, he will be very much a sitting bird for the Home Secretary to pick off at leisure?
Lord Falconer of Thoroton: My Lords, I am glad to see the noble Lord, Lord Peyton of Yeovil, back—I hope with a new hip that works better than the last one. The new arrangements that we propose; namely, the Secretary of State for Constitutional Affairs performing the ministerial functions and the Lord Chief Justice being the head of the judiciary, as a combination, will provide the sort of protection that is appropriate today.
Lord Henley: My Lords, as the noble and learned Lord will be sitting on the committee that will be examining his abolition, can he confirm that he will not be able to give evidence to that committee, and that other Ministers—including the Prime Minister—can give evidence to that committee about the origins of the desire to abolish his post?
Lord Falconer of Thoroton: My Lords, I very much hope that I can give evidence, and I very much hope that the committee will agree that I do give evidence.
Lord Goodhart: My Lords, does the noble and learned Lord agree that the respect for either of these offices depends on the willingness of the Prime Minister of the day to appoint to that office a person who is worthy of holding it? Does he also agree that if a future Prime Minister were to appoint an individual unworthy of that respect, the grandeur and antiquity of the title of the office would not, and should not, guarantee respect for that person?
Lord Falconer of Thoroton: My Lords, it is a very important office, and of course it must be held by someone who is worthy of it. The fact that it is an important office does not mean that we cannot, after proper scrutiny, take steps to improve the discharge of the functions presently performed by the Lord Chancellor.
Lord Waddington: My Lords, will the noble and learned Lord the Lord Chancellor do his best to ensure that the deliberations of the Select Committee on the Constitutional Reform Bill do not end in a cosy lawyers' carve-up? Should not the object of the exercise be to ensure that we finish with a structure that is not just acceptable to judges and lawyers, but commands the confidence of the people because it does not involve the scrapping of well tried systems and the abolition of well respected offices?
Lord Falconer of Thoroton: My Lords, I feel that I can answer this question as one lawyer to another. I am sure that the important thing is to avoid any sense that there is a cosy carve up between lawyers, because that would not have the confidence of the people. I entirely agree with almost all that the noble Lord said. I do not agree with the proposition that we cannot provide a system. Indeed, I believe that we can provide a better system than the one that presently exists, if we make the necessary changes that we propose in the Constitutional Reform Bill.
Lord Renton of Mount Harry: My Lords, did the noble and learned Lord have the opportunity to listen to "Breakfast with Frost" on Sunday, in which Peter Hain, the Leader of the House of Commons, in answer to a question from David Frost about House of Lords reform said:
"I think instead of just looking at composition we will also seek to curtail the powers of the Lords … we need to bring down the period that it can frustrate the will of the Commons, from a year to under a year"?
Does the Lord Chancellor agree with that?
Lord Falconer of Thoroton: My Lords, sadly, I missed "Breakfast with Frost" last Sunday. The relationship between the House of Lords and the House of Commons is right at the heart of any issue relating to Lords reform. I would not wish to say at this stage what the right course is, hut, plainly, the issue should be examined.
Lord Ackner: My Lords, does not the fact that it was only after the former Lord Chancellor, the noble and learned Lord, Lord Irvine of Lairg, had withdrawn his name from the list of speakers who were to attack Clause 14 of the Asylum and Immigration (Treatment of Claimants, etc.) Bill answer the question?
Lord Falconer of Thoroton: My Lords, there was an issue with Clause 14 relating to the judicial review ouster. Many people, including the noble and learned Lord, Lord Irvine of Lairg, raised issues about that. The Government listened and withdrew the judicial review ouster.
Lord Selsdon: My Lords, if and when the noble and learned Lord the Lord Chancellor commits hara-kiri,
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who will stand between the Archbishop of Canterbury and the Archbishop of York in order of precedence in this country?
Lord Falconer of Thoroton: My Lords, I do not know. They may stand next to each other.
The Countess of Mar: My Lords, does the noble and learned Lord agree that respect should be earned, whether it is for an office or for an individual?
Lord Falconer of Thoroton: My Lords, I do.

Yarl's Wood
2.51 p.m.
Baroness Williams of Crosby Baroness Williams of Crosby asked Her Majesty's Government:
When the inquiry by the Prisons Ombudsman on the allegations of bullying and intimidation of detainees at Yarl's Wood immigration removal centre will be published.
Lord Bassam of Brighton: My Lords, my honourable friend the Minister for Citizenship, Immigration and Counter-Terrorism will make arrangements for the publication of Stephen Shaw's report as soon as possible following her consideration of its content and findings.
Baroness Williams of Crosby: My Lords, I believe that the report reached the Minister some time towards the end of February. On 11 December, he pledged to the House that it would be published as soon as possible. Can he give us any indication of when it will be published?
Secondly, why did the Prisons Ombudsman, who conducted the review, interview no past detainees, only current detainees? Past detainees would be freer to speak their mind and give evidence than current detainees, who might be concerned about their status.
Lord Bassam of Brighton: My Lords, I cannot be more specific about the publication of Stephen Shaw's report. As I indicated, a draft was submitted earlier this year—on 24 February. With regard to the interviews, my understanding is that detainees spoke to the inquiry team, as did members of staff. The inquiry team spent two weeks at Yarl's Wood, making sure that it had the opportunity to speak to those who had been detained and to staff as well. A fairly lengthy time and great care were taken to record as much as possible during the inquiry.
Lord Corbett of Castle Vale: My Lords, can my noble friend tell your Lordships' House what plans there are to rebuild the bit of Yarl's Wood that was destroyed in the fire? If there are no plans to develop the site, what will happen when, in two years' time, the Oakington immigration reception centre has to close

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because of housing development on the site, given the Government's ambition to expand the estate for the holding of some of those who claim asylum?
Lord Bassam of Brighton: My Lords, the first phase of Yarl's Wood has already reopened and provides accommodation for 60 single females. It reopened on 28 September last year. I understand that there will be a progressive reopening of the undamaged part of the centre, which will eventually accommodate up to 400 people, comprising single females and families. That should be complete by December of this year.
Viscount Bridgeman: My Lords, what progress is being made in addressing the specific criticisms in the report produced in April 2003 by Her Majesty's Inspectorate of Prisons on the five immigration centres that the provision of interpreters and translated documents was very poor?
Lord Bassam of Brighton: My Lords, it is hard to provide the noble Viscount with a specific response. I recognise that it is an important issue. I know that the Home Office has been addressing it and that great effort is made to ensure that the sort of services that are required for proper communication to take place are put in place and that those who are detained have access to their rights.
The Lord Bishop of Worcester: My Lords, will the Minister reassure the House that the delay—if there is one—in publishing the ombudsman's report is not related to any distinction between publicly and privately run institutions, in terms of the readiness to publish critical documents?
Lord Bassam of Brighton: My Lords, I am more than happy to give that reassurance. It is irrelevant whether the operators of any of Her Majesty's Government's institutions are public or private. Lessons must be learnt, if mistakes have been made. Given the thoroughness with which Stephen Shaw approaches such matters, I am sure that he will have provided the Minister with the fullest possible outline of what took place. I am sure that the recommendations will be carefully considered.
Lord Carlisle of Bucklow: My Lords, the Minister said that the report of the Prisons Ombudsman had been in the hands of Ministers for some weeks. Why is he unable to say when it will be published?
Lord Bassam of Brighton: My Lords, no doubt, the Minister is giving the report very careful consideration and taking its recommendations seriously.
Baroness Walmsley: My Lords, can the Minister clarify the Answer that he gave to my noble friend Lady Williams of Crosby? Was any access given to or any interviews done with former detainees, or were the interviews done only with current detainees? Has any
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disciplinary action been taken in respect of staff as a result of the allegations? Has any retraining taken place or been planned as a result of the allegations?
Lord Bassam of Brighton: My Lords, I would love to be more specific in response to the noble Baroness's first question. The advice that I have is that detainees were able to speak to the inquiry team; no distinction is made, I understand, between former and current detainees. I will check that point; the noble Baroness is right to press it. I cannot be very helpful with the noble Baroness's second point, for which I apologise.
Lord Berkeley: My Lords, will my noble friend remind the House whether the reopened sections of Yarl's Wood are equipped with sprinklers, to avoid a repeat of the disastrous fire two or three years ago?
Lord Bassam of Brighton: My Lords, I am happy to confirm that that is the case and that sprinklers have been fitted.
Lord Avebury: My Lords, will the Minister deal with the point raised by the noble Lord, Lord Corbett of Castle Vale? Oakington is due to close in two years, and the Government have no plans for any alternative facility. Could Yarl's Wood be extended to provide alternative accommodation to Oakington, thereby reassuring all the staff, who are in great anxiety about the future of the institution?
Lord Bassam of Brighton: My Lords, the noble Lord makes a good point. I understand that adequate provision has been made for removal centre locations. I will endeavour to check the point about Oakington, as it is an important matter. As I explained, there is an expanding facility anticipated at Yarl's Wood, with the gradual reopening of that facility.
Lord Hooson: My Lords, will the noble Lord clarify his response to the noble Lord, Lord Carlisle of Bucklow, who asked him when the Government intended to publish the report? He said that the Government had only recently received it. Is that any reason to refuse publication? The Government do not intend to change the report, do they?
Lord Bassam of Brighton: My Lords, the Government have no intention of changing the report. We particularly wanted an independent report. Stephen Shaw is a highly adept and effective official, and his independence is greatly valued. We will, of course, publish his report, and we will publish it when we are ready to do so.
Baroness Williams of Crosby: My Lords, in view of the indications in the original report that appeared in the Daily Mirror—that head-butting and other forms of restraint would be permitted—can the Minister

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assure the House that that would be out of the question in what, after all, is a detention facility where most of the inhabitants arc women?
Lord Bassam of Brighton: My Lords, I thought that I dealt with that matter when the noble Baroness raised it last year. We take it as given that that form of restraint would be highly inappropriate.

Kosovo: Repatriation
3 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
Whether they will suspend the return of asylum seekers to Kosovo until the situation is clearer.
Lord Bassam of Brighton: My Lords, the situation in Kosovo developed quickly last week. The United Nations Interim Administration in Kosovo which oversees flights of returned asylum seekers advised us on 18 March that due to the security situation it would not be able to accept forced repatriation flights until further notice.
In the light of that, flights returning failed asylum seekers to Kosovo have been temporarily suspended. We shall continue to monitor the situation closely in conjunction with the Foreign and Commonwealth Office with a view to resuming flights as soon as is practical and possible.
Earl Russell: My Lords, I thank the Minister for that reply. In considering how long the duration of this policy should be, will he take account of the remarks made by Ruud Lubbers of UNHCR on 18 March, in which he referred to,
"the fragile character of the situation in Kosovo"?
After all, we are dealing with people's lives, about which we ought not to take too many chances.
Lord Bassam of Brighton: My Lords, the noble Earl is right. Those comments are very important. I have no doubt that they will be carefully considered. The Government take the situation in Kosovo very seriously. For that reason, we have suspended flights and are not returning failed asylum seekers to Kosovo.
Lord Renton: My Lords, bearing in mind that for a good many years now in this country we have absorbed many genuine asylum seekers and many whose claims were not genuine, will the Government be firm in ensuring that those who are not genuine have to return to their own countries?
Lord Bassam of Brighton: My Lords, clearly that is the intention of the Government. It is also the case that we are returning increasing numbers of failed asylum seekers back to where it is most appropriate for them to return.
The Lord Bishop of Portsmouth: My Lords, according to my somewhat confused mind, asylum
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seekers can be returned to their country of origin if it is deemed part of a safe area. I think that what lies behind the Question posed by the noble Earl, Lord Russell, is perhaps a need to loosen up exactly the definition of safe areas. I am not at all sure, and I wonder whether Members of the House agree, about the policy being adopted by the Government. Will the policy of not returning asylum seekers be viable?
Lord Bassam of Brighton: My Lords, what needs to be understood is that we have to take very careful cognisance of the safety of those we seek to return if their asylum application has failed. That is exactly what we have done in this situation. We have acted entirely properly. That course has been well advised.
Lord Avebury: My Lords, will the Minister join me in congratulating KFOR on its prompt reaction to the crisis and the rapidity with which we moved forces in to prevent a much greater loss of life than actually occurred? When the Government decide to resume flights, will they pay particular attention to minorities such as the Roma and ensure that the situation in Kosovo is safe for them as well as any others who may be returned?
Lord Bassam of Brighton: My Lords, the whole House will want to congratulate KFOR. It has done a splendid job in the circumstances, for which we are very grateful. My noble friend Lady Symons is taking very close note of what the noble Lord said. I am sure that that will be communicated.
Viscount Bridgeman: My Lords, does the Minister agree that the constitutional limbo in which Kosovo finds itself as defined by Security Council Resolution 1244 represents a major barrier to the move towards stability and democracy in the country? Can he tell us what progress is being made in the Security Council in settling the status of that territory?
Lord Bassam of Brighton: My Lords, I must confess that the noble Viscount has asked a question that is well beyond my brief. To be entirely fair to him I ought to provide him with a written reply.

Foot and Mouth Disease Inquiry
3.4 p.m.
Baroness Byford Baroness Byford asked Her Majesty's Government:
Why the evidence of the Department for Environment, Food and Rural Affairs veterinary officer Jim Dring was not forwarded to Dr Anderson's "Lessons Learned" inquiry into foot and mouth disease.
Lord Whitty: My Lords, at the time there was a concern that the contents of Mr Dring's personal statement, had it received publicity beforehand, could have been prejudicial to Mr Waugh's trial, at which Mr Dring was a witness of fact. Mr Dring contributed to the epidemiological investigations set out in the

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Defra report to the Anderson inquiry and his own notes of his visits to the Waugh farm were submitted to that inquiry.
Baroness Byford: My Lords, I thank the Minister for that response. How soon after the outbreak had occurred was the decision taken to withhold the evidence from Dr Anderson's inquiry? At what level was that decision taken? Was the Minister advised at the time?
Lord Whitty: My Lords, the decision was taken around September/October 2001 when we were submitting papers to the Anderson inquiry. I can give the noble Baroness the exact date. As to the level at which the decision was taken; it was taken by those who were compiling the evidence for the Anderson inquiry on legal advice. Ministers were not informed. As Ministers subsequently have said, had they been informed, they would not have taken the same decision.
Lord Livsey of Talgarth: My Lords, does the Minister acknowledge that the cover sheet on Mr Dring's 30-page memorandum apparently had been removed when it explicitly stated that it was to "The Anderson Inquiry, Room 207, Ashley House, 2 Monck Street, London SW1P 2BQ"? Dr Anderson's report is entitled, "Lessons Learned". What lessons have Defra learnt as a result of this alleged sleight of hand? Is not the best action now to hold a very brief inquiry into this matter? Clearly, foot and mouth is far too important to be left on the shelf.
Lord Whitty: My Lords, it is clear from the cover note and from what Mr Dring has said that he wanted his personal statement to go to the inquiry in some form. The legal advice was that it could be prejudicial to the trial of what almost certainly was the starting point of foot and mouth and therefore to any judgment that that court made. In a sense, that was understandable legal advice. Officials acted on that advice. It is clear that that was the process.
What is now clear is that Dr Anderson should have received that. He would not have put it in the public domain. Had Ministers been informed of that decision based on genuine legal advice, they would have taken a different decision. It is important that Dr Anderson should have been able to make his own judgment on what was in Mr Dring's letter. However, it is also important that, now that Dr Anderson has seen the letter, he says that it would not have altered the terms of his recommendation from the inquiry.
Lord Rotherwick: My Lords, was Dr Anderson aware that he was not receiving this information? Is there any other information that he did not receive that he should have received?
Lord Whitty: My Lords, clearly, Dr Anderson was not aware that that information existed. Of course, he was aware of Mr Dring's involvement and he had sight
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of Mr Dring's contemporaneous notes of his visit to the Waugh farm. Therefore, he was not entirely without information on Mr Dring's views and what he had done.
As to other information, there was some information that was summarised because it was based on confidential material. However, as far as I can ascertain, it does not appear to be the case that other material was withheld for the same reason or for any other reason. However, I shall qualify that. Until two or three weeks ago I was not aware of Mr Dring's letter either. Nevertheless, they were rather special circumstances which related to what were probably the most important legal proceedings arising from the foot and mouth epidemic.
The Countess of Mar: My Lords, does the noble Lord believe that the failure to submit this evidence to Dr Anderson had any effect on the Government's decision to ban swill feeding without compensation for a very small number of pig swill feeders? They were obeying the law by doing exactly what they were told and cooking the swill at the right temperature. They had never created any problems. Does the noble Lord think it is fair that these people should not be compensated?
Lord Whitty: My Lords, at the time the Government were sensible to take the decision to ban swill feed. Indeed, that action has in many respects now been followed by Europe as a whole in the light of the clear evidence that swill feed could have contributed towards or brought the diseased meat into that particular pig farm. In such circumstances it would not be normal practice to compensate because that was a measure was taken for public health or animal health purposes.
Viscount Bledisloe: My Lords, what right or power does some official in Defra have to suppress a communication from Mr Dring to Dr Anderson without the permission or the knowledge either of the author of the document or the person to whom it was addressed?
Lord Whitty: My Lords, officials in Defra and elsewhere are encouraged to take legal advice on how they should proceed in relation to any documentation provided which makes reference to an ongoing legal case. In normal circumstances that would be a sensible and orderly decision, and we would expect officials to take note of that legal advice. Because of the wider significance here, it may be that it should have been referred upwards to senior officials and Ministers, but I would not suggest that officials were acting out of order. They acted in relation to normal instructions. As Members of the House would expect, officials are encouraged to follow legal advice.
Baroness Byford: My Lords, does not the noble Lord agree that it is regrettable that that decision was taken and that neither officials at Defra nor the

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Minister were informed? Members of the House are deeply concerned about the spread of disease. The one thing that we have tried to bring into being is an animal health Bill that in the future would prevent or restrict the spread of disease very quickly. What steps will the Minister take to ensure that these disgraceful events do not happen again?
Lord Whitty: My Lords, I have said that I regret that the letter did not go to Dr Anderson. However, I do not think that it has had any bearing on Dr Anderson's decision. He has made that clear himself. While he feels that he should have seen the letter, he has also said that it would not have changed his decision and recommendations.
Turning to the efficacy of the recommendations, those matters have been debated at considerable length both here and elsewhere. I believe that what has been put in place, along with the contingency plan for dealing with any future outbreak of foot and mouth or similar disease, will prove effective. However, vigilance is required on the part of farmers as well as on the part of enforcers and veterinary advisers.
Lord Soulsby of Swaftham Prior: My Lords, regrettable as this incident might be, does not the Minister agree that one of the major problems at the time of the outbreak of food and mouth disease was the very substantial reduction in manpower in the State Veterinary Service? That put everyone under a great deal of pressure. Without wishing to excuse the situation, can the Minister provide some evidence that the shortage of staff in the State Veterinary Service will be attended to?
Lord Whitty: My Lords, as the Government's evidence to the Anderson inquiry made clear, the changes made to the manning levels of the State Veterinary Service have not been as drastic as is sometimes alleged in terms of farm visits, although it is true that there have been some shortages. Indeed, Mr Dring's statement refers to certain constraints he faced because of staff shortages. We believe that the State Veterinary Service is staffed at the appropriate level to deal with today's problems, but we also need to call on private vets should this or a similar disease break out again. That is very much a part of our contingency plans for dealing with any future emergencies.

Business of the House: Debates this Day
3.14 p.m.
The Lord President of the Council (Baroness Amos): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord King of Bridgwater set down for today shall be limited to three hours and that in the name of the Lord Fowler to two hours.—(Baroness Amos.)
On Question, Motion agreed to.

Business
Lord Grocott: My Lords, I need to relay a short item of business to the House and I am sure that noble Lords will be patient and understanding. The next debate is a very important one on defence. The Minister, my noble friend Lord Bach, was scheduled to be back in the House in good time for the debate. Today he has been visiting the Royal Navy at Faslane. His plane has been delayed. Although I keep looking at the door, it is expected that we shall be able to start the debate in 20 minutes' time, at 3.35 p.m.
Obviously it would be inappropriate to start the debate when the Minister is not in his place. This has been discussed in the usual channels, but more particularly with the noble Lord, Lord King of Bridgwater. Everyone has been most understanding. For the first time in my life I have watched Question Time hoping desperately that the questions would be longer. However, in the circumstances, the sensible action is to adjourn the House.
Lord Selsdon: My Lords, before the noble Lord sits down, perhaps I may ask him one question. As he has said that this is an important debate, why are so few Members on the Government Benches speaking in it?
Lord Grocott: My Lords, the answer is that Members on these Benches are in total support of the Government. In particular, my noble friend Lord Bach will be adequately equipped to deal with any queries that may arise. I beg to move that the House do now adjourn until 3.35 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 3.15 to 3.35 p.m.]

Defence
Lord King of Bridgwater Lord King of Bridgwater rose to call attention to defence policy, including the additional challenges posed by terrorism; and to move for Papers.
The noble Lord said: My Lords, in preparing for this debate, I took account of the events that occurred since we knew that we would have this debate. I remind your Lordships: Madrid, the atrocity; the assassination of a Government Minister in Herat in Afghanistan; the intensive fighting in Waziristan; the outbreak of attempted ethnic cleansing, perhaps, again in Kosovo; the assassination of Sheikh Yassin; the civil riots and petrol bombing in Basra; and the seemingly continuous backdrop of murder of American soldiers and Iraqi police in Baghdad and surrounding areas.
I welcome the Minister, understanding that he has had an extremely difficult journey and very much appreciating the efforts that he will have made. It is not my peroration but merely my introduction that he has missed.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, perhaps I may take this opportunity to apologise to all Members

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of the House for not being in my place at 3.15 p.m. I think that the House knows that I was fulfilling a longstanding engagement with the Royal Navy on the west coast of Scotland. It would have been quite wrong for me not to have gone there. The plane back was delayed. If it had not been, I would have been in my place at 3.15 p.m. I of course apologise to the House, and especially to the noble Lord, Lord King, for not having been in my place.
Lord King of Bridgwater: My Lords, I entirely appreciate—as will the House—the Minister's reasons and the important engagement, which is not one that allows for much flexible timing. You are very much at the mercy of your conveyors, as you might say, when you arrive in Faslane. I hope that the Minister had an interesting trip.
I instance that background to describe what events have taken place. I want to talk about the background to them. I have previously referred to what I think is a dangerous world. The Cold War ended in an almost headlong rush. One of its worst legacies was from one of the last events of the Cold War: the Russian invasion of Afghanistan and the rise of what might now be recognised as the militarisation of militant, extremist Islam.
Afghanistan became the perfect training ground for a movement that was in any case showing considerable pressures, strains and activity because of events in other parts of the world. Many young men travelled to Afghanistan, joined the Mujaheddin and were supported by the United States and us with weaponry and by the Saudis and others with substantial funds. They learnt to fight; they learnt how to conduct warfare against a sophisticated, major modern adversary; and they learnt the fullest compendium of terrorist capability.
They were successful and we cheered them for it and admired them. I remember, at the beginning of the Gulf War, the arrival of the last of the coalition, the Mujaheddin, the Taliban from Afghanistan, who came to help the Kuwaitis in recognition of the Saudi and Kuwaiti contribution to their fight in Afghanistan, to help to clear Saddam Hussein from his illegal invasion of Kuwait. But, of course, having come from this perfect training ground with the gratitude of the Taliban, it did not end there. The Taliban was able to offer massive training facilities. Its instructors were hardened, trained professionals from the Afghan war and there were opportunities for those skills to be deployed in Bosnia and the fight to support the Muslims there; in Chechnya and the Muslim resistance and search for independence; in Kosovo; in the everlasting challenge of Palestine; and now in Iraq.
Out of that has come a recruiting and training system of quite enormous dimension. I do not think anyone knows how many thousands passed through those training camps. Every fresh activity seems to provoke a further grievance. How many willing recruits will the assassination of Sheikh Yassin produce for the training camps that Al'Qaeda may be able to establish?
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I instance this because it could easily be thought that some of the problems we face at the present time are a few rather dangerous sparks of a fire that will be easily extinguished. Any fair analysis will recognise that we face a major conflagration that has been stoked for some time and is a major threat to the world.
I wrote a foreword on behalf of the Intelligence and Security Committee six years ago, as the noble Lord, Lord Campbell-Savours, will recall. We expressed then increasing concern over Islamic terrorist threats. Five years ago in my foreword I said:
"Last year we spoke of the scale of terrorist attacks around the world, which averaged 60 a week, and of increasing concern over Islamic terrorist threats. This year saw the attacks on the US embassies in Nairobi and Dar es Salaam which killed 220 people"—
slightly more than were killed in Madrid—
"and wounded 5,000"—
significantly more than in Madrid—
"and which confirmed the scale of the threat posed by Osama bin Laden and other Islamic groups".
If one observes the examinations and investigations taking place in Washington at the present time on Capitol Hill, one hears the question being asked as—your Lordships may fairly ask—about why we did not have greater consciousness at the time these events were taking place. I omitted from that list of events the earlier attempt on the World Trade Centre some 10 years ago and the subsequent and serious attack on the USS "Cole". So American experience of such attacks is over a long period.
We must recognise that we face an enormous challenge and that it will be a long haul. It will be an even longer haul if we make no progress in the main conflict areas. The ones that I have immediately in mind are Palestine and Chechnya. So my first priority for a defence policy has nothing to do with our Armed Forces but presents a major challenge to the diplomatic skills of the world and ourselves to make some proper progress on those long-standing and troublesome issues.
If we are to have a successful defence policy, our second priority must be to sustain public morale at home. I am critical of the statements made by some with current responsibility who refer to the terrorist threat and say that it is not a matter of "if" but "when". That is not a particularly helpful message. It is not certain that it will be "when". Of course the risk is enormous; of course the threat is very great; but we have substantial capabilities in our intelligence and security services which have served us very well in the past. Our hope must be that, with the maximum public contribution, vigilance and willingness to accept some difficult changes in the way in which we go about our lives, we can determine to ensure that it is not a matter of "when".
Incidentally, I was talking earlier today to Sir Michael Quinlan, the ultimate guru on nuclear policy, who told me that in the late 1950s that was said about nuclear war; that it was not "if' but "when".
If we are to sustain the morale of our people they must understand that we will do our best; that we do have capabilities; and that it is the determination of the

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Government, and the leadership that I am sure they wish to give, to ensure that it does not happen here. We should tell the people the truth, make every reasonable preparation we can to prevent it happening, and give the leadership that people deserve.
The truth is that we have no choice but to stand. We do not face an enemy with whom we are able to negotiate. Against extremist, fanatical militants of this kind we have no choice but to stand. At the same time, we must distinguish them from those who have legitimate grievances, with whom we should certainly seek to engage. So that is the background against which I approach the defence policy.
At this most dangerous time it is absolutely vital to sustain our defence expenditure, which is under unacceptable strain. The reality is that, as we do not know at any one minute what is going to happen—as we did not know until a week ago that we were going to send another battalion to Kosovo; as we did not know that we were going to send another 100 SAS to help in the exercise in Waziristan to tackle Al'Qaeda and to assist the Pakistan army—it is absolutely vital that we maintain our capabilities in this field.
As to resources, I listened to the Chancellor in his Budget speech. I still do not know what he was saying. Against the Aunt Sally that he put up that he might freeze defence expenditure and cut it in real terms, he said:
"At a time when our armed forces are now serving in Iraq, Afghanistan and Kosovo as well as in Northern Ireland and elsewhere … such a course would be irresponsible … I reject it … I can tell the House that I propose real terms increases in defence spending".—[Official Report, Commons, 17/3/04; col. 333.]
The House of Commons and everyone else thought that that meant there was to be new money and a significant new increase in expenditure. The briefing afterwards stated that there was to be no new money. If that is the economic situation, tell the truth. Do not try to embroider it for the sake of a Budget speech that sounds good at the time but proves to be a great letdown to those in the Armed Forces.
The reality is that we shall have to look at our defence policy. One of the phrases that I lived with in my time, which others know well, is that it is not "how many" but "how capable". That sounds jolly good, but if there is ethnic cleansing in Kosovo it cannot be dealt with by a UAV and a stand-off missile; if problems explode again in Afghanistan, you will not deal with them without boots on the ground and people who can play their part. I am afraid that that means not only capabilities but people as well.
I should say to the Minister that he is able to make announcements about what the Armed Forces—the Army, the Navy and the Air Force—and the Ministry of Defence will do largely because of what others have prepared for him before. He and his colleagues are the trustees of our present capability. But that has been bequeathed to him by others. Of the equipment that he was able to praise and produce in the Iraqi campaign, a great deal of it was ordered during my time and earlier. The Eurofighter was ordered way before I became Secretary of State—so you can tell how long
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ago it was—and we do not have it in service yet. So a lead time is necessary for providing such items of equipment.
There is also a lead time for providing that most effective requirement to which Ministers throughout the generations have stood at the Dispatch Box and paid tribute—the wonderful calibre and quality of our Armed Forces. They are admired around the world, led as they are by the captains, the majors, the colonels, the sergeants, and the sergeant-majors, who were trained 10 or 15 years ago. They have been trained and retrained; they have been retained; they have made their career in the services and have given the leadership, around which the recruitment of those who have a much shorter span within the Armed Forces make their contribution as well. So the judgment on the Minister will be made not on how well we do next week or next year, but on whether he hands on those capabilities to his successor and the successor after that.
I was deeply distressed to read the Select Committee report on what happened in Operation TELIC. There is no doubt that the Government took a risk and did not give adequate notice to the forces and the logistics staff for the preparation. What happened to some of the forces who went out there was a disgrace—the shortage of ammunition, the shortage of personal body protection, the inadequacy of uniforms and the lack of desert boots. Those were problems that all Governments have, but it was crucially, above all, because it was left too late. The Select Committee was absolutely right—there was no need to leave it late because diplomatic measures, with overt preparation for military force, was the most likely way in which to avoid a conflict.
Our forces are dangerously stretched at present. The TA and reservists, above all, perhaps, are under quite exceptional pressure. Unless we ensure that the resources are there and can maintain the morale, the training and the capability of our forces, we are on borrowed time. And there is nothing worse than being on borrowed time in such a dangerous world. My Lords, I beg to move for Papers.
3.52 p.m.
Baroness Dean of Thornton-le-Fylde: My Lords, I thank the noble Lord, Lord King, for introducing this debate and setting the scene for the very wide issues that we face. I should also like to comment on the earlier remark about there being only one speaker from the Labour Benches; my noble friend the Chief Whip said that the Minister would answer every point and we would all support him. I do not want it to be thought in any way that I do not support the Government. As a colleague said to me, "Brenda, you're playing left-wing, right-wing and centre-forward today for the party".
This is a very difficult and wide issue and I am pleased that we are debating it today. No doubt we will continue to debate it, because, as the noble Lord, Lord King, said, this is not a five-minute wonder. It is with us; it is about life today. I should like to

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concentrate on the Armed Forces, accepting that perhaps today, more than ever, the integrated working of not only the Armed Forces but our security services generally is essential.
I predicate everything I say against the background that our Armed Forces like to work. They like to do what they are trained for, and if that means being posted into an operational field more than once, sometimes several times, over a two-year cycle, they will face that. But it is a question of what comes with it and what we as a nation give them to carry out that role and to recognise the impact on their lives and families as well.
In the debate on the White Paper of 11 December last year, Delivering Security in a Changing World, Nicholas Soames, leading for the Opposition in the other place, said that he generally agreed with the thrust of the paper. I think that most people would, although there would be great differences on the detail. Chapter 5 of the White Paper deals with personnel. It announced that in April this year, the Government would publish a personnel plan. Essay 5, which accompanied the White Paper—I do not always follow the terminology—talked about the increasing competition and cost of personnel because of the Armed Forces having to compete with other parts of our community. That is essential. Will that personnel paper be published, as a policy, in April, on time? It has to be integral with the overall defence policy.
The National Audit Office report and the report of the Select Committee on Defence referred to by the noble Lord have criticisms but they also recognise what has been achieved. The reports are very positive. The House of Commons Defence Committee report refers to the impact of Operation FRESCO. The firefighters' dispute came out of nowhere—who would have thought it would have had an impact on how our Armed Forces, all 19,000 of them, would be expected to cover in that industrial situation at the same time as preparing to go to war in Iraq? That was an enormous challenge that had a side effect we must consider.
The report referred to lost leave. I gather the situation is improving considerably, but it has an impact on retention. Recommendation 86 talks about the key effectiveness of our services based upon their training. If we do not have the resources available, whether it is time or physical support, that will affect training. If there is anything that helps the professionalism of our Armed Forces, it is the good training that personnel receive.
On the reliance on reserves, the problem over the years is that the reserves, and their employers in particular, probably thought that they would never be deployed. In some skill areas, such as medicine, as much as 10 per cent of the overall cover is provided by the reserves. That has presented problems, and it is covered in Recommendation 29 of the Defence Committee report. It certainly reflects what I heard, going around talking to Armed Forces personnel. They talked about people having lost their jobs when they come back, which confirms what I heard.
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We need to recognise where we have made progress. Staging has gone—it was a legacy left by the Conservative Party when it left government. Although it was some time ago, because personnel such as majors—not the corporals and privates—have made the Armed Forces their career, they still ask questions about staging. It affects morale and it affects their pensions later on. So the fact that staging has gone is welcome.
The welfare package has in recent years improved enormously the support for the Armed Forces and their families when they are deployed. The treatment of partners, as announced in the Iraq conflict, should a service man or woman be killed in action, is very welcome. So there have been many improvements.
A survey of 11 fellow nations and partners—Australians, Americans, Canadians, and so on—showed that the overall conditions and package for our people compares very well with theirs. In addition, of course, the long-awaited outcome of the pensions review is still outstanding.
We have seen progress, but I believe that we are poised at a very important time for defence in this country. We talk about education, health and our communities, which are all very important issues. But defence and defence policy need to be up there with those issues as a priority for the Government in view of what we are facing as an individual nation and what others around the world face. If these terrorists believe in anything, it is that the world is a village. Borders do not matter to them and neither do nationalities.
It is terribly important that the resources for the defence budget are strictly monitored and watched over very closely to ensure that the money is spent properly—sometimes it is not. Those resources are crucial, and I will address my remarks to this matter in the closing minutes of my contribution to this important debate.
Resource account budgeting has proved difficult for the MoD in particular. Like anything new that is trialled, there are always hidden problems. I was pleased to read that an increase in real terms means that. If it is announced in a Statement by the Chancellor of the Exchequer, I am sure that it will be honoured. However, the problem is that we are talking about the next spending round which does not start for two years. We have a problem here and now. The rumoured £1.2 billion shortfall is not an insignificant sum. It is an enormous amount of money. If we are to make savings in the long-term defence budget, it cannot be cut in the first year, because one cuts the very things that are needed. These are people-related issues. Contracts are entered into and time is needed to deal with them. Keeping ships tied up and telling pilots that they cannot go on training because it is too expensive will not help us to contain and use our resources properly.
It is important that we ensure that, in the interim period of two years before we get the real increase—unless the Minister makes my day by telling me that we will get that increase in real terms from this year—we make it clear that we do not expect the £1.2 billion

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shortfall to take place. People are not interested in defence because of any macho reason. I am interested in defence because of the defence of this nation. I want to make sure that the compact that we have as a nation with our Armed Forces personnel is honoured fairly. I hope that the Government also think that.
When the Cold War came to an end, about 30 per cent of the defence budget was cut. Enormous numbers were slashed. That was some time ago, but the services are still feeling the effects of the skills black hole caused by those jobs going. The Armed Forces are still short in some key skill areas. These issues must be addressed in an overall defence policy.
4.2 p.m.
Lord Bradshaw: My Lords, I thank the noble Lord, Lord King of Bridgwater, for introducing this debate. I will turn attention away from defence to terrorism. I declare an interest as a member of the Thames Valley Police Authority. I am speaking in this debate because my attention was drawn to a newspaper headline that I noticed at the station. It announced, "We are not prepared". It was, as usual, a scare story. It said that if there were a Madrid-type incident in this country, we would be in chaos for a long time.
A good deal is being done to prepare us for the consequences of such an incident. About three weeks ago in the Thames Valley, we ran an exercise called Operation Red Signal. It was a partnership operation between the police, the health service, the fire brigade, the military and all sorts of other people. It was not a job for a few office boys around a table. It involved a lot of real people, with two unconnected incidents happening simultaneously on a Sunday in the Thames Valley area. A good state of readiness to respond was shown. There was a rather grim attitude rather than an enthusiasm to respond, but we are moving towards being properly prepared for an event, even though it is impossible to know what it might be or where it might happen.
However, such exercises are very expensive. This one lasted only a day, but the police costs for my own authority were more than £500,000 and there were further costs for each of the 15 or 16 local authorities for the lire service and ambulances. Our authority went three times over the Government's suggested level of precept, so we had already stretched the Deputy Prime Minister's patience to the limit with what we asked of the council tax payers. There will be more exercises and more alarms, but we must spend the money. To some extent, that touches on what was said by the previous speaker. These are expensive but necessary things to do.
We have to set such exercises beside the Government's priorities to cut burglary, car crime, robbery and drugs misuse. We have a great shortage of experienced people, because most of our officers leave us to work for the Met. We are constantly recruiting officers and we have a young and very inexperienced force of people. They are not unenthusiastic, but they are inexperienced. Looked at from the point of view of those who lead the police force, the day-to-day work
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is very difficult. It is intensive and nerve-racking work, deciding what to do and when to do it, knowing that the blame in modern circumstances will fall on the front-line police officers, who will be asked why they did not foresee the problem. I am afraid that incidents are now seen as media events rather than tragedies. There are also the inevitable after-the-event opinions of journalists who criticise everything from the safety of not having to plan, foresee or do anything.
There is a second element involving delicacy of judgment—not to make a pre-emptive move. If people are to be prosecuted—and many noble Lords have referred to this matter in this House—evidence is required in order to make arrests. There will be problems if someone is jumped on too soon, without sufficient evidence. However, the webs involved in international terrorism are extremely complex and secretive, as the noble Lord, Lord King, said. I challenge my own Benches to consider how much civil liberty needs to be conceded in this fight. Do we take risks in circumscribing the liberties of a very small number of people when, on the other hand, there is the possibility of the death or injury of a very large number of people? Officers have to make such judgments. The primary function of the police force is to protect the public, but it can be a very uncomfortable trade-off.
For example, along with other police forces, we recently received reliable intelligence of the possibility of an attack on an aircraft approaching or leaving Heathrow. Huge numbers of police, some military and other people were involved in what had to be an intrusive operation to thwart this threat. Such operations may involve intrusion into people's lives and liberties, but the alternative could be a major almost unspeakable tragedy. Similarly, we must view stop-and-search as a necessary weapon in such a struggle which has to be balanced against treating ethnic minorities or asylum seekers with dignity and respect. This debate is not helped by people who use arguments about stop-and-search that are ill founded and ill researched as fairly cheap political propaganda.
I am not expecting an off-the-cuff answer on this matter, but the railway systems in the capital are extraordinarily vulnerable to attack. Will the Minister ensure that the police are equipped with sufficient good-quality equipment to x-ray packages that are found and those that are left in left-luggage offices? I believe that there is some equipment, but there is only a limited amount that has to be shipped around from station to station according to demand. We should supply equipment that is needed to deal with the terrorist threat.
I conclude by saying that the co-operation at local level is better than ever. People are working together. Those in local government and the police, ambulance and fire services have a unified command structure to deal with the problems. The area is very difficult but the agencies involved are working hard to ensure that, if required, they are prepared—not willing or enthusiastic but quite determined to deal with the problem. The chiefs of our public services are doing their best to keep up our defences and preparations much as the noble Lord, Lord King, asked. It is not easy in a world where newspapers seem to make a virtue of ghoulish headlines,

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but it is one where the people who are doing the work at ground level deserve tremendous support wherever they can get it, because they are doing a very vital job for our community.
4.11 p.m.
Lord Craig of Radley: My Lords, I, too, should like to thank the noble Lord, Lord King, for introducing this important debate. I should like to concentrate, and narrow the focus of my remarks, on Eurofighter, or Typhoon as it is now named for the Royal Air Force. It will be a key contributor to our defence capability for many years ahead. Control and dominance from the air are widely agreed to be vital to success in military operations. However, there continues to be a great deal of adverse criticism about this major equipment programme: it is said to be outdated, delayed, too expensive, designed for the Cold War and not required for today's and tomorrow's front line.
Bearing in mind the comment of the noble Lord, Lord King, about long gestation periods, it will not surprise your Lordships to know that I was closely involved in the formative period of that vital air power requirement. As Chief of the Air Staff in 1987, along with my opposite numbers from Germany, Italy and Spain, I signed the revised operational requirement for the project. Before that, we had some hope that the French might be persuaded to join us, but that was not to be. We envisaged then that prototypes would be flying in the early 1990s and that the aircraft could enter service by mid-1995 in the air forces of all four countries. Regrettably, we are still nowhere near that level of achievement. It has been a highly unsatisfactory and frustrating story for the air forces and, of course, for the nations involved. I shall not attempt to apportion blame, some of which must lie with the manufacturers and more with the behaviour and procrastination of all the governments involved.
There have always been, in a major collaborative programme, periods of review and uncertainty as governments and new administrations satisfy themselves about committing very large sums of money to the next stage of development or manufacture. In spite of all our experience with such programmes, we have yet to be realistic enough about the political/bureaucratic problems. At times, frustrations are such that it is tempting to pull the plug on the whole programme, but except in the very first few years that is rarely very realistic either, any more than would have been an early decision to run the whole programme as a national one.
For those who criticise the delays and inefficiencies of this collaborative programme, I have a lot of sympathy; but for those who then go on to criticise the performance and operational need for the aircraft, as part of their argument for withdrawing from its procurement, I have no such sympathy at all. Cost is one criticism—and, yes, the programme is costly and imposes a major demand on the defence budget for a number of years, some of which is already past expenditure and so of no more than academic interest, and some is still to be committed.
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Our Armed Forces are today being committed to a global expeditionary role, which in turn requires new capabilities, particularly if we are to operate alongside United States forces, as the Government have stressed that we must expect in their recent defence policy statements. I welcome that. We have only to recall the many years of air operations over the no-fly zones in Iraq or the intense rates of air effort at the start of any recent campaign, to appreciate that there is a real and critical role for air power in all warlike and conflict prevention scenarios.
While one would hope to be able to bank on the short, sharp shock, the more likely eventuality is that roulement and replacement of deployed forces will have to take place. For each squadron's worth of strength deployed overseas, another couple are required to allow for operational role training, recuperation, and the ongoing requirement to provide experienced instructors for the next generations of air crews.
Critics argue that Typhoon is far too sophisticated for today's type of operation. It was designed, admittedly, to fight in intensive combat against Soviet forces, and we no longer face such threatening capabilities, so it is claimed that it is no longer required. But critics do not think to distinguish between the performance of the airframe—the platform—and the weapons systems with which it may be equipped. In the late 1970s and the 1980s, a great deal of study was undertaken into the relative performance of an airframe and its weapons for the air superiority role. High manoeuvrability and agility of weapon and/or airframe are of course essential if one is to give one's air crew a reasonable chance in a one-on-one joust in air superiority battles against well equipped enemy fighters. It would be foolhardy, as well as immoral, to set out to equip one's own side with inferior performance overall to that of potential adversaries.
The outcome of all the operational evaluation work was clear: the airframe itself had to have high manoeuvrability. Hence the design and performance of the Typhoon airframe. But what seems to be overlooked completely in the argument is the enormous flexibility offered by this high agility in air power's other key requirements. Yes, there is air superiority—but in addition there is a platform with different or additional weapons and other pods that can provide for close air support, air offensive and reconnaissance roles.
The operational lives of modern airframes are much greater than those from a couple of generations ago—and some of those did us well. I flew the Vulcan in every rank in my service from Squadron Leader to Marshal of the Royal Air Force. The Vulcan and I entered the Royal Air Force in about the same year. Nearly 40 years on, it was still in service as an air-to-air refuelling tanker. The B52, a strategic Cold War bomber at outset, is now rearmed with smart weapons and able to provide close air support for ground forces from far-flung airfields. The Canberra, the RAF's first jet bomber, is, 50 years on, an outstanding intelligence platform with its modern sensors. Those and other Cold War airframes are still flying operationally in today's conflicts. I expect the same longevity for Typhoon, with weapon changes and upgrades over the years of its service life.

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At the end of the day, one of the best tests of any equipment is whether those who will have to rely on it for their lives like it and are happy to be operating with it. I have no doubt that there is a big thumbs-up from the air crew now that Typhoon is at long last in RAF hands and will soon reach the front line.
So long as our Armed Forces are to be sent on expeditionary operations far from home bases, they must enjoy the protection, both offensive and defensive, that only air power can provide. Typhoon has a critically important role to play in any future operations. Its initial cost will be well amortised over a long in-service life. I hope that the Government will continue to give it the fulsome support it deserves to help to meet the Government's defence objectives.
4.20 p.m.
The Lord Bishop of Portsmouth: My Lords, I begin by commiserating with the Minister for the circumstances that brought him here this afternoon. I look forward to his words at the end of the debate. I hope that he will have caught his breath by the time we finish.
This debate is important and timely. Like others here this afternoon, I want to say how grateful I am to the noble Lord, Lord King, for inaugurating this exploration of a number of interlocking issues that need to be addressed together, which is precisely the advantage of an occasion such as this. We do our defence policy, in relation to terrorism or anything else, a grave disservice if we do not see it in its complexity.
For example, I am sure that many noble Lords are relieved by the promise held out in last week's Budget that defence spending is to be increased in real terms. But we need to know more about what this will mean in the long run. There are some large equipment spends coming up that have already been negotiated and of which knowledge is in the public domain. I refer, for example, to the new Eurofighter aircraft and the two new aircraft carriers that Portsmouth will be proud to have in the naval dockyard. But there is the lack of equipment for front-line troops in Iraq. This may be explained by the fact that it simply arrived at the wrong place, which may reveal a lack of investment in logistics.
There is also the fact, which comes across to amateurs such as me, that modern warfare is reported and debated by the media in a way and to such an extent that would have been impossible, and probably not allowed, even 10 years ago. That places a burden of accountability on the Government and Armed Forces that they have not hitherto known or experienced.
In recent years many quite dramatic thresholds have been crossed. For the navy world-wide, the suicide terrorist attack on the USS "Cole" in Aden in late 2000 opened a new era in force protection for sea-borne forces. That has led to the need to work out exactly how to identify and destroy at sea vessels full of explosives.
As the First Sea Lord, Admiral Sir Alan West, has made clear recently, the role of international policing currently undertaken by the Royal Navy includes
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curbing the work of modern-day pirates and uncovering the insidious links between terrorism, drugs and arms smuggling, as well as the smuggling of illegal immigrants. These facts are not known to the public. They can be known but many people seem to be unaware of this widening role. Eighty per cent of the world's trade and 95 per cent of Britain's trade moves by sea. Our country is more reliant on the sea than almost any other nation. A threat at sea has a direct impact on us.
In all the reorganisation that rightly goes on in our Armed Forces, it is important that we are aware of the need for high morale among our service personnel, as the noble Baroness, Lady Dean, said earlier.
That brings me to the question of security. Security processes are now far tighter. As we know well, that affects civilians. We are getting used to living in a far less predictable and far more dangerous world than the one in which my generation grew up during the Cold War, which was stark and resented but was, in some strange ways, manageable; at least it was more manageable than the situation that we are in now. In the presence of the noble Lord, Lord Campbell-Savours, I am not sure whether I am allowed to admit to being the son of a former MI6 officer, but since he has died I am perhaps allowed to do so.
Our new climate of "controlled fear" places new burdens on many of our institutions and intelligence, as a concept, often has to carry additional burdens that may make us confuse it with fact. When the facts, as we experience them, do not match the intelligence that we may maintain we have received, it is assumed that something must be wrong with the system and heads must roll. That is not always a helpful way to operate. All knowledge is partial because it is incomplete. We cannot always know and express the whole picture. In being aware of what we come to know and in trying to communicate it, we are limited by our attitudes, which are formed by education, experience and country of origin, as witnessed by possible changes in policy towards the Iraq conflict and its aftermath in Spain.
That brings me to terrain that noble Lords might expect to be covered by someone speaking from these Benches. In the major speech given by the Prime Minister on 5 March, he referred to,
"the poison of religious extremism,"
and the need for the peoples of Iraq and Afghanistan—I am glad that he mentioned both and not just Iraq—to be enabled to triumph over that kind of oppression. Since 9/11, religion has re-entered the world map with a new force that cannot be dismissed by the western, secularist agenda. If we follow that tack we shall be storing up a great deal of trouble for ourselves and the next generation.
As my friend the most reverend Primate the Archbishop of Canterbury has said in some recent public contexts, religious extremism needs to be countered with religious language, knowledge and understanding. He said that more work needs to be done in order to find the right kind of language, not only for dialogue with religious leaders and between them, but for really effective religious education in our

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schools. Religious education should be about more than exploring rites of passage and festivals, important as these are. It should be about much more basic questions, such as why people believe certain things and what makes them act in a particular way. The challenge that I, as a theologian and a bishop, have to live with is how those two relate to each other, if they do so at all. The word for actor in the original Greek is a hypocrite and all men and women of faith are challenged all the time as to whether they are actors, even when they are dressed in rochet and chimere in your Lordships' House.
I am aware of straying into other areas but, as one might say in the Navy, that is my part of ship. We need to know what the extra resources in the Budget are likely to produce and to learn lessons from logistical mistakes in the Iraq conflict, as well as elsewhere. Those of us, including me, who were doubtful about the wisdom of getting involved in that conflict, even on the worthy grounds of tempering US policy a little, need to realise that we have to start from where we are: post 9/11, post the initial part of conflict in Iraq and post the Madrid bombing.
For those who have studied the history of world civilisation in any depth, there are many lessons to be learnt, the most important of which is that there are always new forms of old dangers. Europe's 20th century collective memory is scarred by the two world wars. It is one of the reasons why we instinctively mistrust authority and historic institutions. We need a defence policy that is backed up by adequate defence resources in this new, wonderful, but at the same time, errant, world in which we find ourselves.
4.28 p.m.
Baroness Park of Monmouth: My Lords, as Sir Kevin Tebbit told the Defence Committee,
"British military forces are designed for serious military duties rather than simply peace-keeping".
By dint of immense professionalism and courage they performed magnificently in Iraq, but I suspect it was a close thing. Operation Fresco, which tied down 19,000 troops to cover the firemen's strike, preventing them from training and rotating, undoubtedly adversely affected our operations in Iraq and, as the Defence Committee said,
"could have undermined the Armed Forces' ability to sustain combat operations".
The Armed Forces are being more and more stretched to cover more and more tasks and a breaking point must come. It should not lie with them to make more cuts in an already overworked and under-resourced force, but with the Government who should refrain from adding to the demands placed upon them while still withholding the essential resources. Highly trained and highly motivated men and women should not be lightly discarded to save money; nor should the facilities needed such as training to make them effective.
The Chancellor, as the noble Lord, Lord King, has already reminded us, believes that we should support our Armed Forces to ensure and enhance our security.
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He rejects the idea of freezing the defence budget and cutting it in real terms as irresponsible and contrary to the national interest and proposes a real-terms increase in defence spending. On the face of it, those are very reassuring words. Why then is it widely feared that severe cuts throughout the forces are having to be considered? I suggest that too many commitments have been blithely agreed, especially in Europe, and the Army is being used far more than ever before as a useful political weapon in operations that do not necessarily serve the nation's defence interests.
While I believe the Government and, still more, the media have misjudged our national character in giving so much oxygen to terrorism by making such a public drama of the potential terrorist threat, steps do need to be taken to free whatever military resources—including naval forces—are judged necessary to prepare our defences. We have, after all, plenty of experience, thanks to the IRA—I never thought to thank them for anything. The man in the street only wants to feel reasonably confident that measures are being quietly taken to ensure that there are proper plans and enough resources in terms of intelligence, policing, urban planning and military resources. An important step to be taken at once is to ensure that the Armed Forces are able to do their prime job of defending the realm. That means freedom to train and to rotate and to work in conditions that encourage men and women to stay in the forces.
Add our NATO commitment and the fact that only we and the French—and in due course, perhaps, the Poles—have professional standing armies, and we must surely begin to wonder how many more hats we can expect our Armed Forces to wear and still be able to defend this country, especially against a very sophisticated terrorist threat. Russia, too, has not gone away. There are still considerable stocks of weapons of mass destruction vulnerable to theft or illicit sale. Despite much investment since 1991 by the EU to dispose of 40 tonnes of chemical weapons, for instance, some 35 tonnes have still not been disposed of.
Since 2000, the MoD has worked as part of the new Global Conflict Prevention Pool with the Foreign and Commonwealth Office and DfID. It is described as a joint approach to reducing conflict. Necessarily, our military strategy is thus more tied than ever to political and humanitarian goals. That sounds splendid, but it makes planning very difficult and can only dilute the military ethos and lead to defence needs being subordinated to non-military aims and thus to losing sight of the main priority, the defence of the realm. Part of that defence is to know our enemy—how he thinks, how he feels. Reviving MECAS would be a useful start.
I beg the Government to recognise that the armed services will no longer be able to carry out their vital tasks if they are spread too thin. Not least, they must not constantly be required to do the impossible in interventions which may not be directly relevant to our defence. Pride in their professionalism is an essential component of their success; it can only be blunted by perpetual overstretch. These men have families. Marriages are constantly eroded by the unreasonable demands being put upon husbands and fathers. That is a serious social injustice.

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Unfortunately, developments in the EU in the past four years and the many new tasks arising from the SDR doctrine of a defence strategy driven by foreign policy and humanitarian needs mean that our Army, as well as ensuring strategic national defence, both here and abroad, must be ready for global intervention, peacekeeping at several levels and special forces tasks as in Afghanistan and Sierra Leone.
It must fight as part of NATO, as part of the EU, as part of the UN, as the partner of a sophisticated high-tech ally, the US, and as the framework nation leading a so-called EU force where the only other professional army at present is the French. It must be equally capable of a high-tech war requiring interoperable skills and sophisticated command and control procedures with the need for rapid deployment to a rescue operation such as Sierra Leone or the recent deployment to Kosovo. The training for those two tasks is very different, as are the weapons and skills used. Asymmetric warfare and its new challenges will also call for very sophisticated training and flexibility. What chance have our Armed Forces of continuing to perform miracles if they are denied the resources and there are too many tasks?
At present, we are committed to five EU strategies. The first is the EU working with NATO. The second is the EU on its own, doing peacekeeping and the Petersberg tasks. The third is the EU conducting, under the new Solana strategy, early, rapid and robust intervention in other countries on a global basis before situations deteriorate or before terrorism or proliferation threatens. The EU expects to be able to conduct, and it says so in its strategy, several such operations simultaneously—with whose troops? State failure and regional conflict may be judged under the strategy to require preventive intervention by force of arms.
Fourthly, the EU and the UN have signed a formal protocol to co-operate on crisis management where they are to train and exercise together with interoperable troops and a common command and control structure. Fifthly, the EU and the African Union have agreed on the development by the African Union of a Peace Support Operation Facility. That turns out to be an African military force, to be funded by EU development money and monitored by DfID and other development officials. This African conflict prevention force would intervene in unstable situations, where necessary with the EU supplying logistics, communications support—both things that we are short of—transportation costs and per diem payment for the troops.
Finally, it is vital that our Armed Forces should be able to draw upon good intelligence. It is good news that the idea of a central European security agency is not to go further. Bilateral relations work and are trusted, in varying degrees, for the exchange of intelligence and another Europol would not be useful. I hope the Government will also resist any movement towards broadening access to intelligence in this country. We are facing a ruthless enemy which is not a national entity easily identified but a kind of amorphous jellyfish. That enemy must be kept
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guessing. We must never forget that whatever is said in public, in Parliament or elsewhere in a free and open society, will be heard too by our enemy.
4.37 p.m.
Lord Bramall: My Lords, I, too, am most grateful to the noble Lord, Lord King, for this debate at this crucial time, when our military commitments and challenges are manifestly so many and the pressure of stretch and finance on the Armed Forces still so great.
In the memory of many of the British public, the Armed Forces of the Crown have done everything that could be expected of them over a wide spectrum of operations. As a result, the country may well have become complacent and come to assume that they will always be successful in any task given them irrespective of those pressures to which they are continually subjected. This may prove a dangerous assumption. There is not much wrong with their organisation and speed of response for war fighting, peacekeeping or anti-terrorist operations. Indeed, the confidence and capability which comes from the first is invaluable in dealing with the second and also with the third, which of course depends as much on international police co-operation, on greatly improved intelligence, on highly selected land and air operations involving special forces and, as the noble Lord, Lord King, said, on solving the key diplomatic issues. But it is important to recall how marginal the circumstances have often been which have allowed the Armed Forces to be so successful.
Over the past quarter of a century, we have had for instance, the Falklands campaign, when I was Chief of the General Staff, which was embarked upon only just in time because many of the ships vital to that operation would have been dispensed with because of financial pressures and the consequent political decisions. In the first Gulf War, a great deal of cannibalisation of equipment and units from the three divisions in the then much stronger British Army of the Rhine was needed before one effective armoured division could be put into the field. The ground war then lasted only 100 hours so casualties were minimal and the logistic machine was not really tested.
In Bosnia our intervention was mostly of the peacekeeping variety with only an element of peace enforcement, while in Kosovo the commitment of our ground forces was dependent on Yugoslav compliance induced by 70 days of high level air bombardment, much of it provided by the Americans. One year ago in Iraq, the British joint forces were able to operate effectively in their own way in their own time without pressure on them to get to Baghdad quickly. Their area—Basra being much more homogeneous than Baghdad—was somewhat easier and the casualties therefore thankfully light, and the duration of the operation was again really too short to test any inherent weaknesses in equipment and the logistic chain, although some obvious ones did become apparent.
Against the background of it "just being all right on the night", there are four areas that give great cause for concern because they would increasingly affect

721
performance. The first is manning where the quite unacceptable and unsustainable overstretch has led to disappointing retention and continued undermanning, cancelling much of the improvements on recruiting. I agree entirely with the noble Baroness, Lady Dean, that soldiers like to be actively employed, but there is nothing unusual for soldiers in combat units to have nine months' separation from their families in every year, and for operational tour intervals to be no more than a few months instead of the two years thought to be essential for proper leave, vital retraining and domestic harmony, and promised year after year by Ministers as being an aim that will be achieved "just round the corner".
Moreover, few combat units can now operate effectively in battle without some injection from other units and other cap badges and without reinforcement from the Territorial Army. This, of course, applies particularly to the medical services. It may be possible to reorganise combat units and the regimental system so that they are a bit more economical in organisation and movement costs, but whatever happens in Northern Ireland—that is by no means clear—whatever pressures there are on finance and whatever improvements in technology may be said to be in the pipeline, there must be no fewer units or less manpower allowed for in future plans. Otherwise, it will not be possible to provide a proper roulement for all the various commitments, both those manifestly current and those as yet unforeseen but no less likely if the Government are to continue a hectic policy of intervention operations, some of which are, of course, essential. Having enough boots on the ground and being ready to relieve those on the ground to maintain and sustain the commitment must be a high priority, and the noble Lord, Lord King, made the point so graphically.
I mentioned the TA which, despite a financial squeeze on training days, has proved its quality as the best reserve we have, and its ability to integrate with and reinforce regulars in emergency operations. Moreover, its partial mobilisation worked well. The fact may have to be faced, however, that for the immediate future this volunteer force may have partly "shot its bolt"—volunteers feeling that they have done their stuff and finding that on their return their jobs have been put at risk. That must be watched very carefully because, vital as the volunteers remain—not least because of the terrorist threat to this country—an undermanned Regular Army may not be able to rely on them to quite the same extent for operations overseas. If that flows into the medical services, medical cover could be in real trouble.
That brings me on to the third concern—the medical services. The centre of excellence on which the regeneration of the defence medical centres was based, and was boasted about, is now a bit of a nightmare. At Birmingham there is neither the space nor as yet any indication that the money will be provided to produce the facilities and the right esprit de corps, both so essential if this centre is to be the beacon of quality and example which will encourage middle peace doctors
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and surgeons to stay on in the services. Certainly a great deal more money will have to be spent on the centre if it is not to fail. If it fails, we shall not have any regular medical services to speak of. Therefore, I should like an assurance from the Minister that the necessary money will be provided.
Shortages in vital equipment and weaknesses in the logistic chain still exist, particularly in the signals field and ground to air communications for which in Iraq the British Armed Forces were almost entirely dependent on those provided by the US Marine Corps. Other shortages, of course, have been given rather more prominence in the press.
To conclude, I believe that the public should be made aware of all this because unless the Ministry of Defence tackles these things with a high degree of urgency instead of, for political reasons, playing them down or even denying that they exist, there is a real risk that the next time the Armed Forces are ordered to take part in medium or large scale intervention operations, it will end in the sort of military disaster that we have avoided for the past quarter of a century. When I say, "tackling", it will, of course, mean getting the Prime Minister's backing to obtain the necessary funding from the Treasury on which all these improvements may ultimately depend. Much play is again being made about a marginal growth in the defence budget, but, as we have heard, this is probably not new money, and in any case is almost certainly offset by the money that the Treasury is now demanding back as a result of a new accounting system forced on to the MoD to its disadvantage.
During the previous defence debate I gave the Minister every opportunity to deny my point that in practice there would be less and not more in cash flow terms for vote holders in the coming years to end the serious shortcomings. Noble Lords may think it was significant that he decided not to do so. After all they have done, and continue to do, at the drop of a hat to support this country's foreign policy, I believe that the Armed Forces deserve better. I just hope that the British people will remember this.
4.47 p.m.
Baroness Sharples: My Lords, I, too, wish to thank my noble friend for initiating today's debate. I very much welcome the noble Baroness, Lady Dean, as the new chairman of the All-Party Defence Group in your Lordships' House. I am sure that she will be a great success.
With other Members of your Lordships' All-Party Defence Group, I visited the Defence Logistics Organisation near Bath a year before the exercise in Oman. At that time the organisation appeared ready—or it told us that it was—for the problems that obviously lay ahead. The aim of the exercise was obviously to expose any flaws in the organisation. As we were told following the exercise, there had indeed been problems with certain equipment. So when the war in Iraq started, had the initial difficulties and mistakes been rectified? It appears—other noble Lords who have spoken have mentioned this—that in many instances they had not.

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Reports from those actually fighting make disturbing reading. We have certainly seen a lot about this in the press, and I do not think that it has been exaggerated. I can only pray that in any future conflicts, men and women can rely on those behind them not to let them down.
The Defence Logistics Organisation is vast, employing some 28,000 people. Each of the divisions within that organisation is charged with a distinct task. I shall not elaborate on that. Is its strategic goal to reduce output costs by 20 per cent before the end of 2006 realistic if it is to provide a truly first-class service to the front line which is its objective and which is necessary for it to do? To have set up the DLO combining the three services must have been the right decision at the time. It was set up only in 2000, so it is not very long ago. One realises that the initial difficulties must have been considerable. Were the initial savings of £2.8 billion necessary and were they a factor in the lack of certain equipment in Iraq?
Restructuring now undertaken shows that lessons have indeed been learnt, and I hope that they will be truly learnt. The approach now taken seems realistic. Yesterday evening, the group was lucky enough to be addressed by Sir Alan West, who was encouragingly upbeat and optimistic about the future of Iraq, which he had recently visited. Like many of us he wondered why so few of the press presented a similar view.
My worries are genuine, and many noble Lords feel the same way; many of the public feel the same way. I sincerely hope that when the Minister replies, he can honestly—I mean honestly—reassure us on the various concerns expressed.
4.51 p.m.
Lord Lyell: My Lords, noble Lords consulting the list may wonder why I am batting before two noble and gallant Lords. The Minister may come to understand three wicked words—"Just in time"—to which I shall refer, and I am afraid that the problem is due to the slight disruption of time. I am one of those multi-role combat Peers, and I shall have another duty in your Lordships' Chamber before the close of the debate. That is why I am very grateful to the speakers who have allowed me to make a few short comments in support of my noble friend Lord King. He has enormous experience of defence, of course, not least against terrorism. He was a fine boss when I was last in the employ of the government in Northern Ireland. He has enormous experience; we heard of a great deal of it today.
As my noble friend Lady Sharples said, we are extremely lucky to have the noble Baroness, Lady Dean, as the chairman of the House of Lords defence group. It is 31 years since I made my first visit with it. Over the years, I must have made upwards of 50 separate journeys, some far, some near, but on each and every journey one message was hammered home to me: it was the men and women of the defence forces that made them the best in the world. Indeed, that was brought home very shrewdly by the noble and gallant Lord, Lord Bramall.
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I am one of the last conscripts in the British Army. I think that there are four conscripts speaking today. My noble friend Lord Selsdon asked me this morning what my record and regiment were. He may have something to say on the subject; I must cut my remarks fairly short. In three months, May, June and July 1957, a well known sergeant in the Coldstream Guards known as "Kiwi"—after the boot polish, not the creature—insisted on the very highest standards. He turned youths of 17 and 18 such as myself into soldiers. I have never forgotten that. We find noble and gallant Lords, senior officers and every kind of distinguished man and woman serving in the defence forces. What someone such as myself considers important first of all, whether we are talking about men or women, is that they be soldiers—they should not start dreaming about being a leader or moving up; they must do their job. That is the strength of the British defence forces.
Since the 1950s and even the 1960s, the British defence forces have become all-volunteer. As has been stressed by my noble friend Lady Park and, above all, the noble and gallant Lord, Lord Braman, overstretch now meshes dreadfully with domestic life. The men and women in the defence forces are not like African or Mexican warriors, leading a celibate and delicate life until 35 or 40, whereupon they retire to domestic life. Our volunteers want to lead normal lives. I worry a little when I hear gentle tales suggesting that there are occasionally some difficulties in filling all the vacancies on the non-commissioned officers' course in Brecon for the future leaders in infantry tactics.
Indeed, the noble and gallant Lord, Lord Bramall, stressed the appalling problem of overstretch. We always hear—undoubtedly we shall hear it again tonight; I point out to my noble friend Lord King that we have heard it from noble Lords of all persuasions—that the average gap between tours of duty is two years. Of course it is not. First, we have to deal with cross-posting, filling up other regiments. Special duties in special areas may cover many roles. Also, there is the length of training for those separate and quite often new tasks. All that reduces the two-year gap. It is nothing like that. My noble friend Lady Sharples referred to the First Sea Lord. He pointed out that, even in the Royal Navy, overstretch and retention is becoming a little problem.
It is clear that the defence forces cannot perform their full duties without marvellous help from the reserves. I have some figures from 2003. My noble friend Lord Luke and the noble Lord, Lord Brett, came with us to Cyprus. One tenth of the British battalion on the blue line in Nicosia were reservists. In Kosovo two years ago when the noble Earl, Lord Attlee, came with me, 37 of 115 of the personnel at the headquarters of the multinational brigade were reservists. Of course, that is just the headquarters; the figure was 8 per cent for the total. The noble and gallant Lord, Lord Braman, pointed out that the proportion in the Defence Medical Services is much higher. Without the reserves it would be in far greater difficulties, and the difficulties are bad enough as it is.

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I am sure that the Minister looks after equipment and what I think he calls procurement. Priorities are obviously the name of the game, and I am sure that he, his entire department and his sector will be very professional. However, I hope that the first priority every single day, week and month for him, his department and the Secretary of State would be what I call the kit—the body armour and NBC kit needed by soldiers and defence forces. We might have had slightly distorted reports in the press, but there can surely be no excuse for problems over body armour. The second priority is ammunition. We have had reports—ever so discreetly—that units were occasionally short of ammunition. Then there is the question of food, drink and all the tents, as was referred to by the noble and gallant Lord, Lord Bramall.
After I left the British Army, I was trained to be an accountant, so I am very well aware of what Americans call inventory and we call stock. My noble friend Lord King referred to the Select Committee on Defence in another place. The Minister would be knocked from here to heaven and back if it found warehouses full of obsolete kit from the 1950s and 1970s, so he is squeezed delicately. He does a decent job, and I congratulate him, the Ministry of Defence and all those who made Operation TELIC such a success. Many things went right, perhaps by luck, but I suggest that there was some good judgment.
I have a little motto: "Every little helps". That is a rather naughty jingle, but it is very true. Every improvement in kit, weaponry, perhaps avionics—that was spoken about by the noble and gallant Lord, Lord Craig of Radley—and families and welfare keeps the men and women of our defence forces in the place where they should be, which is being the best. The right kit must arrive on time, the forces must be trained to use it and, above all, the Minister must take on board the question of overstretch. Indeed, it was stressed to us last night that Operation FRESCO pushed one section of the Armed Forces to a very critical level of margin, given the manpower and duties that were expanding all over the world.
I hope that the Minister can take that on board. I am very grateful to my noble friend for initiating the debate and to other noble Lords. I for one want to thank every man and woman in the forces today, tomorrow and every day. They do not have such a comfortable life as we do, on our soft leather Benches; they work and work for us all.
5 p.m.
Lord Boyce: My Lords, let me add to others before me my own welcome to the initiative of the noble Lord, Lord King, in refocusing the attention of this House on defence. Given that, as we speak this afternoon, there are some 33,000-plus soldiers, sailors and airmen scattered around the world on various operational duties—duties that are all arduous and many dangerous, but all being conducted with exemplary professionalism—defence is certainly a subject that deserves a higher profile than it
726 ordinarily gets, especially as the tempo of military activity is hardly slowing, as our deployment to Kosovo showed last week.
We have a defence policy which encourages that high tempo, with the Armed Forces being enjoined to develop their force planning such that it is able to cope with multiple concurrent small to medium sized operations—including contributing to countering terrorism—on a global basis. I do not have a particular problem with that. But agility, mobility, responsiveness with high levels of readiness, and the ability to shift information fast and act on it with minimal delay, will be key features needed to enable that policy. We are also encouraged to believe that the future equipment programme is being shaped to accommodate those capabilities, or improve them if they already exist, especially in the development of technologies using network techniques.
But, we need to assess carefully how the change to the new way of doing business will be managed. We absolutely must be wary of getting rid of old systems until the new ones are adopted in good working order—especially if the aspirational specification has been diluted, or brought in incrementally for reasons of economy. We must remember that however clever the new technology, it does not allow a unit to be in two places at the same time. We will want to keep in mind that much of the future hi-tech that is given so much hype is not suited for what goes on operationally for the vast majority of the time—that is to say, mundane, albeit important, low intensity peace keeping tasks which do not require super hi-tech capabilities to conduct.
I shall give a couple of examples which, needless to say, have a maritime flavour. I am sure that the Royal Navy will be delighted to have further evidence that it has such a champion in the shape of the right reverend Prelate the Bishop of Portsmouth, following his intervention. The future carrier should be an archetype of our new technology—a system with global reach that will have a potent, self-contained and sustainable offensive capability, providing presence, deterrence and coercion independent of host nation support. It will be a positive exemplar of true joint flexibility across the air and maritime elements. But that will be in danger of not happening if the concept starts to be nibbled away at for affordability reasons. We also need to ensure that our legacy systems, both hulls and aircraft, are kept in good operational order to cover any gap created by project drift which, I fear, is not an unlikely scenario. There are, of course, analogies to my carrier example in land and air systems, which time does not allow me to describe.
My other example concerns being in two places at a time. The destroyer/frigate force provides a striking example of effective war fighting elements—the Type 45 destroyer will be a world class warship—which are amenable and at the high intensity end of the war fighting spectrum, to the attraction of network enabled capability. But the highly mobile and flexible destroyer or frigate is also the most versatile of all platforms and can be seen employed across the full range of operations. They are engaged in 18 of our 21 military tasks, from high intensity war fighting to peace support, humanitarian operations,

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maritime interdiction, policing and supporting Britain's overseas trade and diplomatic interests. That force provides a means of flexible, political and military response to developing crises, remaining ready for operations in international waters for extended periods with no requirement for a logistic footprint ashore.
In low intensity tasks that "presence" provides a serious, effects-based contribution and it is one for which numbers are required. I am afraid that the new defence policy mantra of "numbers are not important", alluded to by the noble Lord, Lord King, is very glib in the context of peacekeeping operations, unless the Government intend to drive our people even harder or dramatically reduce the number of our commitments.
That brings me to the most important of the attributes called for by our defence policy—the resilience, good will and morale of our Armed Forces. I believe that those are in serious jeopardy. Our commitments today exceed the currently laid down defence planning assumptions and they have done so since 2001. The stretch caused by that—for example, with 30 per cent of the trained Army deployed on or committed to operations—is demanding, to say the least.
However, despite that, our solders, sailors and airmen have totally committed themselves to whatever has been demanded of them, with huge success; and they deserve recognition and reward. But I fear that they may think that we are going in the opposite direction. There is the £1 billion to £1.5 billion that it is said the Treasury wishes to claw back from the settlement that defence received in 2002, a point made by the noble Baroness, Lady Dean. For this year and next year, with much of the budget already committed to the procurement programmes, uncommitted money can be found only from the front line. So raids on training, quality of life improvements and so on have already started. I should be grateful if the Minister would reassure the House that no such raids are taking place, notwithstanding the impression currently held by those in the field.
If that is true, the message being sent to our hard worked Armed Forces hardly bears thinking about. Furthermore, if that raiding of money flows into future years with certain capabilities being cut, thus denying the Armed Forces what they have been told they will receive in order to be up with the best in the 21st century, the effect on their confidence in those who sit at the top of defence will not be helpful.
In short, it does not require much imagination to conjure up the impact that the combination of short-term pain and medium-term disillusionment will have on those cornerstone attributes that I mentioned—resilience, good will and morale. In summary, I am concerned that our defence policy does not give sufficient attention to the low intensity and ordinary tasks which occupy our forces for 90 per cent of their time. I fear that what is expected of our soldiers, sailors and airmen who have to implement this policy of rising tempo will not be matched by sufficient recognition, in
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terms of resource, of what the Armed Forces do for this country and the Secretary of State's comment in our House Magazine last week that,
"They deserve nothing less",
in the context of the services being properly resourced, could sound hollow to those at the coal face where our people could be left wondering, "Less than what?".
5.8 p.m.
Lord Marlesford: My Lords, I pay tribute to my noble friend Lord King for giving us the chance to have a debate on defence. It is a debate in which we have no fewer than four former Chiefs of the Defence Staff—one from the Royal Navy, two from the Army and one from the Royal Air Force. That is indeed a major contribution to the debate. There is a particular point for the Minister to deal with when he replies; it was made first by my noble friend Lord King, and echoed by the noble and gallant Lord, Lord Bramall, and the noble and gallant Lord who has just spoken. It is the matter of defence expenditure. I recognise that the Minister will not be able to answer all of the points that have been raised in a debate such as this. But it is crucial that he gives a clear indication of the expenditure that will be available for defence in the coming two years. Is there to be the increase which was implied in the Chancellor's Budget Statement? We simply cannot play around with words.
It is disappointing that only one Member from the Labour Benches is speaking today. Although the noble Baroness, Lady Dean, is not now in her place, she is extremely welcome in taking an active interest in defence matters. However, I do not believe the Chief Whip's comment that there are no more Labour speakers in the debate today because everyone is so satisfied. That cannot be true. The subject is much too important for that explanation. I hope that more Members on the Labour Benches will take a real interest in defence.
On expenditure, the role of Trident has not been mentioned. It takes a significant proportion of the defence budget and there are those who might say, "That is a relic of the Cold War and part of the defence which is not relevant today". I beg to differ. With certain developments taking place in certain parts of the world, it is right and proper that we should maintain the Trident capability. It has probably as fine a deterrent capability as any and it is one that we know will work.
I want to talk primarily about terrorism. A factor not always taken on board is that the difference between a war on terrorism and a conventional war is that in terrorism one is not fighting against a nation state. The enemy is much more amorphous. That is one of the reasons the United Nations has had such difficulties. Indeed, most of our international arrangements and obligations and the framework of international law are based on the concept of exchanges and wars between nation states. We are now fighting something which in no way is a nation state.
Primarily, we are fighting militant Islamic fundamentalists. My noble friend was right to point out what a long time they have been a threat. Osama bin

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Laden founded MAK—the Arab volunteer force to fight the Soviets in Afghanistan—in February 1980. It became Al'Qaeda, which means "The Base", in 1988. As my noble friend pointed out, it is 10 years—February 1993—since the first Al'Qaeda attack on the World Trade Centre. Bin Laden published his infamous and chilling declaration of war on the West in September 1996. That was a long time ago. Until 9/11 we had a period of phoney war, but during all that time Al'Qaeda was inexorably gaining strength and preparing. After all, 9/11, whatever else one thinks about, was an astonishing achievement in purely logistical terms.
How are we to fight terrorism? Clearly, it has to be a combined operation with the military forces. Secondly, we want to try to remove the causes of terrorism. The greatest cause is the Palestine problem. We have to drain the reservoir of hatred which nourishes this form of terrorism. Like most noble Lords, I too believe that the two-state solution is the only practical one we can contemplate. The chances of that happening—one gets more depressed rather than encouraged—must largely depend on the United States' influence on Israel. However, Britain and France have more expertise on what makes the Middle East tick than any other part of the world.
In fighting terrorism, we must constantly weigh the loss or erosion of civil liberties against the measures that we need to take to protect our people and our way of life against the threat of a theocratic state which at best would be like Iran and at worst like Afghanistan under the Taliban.
I was pleased that the noble Lord, Lord Bradshaw, speaking from the Liberal Democrat Benches, specifically referred to the extent to which inevitably and with great reluctance we have to sacrifice or modify some of our civil liberties in order to fight the war against terrorism. There are those who say that if we forgo civil liberties in the war against terrorism, we are in effect losing that war. I do not accept that argument. I believe that we must make sacrifices at each level.
I want now briefly to turn to the need to introduce into this country a much better method of knowing who is who. I refer not to identity cards as such, but to the need for everyone to have a number linked biometrically to a central record. The card is merely a method of recording it. Arguments have been put forward against such a system on grounds of civil liberties. I do not believe that those arguments are sufficient to overcome the urgent need.
There appears to be a battle inside the Cabinet, with the Home Secretary in favour of the scheme, while the press suggest that groups of other Ministers are forming up against him. I believe that we need such a system and that we must also soon reform our passport system, which is most insecure. Noble Lords may have noticed that since the Madrid bombing, on arriving at Heathrow you queue up and someone actually looks at your passport and swipes it. That is new and it is astonishing that during the period of phoney war no such thing was done
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Some months ago, I had a conversation with representatives of the Passport Office and it convinced me that we have a most insecure passport system. All these proposals go together and I hope that the Government will pay serious attention to them. And in this House we can play our part by always wearing—as we are asked to do—our own passes. I see the noble and gallant Lord, Lord Bramall, and a former Commissioner of the Metropolitan Police are wearing their photo passes and we would all do well to follow their example.
Finally, the economic cost of countering terrorism is considerable and significant in national terms. We must all pay that cost. It is much lower than the cost of successful terrorist operations against us.
5.18 p.m.
Lord Guthrie of Craigiebank: My Lords, I, too, am grateful to the noble Lord, Lord King, for initiating the debate. I have been asked by my noble and gallant friend Lord Inge, who is in the United States with the Butler inquiry, to say that he much regrets that he is unable to attend this important and timely debate. He wishes to be associated with what I am about to say.
Since I have been a Member of your Lordships' House, I have on numerous occasions heard many noble Lords rightly praise the performance of the Armed Forces. Whether it has been in Bosnia, Croatia, Kosovo, Northern Ireland, Afghanistan or Iraq, the services have risen to the demands of the occasion. Many people in this country and overseas now take their success for granted. Like the noble and gallant Lord, Lord Bramall, I believe that to be very dangerous indeed.
The Iraq war took just three weeks and the British forces were spectacularly successful but we must clearly understand that we were fortunate. If the Iraqis had fought better and if we had had to fight in the towns and the war had been prolonged, in my professional judgment the Armed Forces could have found themselves in considerable difficulty. We are right to praise the services, but we need to recognise that all is not well and that a time may come when they could fail. We cannot continue to take their achievements for granted, nor can we continue to take the risks with them that we do. There is much to be worried about.
At present, because of financial restraints and continuing operational commitments, the services are not able to train to the necessary standards. Too many training exercises, particularly overseas, have had to be cancelled or curtailed for both the regular and the Reserve Forces. The services are being pulled in too many directions. Training is expensive but unless it happens we put servicemen and servicewomen in unnecessary danger.
A major reason for the success of the Gulf War was that the services had trained together in Oman on an exercise which, for financial reasons, many in Whitehall had tried to cancel. The shortcomings of our Challenger 2 tank were detected on an exercise in Oman rather than later in the Iraq war. We are now hazarding future

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operations as training opportunities are reduced and many members of the Armed Forces could be committed to operations less well prepared than they need to be.
Despite the Chancellor's reassurances, there remains considerable scepticism, indeed, cynicism, in the services as to what financial help their overstretched budget will receive. Too often in the recent past, budget increases which had been trumpeted have had so many conditions imposed upon them that they have made very little difference to the services. On two previous occasions I have asked the Minister in this House whether the rumours were true that over £1 billion in savings were to be made over the next four years. I should be grateful if my question could be answered tonight.
If large savings are to be made and new money will not be available, very difficult decisions must be made and not just funked. It is quite right for priorities to change, and we need to move on from some of the decisions taken by the Strategic Defence Review, which at that time were appropriate. Defence cannot stand still and, now that the threat has changed, we cannot afford to spend a penny more than we have to on equipment which is unlikely to be used in the foreseeable future.
Resources will need to be rebalanced and money directed to where it is most needed. That will be a very difficult exercise. Some will benefit and others will not, but unless this happens we could end up by being fairly ordinary everywhere. Equal misery for all three services is not the answer, but too often has been in the past.
I pay tribute to the reserves, whose contributions to operations over the past few years has been crucial. However, we have to be very careful in continually using them to the degree they have been used and are being used. They are not in existence just to get the regulars off the hook when shortfalls appear and for the Ministry of Defence to get personnel on the cheap. Some members of the Territorial Army relish their many deployments but others do not expect to commit so much time, neither do their employers expect that. It would be very sad if overuse led to many of the excellent young people who are reservists leaving the services. That seems to be a trend which may be emerging.
I was in the Army for 44 years. My experience and instinct tells me that we are already in very difficult times, perhaps as difficult as any time since World War II. The only time of similar concern that I can recall was the late 1970s when it became necessary for a new government to rescue defence from ever increasing decline. But today I judge the situation to be far more serious than it was then. The Armed Forces are already very much smaller than they were in the 1970s. The world is more unpredictable. Sudden danger is likely to be with us for many years. The noble Lord, Lord King, has clearly outlined what we are up against. How long will the services be involved in Iraq and Afghanistan? How often will soldiers be rushed back to places such as Kosovo?
Today the risks are very high. Soldiers are being killed in action and attacked daily in Iraq. I suggest that the Government have to do more than pay lip
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service to the loyalty of the Armed Forces. We need to recognise just how serious the situation is and take appropriate action.
5.26 p.m.
Lord Selsdon: My Lords, I am grateful to my Light Infantry friend, the noble Lord, Lord King, for the speed at which he moved from one subject to another, fully informed, and to the Minister for having given priority to the Royal Navy.
I questioned earlier why no Back-Benchers on the Minister's side other than the chairman of our Defence Committee were to speak in the debate and was told that that was because the Minister had the competence to speak about any subject.
I should like him to know that he is among friends. We have here the Life Guards, the Coldstream Guards—I have them in the right order because I have been well briefed—the Scots Guards, the Welsh Guards, the King's African Rifles, the Royal Green Jackets, and a Hunter and Meteor pilot, who is not in his place. He is probably flying around somewhere else. We have too, naturally, a submariner, as noble Lords would expect and, on the Liberal Democrat Benches, apart from a policeman a brass bandsman—it is a pity that there are not more Liberal Democrats speaking in this debate—and, on their Front Bench, a member of the TA. On the RAF side, apart from a pilot, on my left we have a leading aircraft woman. We have a FANY masquerading as an SOE, and an SIS. He probably trained the father of the right reverend Prelate the Bishop of Portsmouth. Against all of that we have a knowledge which is quite intriguing. However, we do not have the Irish presence.
I was in the Navy and was brought up to address your Lordships on defence matters by recalling Lord "Jackie" Fisher and that the role of the British Army should be that of a projectile to be fired by the British Navy. The role of the Navy is to deliver our forces in the right place at the right time. Last Sunday I found myself in Munster, trying to help it in its challenge to become European City of Culture. As your Lordships will know, 92 per cent of that city was destroyed. They are very keen down there on the British Forces. I nipped down to the barracks to try to find out who was serving there because that information was not available on the Internet.
It was a windy day. I looked in, leaving the car outside so that they would not think I was a terrorist, and someone asked, "Who are you?" I handed over my House of Lords pass and within a moment someone said, "My Lord, would you like to join in today? It's Oates Sunday."
Many noble Lords may not know that, if you have been in the Navy, the only thing that you can remember is your service number—mine is PJ963040. I shall now ask my noble friend Lord Marlesford, who says that he believes in numbers, whether he happens to remember his service number. My noble friend Lord Lyell can remember his. It is the one number that we can remember better than any other, including our bank code, thus showing the discipline that we all underwent.

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I did not dare admit that I did not know what Oates Sunday was. Only when I returned here and asked Black Rod and a Clerk did I find out that it is named after a man who gave his life for his friends, Captain Oates. As I was dealing with a cavalry regiment, I had thought that perhaps it related to feeding horses on a particular day, but I was told that "Oates Day" went with "Paddy's Day". Seeing the emerald green opposite, I recall that, although I am not a Catholic, I was on Catholic territory. A band was playing; the wind was blowing; the ladies' hats were flying; and men were holding down the tents. Looking at the background, one realised that one was in an Army community not just of husbands and wives but also of children. They were dressed in cub scout uniform, washing the wheels of cars for a small amount—in the green territory of Germany you are not allowed to wash your car with a hose, except in a washery, which recycles water.
I took the chance to ask those present what I might say today. I suppose that they will not mind my quoting them. The senior officer said, "Tell them that our men would fight in socks and jockstraps, if it were necessary". It is becoming increasingly necessary as we realise that the equipment and resources that we need to keep our men are no longer there. I shall not criticise; I shall read from Armed Forces personnel note SN/1A/2182 of 10 October 2003:
"Fundamental to our ability to field Armed Forces which are among the best in the world is the quality of the volunteers who make up those forces".
It continues:
"The SDR defines overstretch as 'trying to do too much with too little manpower'".
Manpower without personal equipment loses pride. My noble friend Lord Lyell referred to the absence of tenting, equipment, boots and personal facilities, despite long-term spending on carriers et cetera. When fighting terrorism we must equip our men with the best possible personal equipment. It is not a terribly expensive exercise.
In the days when our men were three to one, you should have heard the words spoken in the souk, the bazaars and mosques in the countries of the Middle East and others where I spent time. People there had a respect for these men. Moreover, those directly or indirectly associated with terrorist activities or suchlike advised their supporters and followers to steer clear of the British. They said that, should you confront the British, your life expectancy would be half what it would be if you confronted the Americans or others, but should you be honest and uninvolved in such nefarious activities, you will be protected and looked after as a friend.
I shall now raise some of my concerns. Why did we disband the Iraqi army? In the old days we took over other people's armies. At one time we did that in East Germany, disbanding the officer or political class and taking over. The Iraqi army did exactly what it was told. Looking around the world at present, we might try to bring the military of some of these countries into a group that might fight terrorism.
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We now come to what I was told by philosophers were the three Ps—not public/private partnerships. The first is psychology: the knowledge of the psyche and the ability to get behind and understand the minds of those planning or proposing such activities. The second is philosophy. I used to think that philosophy was love of knowledge, but it is the love of wisdom, which one cannot have without knowledge and intelligence. The third is politics: understanding the reasons that people seek to do such things. Possibly, as has been said, international media attention may well promote an idea.
In our Armed Forces and among our own expatriates around the world, we have eyes, noses and ears, but we have failed so far to explain the cause and root of terrorism. We have failed to explain the religion behind it. It is not a religious war. When I have spoken to many in the Arab world, the Islamic world and other cultures, I have found that they, too, share the horror of the activities that take place. Even the Koran—I am sorry, I should not say "even"—says:
"He who kills shall surely himself be killed".
We should concentrate on recruiting and equipping people to fight or to combat this particular evil, which has been around for many, many years. Noble Lords will remember the Mahdi and the Emir of Bokhara—throughout this world we have had problems. But, for the first time ever, we have by far the best personnel in military service in the world. If we were only to equip them properly and add to their numbers, I believe that we would have nothing to fear.
5.35 p.m.
Lord Redesdale: My Lords, like a number of noble Lords, I congratulate the Minister on his Herculean efforts to make it from one end of the country to the other to be with us today. I also thank the noble Lord, Lord King, for introducing the debate. I commend him on introducing a debate without falling into the trap of talking about spending, which seems the subject closest to our hearts in such debates. I apologise for falling immediately into that trap myself.
I know that in his speech later in the debate the noble Lord, Lord Astor, will take an interesting position on spending. It has been the position of his Benches to talk about an increase in spending, a message that does not seem to have percolated down to another place, given that the noble Lord's right honourable friend in another place Oliver Letwin talked about cuts in the Ministry of Defence budget.
On that basis, we welcome the Chancellor's talk of increasing the money available to the Ministry of Defence. However, that must be taken with a pinch of salt, because no budget can rest solely on the claims made during the Budget speech and in interviews given afterwards. As the noble and gallant Lord, Lord Boyce, and the noble Baroness, Lady Dean, pointed out, there are significant areas of uncertainty over certain spending commitments. This will test whether the rise in the MoD's budget will be a significant increase above inflation, or whether there will be a rise at all.
In the present climate the Liberal Democrats would try to avoid cuts to the MoD budget. In responding to a Question on carriers recently, the Minister asked me a

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rhetorical question—it must have been rhetorical because I could not answer at that time—on our position. I shall send the Minister the Liberal Democrats' position on defence because he was so interested in it. As many noble Lords have said, it is very difficult to set a position on how one would deal with spending commitments. As has been pointed out, a massive procurement programme is under way at present. It appears to face real problems, especially in 2008–12. If there are problems of overrun and cost escalation, any figures put down on paper now could look farcical.
However, one area in which we believe that there could be cost savings is the Eurofighter/Typhoon. It would be our intention to cut back on the third tranche of the Eurofighter. Before the Minister attacks me on that point, I wish to ask him a question, as the Government appear to have their own considerations about Eurofighter. There has been talk of possible savings of £2 billion to £5 billion if a cutback took place. Perhaps the Minister could tell us the Government's position on the third tranche of Eurofighter. I agree with the noble and gallant Lord, Lord Craig, who is not in his place at present, that it is a fabulous aircraft. I have seen it doing unbelievable feats at air shows. However, one must ask whether a weapons system designed to meet Cold War capabilities, and whose only comparable aircraft in the air are American, is needed at present.
Have there been any further developments in the RAF air-to-air refuelling contract? There seem to be a number of question marks hanging over that. The procurement budget has the possibility of making all figures look interesting. Who will be the prime contractor for the new aircraft carriers that are on order? Although it is a joint contract between BAe and Furness, there is an indication that a new prime contractor, possibly IBM, could be taking over as lead contractor. That would be of' interest to the House.
One area of spending that will be interesting is whether the Government will consider cutting the number of troops on the ground to meet procurement budgets. The noble and gallant Lord, Lord Bramall, mentioned the issue of troops on the ground. It is important at the moment, with so many commitments, and particularly in the past week the commitment in Kosovo, that we do not reduce the number of troops on the ground. Their professionalism and expertise will be incredibly important in the Balkans to stop that situation disintegrating.
Quality of life is always cut when looking at cost savings, a point mentioned by a number of noble Lords. It would be tempting to start talking about overstretch and commitment, but there is a real issue over quality of life and time spent away. In the past the issue was the quality of accommodation. The issue was brought home to me by a friend who has recently left the Armed Forces. He said, "It is easy to improve the quality of life for the Armed Forces—you quit". That obviously has cost implications in losing experienced personnel, the loss of those skills and the cost of those training skills.
Another area that has been raised this afternoon is logistics and asset tracking, as the noble Baroness, Lady Sharples, pointed out. I was particularly concerned
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by television reports about equipment, especially ammunition. I remember training in infantry skills on my way to Sandhurst, in the TA. I was only in the REME—I do not know if that counts, according to the noble Lord, Lord Selsdon, as being the Army. I admit that I was never a very good infantry soldier. One of the things that was drilled into us at great length was winning the fire fight. The reports coming back from the Gulf of some soldiers going into action with only five rounds of ammunition make a mockery of one of the basic tenets of infantry doctrine. I very much hope—I know that this is an area of concern, as it was raised by the Select Committee and the NAO report—that the Government will look again at this area, especially the provision of ammunition.
I have left myself very little time to deal with the massive area of terrorism, an area with which my noble friend Lord Bradshaw and the noble Lord, Lord Marlesford, dealt. The White Paper set out the formation of the Civil Contingency Reaction Force. The Minister said that this has reached its operational strength. Its operational strength envisages 500 troops per area. Considering the Madrid bombings, is 500 troops considered a sufficient number of troops per area? I believe that London is one area. Have they the equipment and training to meet the task set out for them? Many reports on our ability to deal with such disasters have suggested that we do not have the equipment, personnel, or training to deal with a large-scale disaster.
I did wish to look at terrorism. We must be careful about our terminology. The term "war on terror" and the term "axis of evil", which is now somewhat redundant, have caused a great deal of unrest and unhappiness in areas in the Middle East, which I travel to reasonably frequently. The effect should not be underestimated. Those people carrying out the bombings, especially suicide bombings, are those who are most easily influenced by the terminology that we use. If we start talking about a "war on terror", that delineates one side against another. This is a presidential election year, and the talk from the United States on terrorism will gear up. Many such comments feed in to the unhappiness that is felt by many people in Iraq. Our soldiers are doing a fantastic job in Iraq, but the recent attack on our soldiers, and the comments that were shouted at them, show that Iraq could well be a breeding ground for future unhappiness and those who would sign up to the cause of the terrorists.
This has been an important debate. Although we are critical of the Minister, he has tried extremely hard to meet many of the problems that are set out. I echo the words of the noble Lord, Lord Lyell, that we thoroughly appreciate all the efforts made by the Armed Forces.
5.47 p.m.
Lord Astor of Hever: My Lords, I, too, thank my noble friend Lord King of Bridgwater for initiating this important debate. I congratulate him on a powerful and thought-provoking speech. With such knowledgeable and experienced speakers, this debate was always going to be of the highest quality. I would also like to thank the Minister for making such an effort to come here tonight from Faslane. I hope that he enjoyed his visit there as much as I did.

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I am sure that the House will join me in expressing our continuing admiration and appreciation of our service men and women serving in Iraq and elsewhere, particularly the reserves. This is an appropriate time to be debating the defence of the realm. It is imperative that at this time we do not become so fixated on the war on terror that we neglect the need to look after our Armed Forces. We must look after service men and women, whether regular or reservist; look after the families, because their support underpins the morale of our service men and women; and look after the procurement programmes and logistics, because without the right equipment we cannot expect to meet the security challenges of the years ahead.
This is a time when the Government must prove their competence to manage all these things, not just through their words, but through their actions. We on these Benches were consistent in our support for the Government and for our Armed Forces during the war in Iraq. However, it is our duty as Her Majesty's Opposition to probe and question government policy. My noble friend Baroness Park of Monmouth rightly said that our Armed Forces are spread too thin and are more and more stretched. This was reinforced in an excellent speech by the noble and gallant Lord, Lord Bramall. They cannot be turned on and off at the whim of government. They must be given the time to recruit, train, and see their families, if we are to retain the most skilled and experienced servicemen, particularly when servicemen are being approached for security work in Iraq at the rate of £100,000 plus a year, tax free.
As my noble friend Lord Selsdon said, our Armed Forces must be given the best possible equipment. The operational demands placed on the Armed Forces have meant that hundreds of training exercises have been cancelled. If soldiers, sailors and airmen do not train enough, they stop being combat-ready. That stark truth was pointed out by the noble and gallant Lord, Lord Guthrie of Craigiebank. I agree also with the noble and gallant Lord's observations about the reserves.
The noble Baroness, Lady Dean of Thornton-le-Fylde, gave an excellent speech on personnel. I congratulate her on her election as chairman of the Lords All-Party Defence Group. She and my noble friend Lord Lyell have worked hard to draw up a full and interesting programme, and I hope that as many noble Lords as possible will support them and the group. My noble friends Lady Sharples and Lord Lyell mentioned the excellent speech given to the group last night by the First Sea Lord.
I agree wholeheartedly with the noble and gallant Lord, Lord Boyce, that numbers are important. The hearts and minds of the local population cannot be secured with network-enabled weapons systems; it can be done only with troops on the ground. The situation in Basra would be much easier if more soldiers had been available in the days immediately after the occupation of that city.
The noble Lord, Lord Redesdale, asked about my party's resource intentions for the Armed Forces. That was covered in detail yesterday in the other place. I commend
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that debate to the noble Lord. We believe that our front-line Armed Forces must be a fundamental priority. They must receive sufficient resources adequately to fulfil their duties and their extensive commitments. When we announce our detailed spending plans later in the year, we will make clear how we intend to shift money from unnecessary and inefficient back office expenditure to the front line to maintain and enhance our defence capabilities.
There are still too many question marks over major equipment programmes. The noble and gallant Lord, Lord Craig of Radley, set out the uncertainties with Typhoon. There is also the support vehicle project. That important tri-service project for over 8,000 supply and recovery vehicles is already running a year late. It is therefore disappointing to learn from the Defence Procurement Agency's website that the preferred bidder is not expected until late 2004, a delay of a further nine months. When does the Minister expect the support vehicle to be in service?
The noble and gallant Lord, Lord Boyce, mentioned future carriers. The Government know that they have our wholehearted support for that programme. They may therefore reasonably expect our support for firm decisions on moving the programme forward and on time. I am sure that the right reverend Prelate the Bishop of Portsmouth also hopes for an early announcement. Earlier this month, my noble friend Lord King of Bridgwater was told by the Minister not to concern himself too much about air cover for the existing aircraft carriers, but the early withdrawal of the Sea Harrier FA2s represents the loss of our fleet's ability to defend itself or its associated land forces from any form of sophisticated air attack until the new carriers, together with the air defence versions of the future joint combat aircraft, come into operational service.
Our Armed Forces remain thinly spread, with urgent commitments to Kosovo and Afghanistan on top of our continuing commitment to Iraq. The Commons Defence Select Committee warned that, in Iraq, the Armed Forces were stretched very close to the maximum that they could sustain.
At home, terrorist attacks are described as inevitable. We on these Benches will not flinch in our determination to pursue the war against terror, wherever and whenever it must be fought, but A New Chapter to the Strategic Defence Review and the defence White Paper made little mention of the threat of terrorism of the kind that we now face. Are we prepared? The public have been told almost nothing about the threat. They have received no training, and the emergency services have been given no extra manpower to deal with any incident. Can the Minister confirm that all 14 civil contingency reaction forces are now fully manned, fully equipped and fully trained? Have they all taken part in joint training exercises with the police, ambulance and fire authorities? Are the command and control structures in place and fully understood? Have civilian and military radios been tested together in the urban environments in which they may have to be used and without the use of mobile phones as a back-up? What happens if a terrorist attack takes place on the boundary between two or more police

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force areas? The noble Lord, Lord Bradshaw, with his wide experience, pointed out that much is being done, albeit at huge cost.
The success of the attacks against America in 2001 was due as much to a failure of imagination as of intelligence. There is no manual to tell us how to fight the war on terror. Our future success lies in our creativity in anticipating and deterring the actions of terrorists, coupled with a relentless desire to root them out wherever they may be.
What are the Government's plans for engaging the patriotism and religious ideals of the British Muslim community in the war against terror? What plans do Her Majesty's Government have for increasing the number of Muslim recruits to the Armed Forces?
My noble friend Lord King of Bridgwater initiated this excellent debate by showing what a dangerous world we live in. The future is uncertain, but we have faced uncertainties before. My noble friend Lord Marlesford said that we would have to make sacrifices. With decisive leadership, strong alliances and, as my noble friend Lord King of Bridgwater said, the maximum public contribution, we can meet whatever is to come.
5.57 p.m.
Lord Bach: My Lords, the House has a fine tradition of well-considered and thought-provoking debates on defence. Today's debate is no exception. In my turn, I congratulate the noble Lord, Lord King of Bridgwater, on instigating the debate. Again, I apologise to the noble Lord—and through him to the House—for being late on parade. I agree with the noble Lord, Lord Astor of Hever, that the noble Lord's speech was forceful. There was a bit of the light infantry about the brilliant counterattack on defence spending that he launched from his side of the House towards the close of his speech. I will have more to say about that in due course, but, more seriously, I thought that his speech was thought-provoking and excellent.
Before I begin, I congratulate the noble Lord, Lord Astor of Hever, on being appointed defence spokesman for his party in this House. He has a hard act to follow—the late Lord Vivian—but I know that he has great experience in the field. I look forward to working with and against him, in the way that we do.
Two weeks ago, a series of bombs was detonated on packed commuter trains in Madrid. It was the largest single terrorist atrocity witnessed on mainland Europe. The scale and sheer inhumanity of the attacks, calculated ruthlessly to cause the maximum loss of innocent life, brought home once again the immediacy of the threat posed by international terrorism. Our White Paper, which was the subject of what I thought was another good debate earlier this year, highlighted three key challenges that face us: international terrorism; the proliferation of weapons of mass destruction; and the consequences of failed and failing states. The chilling consequences of the coming together of those three challenges will not be lost on noble Lords.
If we are to rise to meet those challenges, our Armed Forces must adapt accordingly. That is why the Strategic Defence Review, with its emphasis on
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expeditionary forces, sets us in the right direction. Following the events of 11 September 2001, A New Chapter to the Strategic Defence Review developed that further and introduced a number of measures designed to enhance the ability of the Armed Forces to support the civil authorities as they respond to major crises at home.
These included the development of a network of joint regional liaison officers, to which the noble Lord, Lord Redesdale, referred, the introduction of communications equipment compatible with that of the police and, of course, the establishment of 14 civil contingency reaction forces. At the moment we have no plans to review that.
The White Paper builds on that foundation to present the case for even more flexible rapidly deployable forces that are structured and equipped to perform a wide range of tasks from peace enforcement to counter-terrorism operations. Of course, we must embrace new technology so that we can exploit the potential of our military capabilities to the full.
In the January debate, I bemoaned our lack of a crystal ball in which we could see where and when we shall deploy in the future. But we have a wealth of experience which shows us that we should plan to be able to support three concurrent small and medium-scale operations, at least one of which is an enduring peace support operation. That is the pattern that has increasingly become the norm in recent years and we judge that it will continue to be the case for the foreseeable future. In building that into our plans, as all noble Lords have said, we must ensure that our Armed Forces retain the ability to adapt at longer notice for less frequent but much more demanding large-scale operations. On top of that, we also have to continue to meet our standing tasks and commitments. We believe that the White Paper provides the policy baseline against which we will work. I do not claim that it will be easy to achieve that balance.
In response, we will plan to maintain a broad spectrum of capabilities to ensure that we are able to conduct limited national operations or be the lead or framework nation for coalition operations at small and medium scale. But we do not see there being a requirement to replicate the same range of capabilities at large scale, given that in the most demanding operations it is inconceivable, we think, that the United States would not be engaged either leading a coalition or as a part of NATO.
That is nothing new. It has always been the case in modern times that we have worked alongside our allies in the more demanding and complex of operations. Nor does it mean that we will be able to operate only in tandem with the United States. Indeed, the changes presaged by the White Paper will enhance our ability to conduct expeditionary operations, both nationally and as part of a coalition.
A wide range of issues has been raised in the debate. In the 15 minutes that I have left, I intend to address the main issues. If there are questions that I omit to answer. I shall write to the noble Lord, Lord King, with copies for all relevant Peers. I intend to cover briefly terrorism,

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personnel, Typhoon and procurement generally, the House of Commons Defence Committee and Operation TELIC. Although I am not sure that I shall succeed, I hope to satisfy the noble and gallant Lords, all of whom spoke about the Budget. I shall be frank and, I hope, helpful about the Budget, even if I do not satisfy them fully in terms of figures.
I turn first to terrorism. We accept as a government that there is no military solution to international terrorism. It is one strand of meeting the challenges. The Armed Forces play an important part in support of the Government's strategy for tackling the problem. As Members know, the Home Secretary and the Home Office are responsible for security and consequence management in which we, as government, have invested heavily. Of course, the Armed Forces are available to help civil authorities if they need to ask for help.
We have achieved a great deal—for example, the operations in Afghanistan and widespread international co-operation post-Afghanistan—in pursuing terrorist networks worldwide, international progress on aviation security and, not least, tackling terrorist financing, as well as other issues. We shall continue to play our part in doing that. As the noble Lord, Lord King, said, this is an enormous challenge, not just for the UK to have to fight, but for all of us. We need diplomatic and many other skills in order to combat it.
The nonsense of the "end of history", which I have mentioned to the House before, has been shown up so clearly by the events since the end of the Cold War. It falls to us to deal with it. I believe that the House will deal with it in a united way.
The noble Lord, Lord Bradshaw, mentioned the civil contingency exercise. Please forgive me if I rather duck that issue; it is a matter for the Home Office rather than for us. But his remarks have been heard and will be in Hansard. Like the noble Lord, Lord Marlesford, I, too, was impressed when, from the Liberal Democrat Front Bench, the noble Lord posed the question about balance, for his own party and for all us. We must try to get the right balance between a terrorist threat and our protection and love of our civil liberties.
The right reverend Prelate the Bishop of Portsmouth mentioned merchant shipping. The Royal Navy deploys worldwide on a range of tasks. Like other navies, under international law it is obliged to render assistance to other mariners. If a Royal Navy ship encounters a clear case of piracy on the high seas, Royal Navy policy is to deal with such incidents and those responsible. Commanding officers of warships are issued with clear guidance on the action that they should take.
My noble friend Lady Dean asked about the service personnel plan; I, too, congratulate my noble friend Lady Dean on her new appointment. I am advised that that plan is still expected to go live in April as planned. It is an internal plan but none the less important for that. The noble and gallant Lord, Lord Bramall, raised concern about medical services, which he has raised in this House on many occasions. He knows that mistakes have been made in this field in the past.
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Historically, it has been under-funded. That was recognised in the Strategic Defence Review. We have since seen substantial additional funding. I shall look into the problems that he mentioned today to pass on to the relevant Minister as soon as I can.
As regards reserves, we provide detailed advice to reservists on their legal right to reclaim their civilian employment in the UK and how to seek reinstatement in line with the Reserve Forces (Safeguard of Employment) Act 1985. Each reservist receives a copy of the guidance. In respect of retention in the Territorial Army, we are not sure yet of the impact that operations in Iraq have had. Work is in hand to identify the effects through the use of demobilisation surveys and the continuous attitude survey to be published shortly.
The Army is very busy. The noble and gallant Lord, Lord Boyce, used the figure of 30 per cent of the Army being committed to operations in mid-March 2004. I compare that with 57 per cent committed and 54 per cent deployed in late April 2003. We are committed to achieving a balance of commitments and aim to commit personnel to operations for no longer than is necessary to achieve the military aim. We will withdraw our personnel from operations as soon as we can.
The noble and gallant Lord, Lord Boyce, made an impressive speech in which he commented on the practice of leaving out the issues of numbers in terms of platforms and manpower while we are quite rightly engaged in trying to use modern technology in order to achieve effects-based results. In our view, flexible forces and platform numbers are not mutually exclusive. We are ensuring that our forces are used in what we hope is a smarter manner appropriate to the particular threat that needs to be confronted. So we are trying to achieve a series of effects, some of which are manpower intensive. Indeed, the example given by the noble and gallant Lord of peace support operations is one. Others are more technologically intensive. Flexible and technologically advanced forces do not preclude troops on the ground. Rather, we envisage a mixture of hi-tech and troops on the ground to maximise the chosen effect. I hope that that is helpful to the noble and gallant Lord.
I shall deal next with the Typhoon programme. I was delighted by the speech of the noble and gallant Lord, Lord Craig. The Government remain committed to Eurofighter Typhoon. We have a contractual commitment to purchase 55 Typhoons in the first of three planned production tranches, and there is a memorandum of understanding with our partner nations to cover a further 89 in tranche two and 88 in tranche three. As is well known, discussions with the four nation members and with industry regarding tranche two are ongoing. Given the obvious importance of the contract, our priority is to ensure that industry's proposals for the programme are soundly planned and based on appropriate levels of design maturity. In response to a point raised by the noble Lord, Lord Redesdale, a commitment to tranche three is not expected before 2007.
Of course we believe that the role of Typhoon must be one of multiple capability, otherwise the criticisms that are made of it would have some weight. It must

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have a multi-role capability, which is what tranche two is supposed to do. We are doing our very best to bring forward a suitable package on that.
I shall say a brief word about procurement in general. Sometimes we set our minds on in-service dates all the way through a programme. It seems to me that on occasion that can be a mistake. The assessment phase of a programme, which leads to main gate, as it is known—in effect, the signing of the contract with the company that will procure the goods comprising the programme for us—sometimes comes too soon. The principles of Smart Acquisition refer to 15 per cent of the total cost being spent during the assessment phase. The danger of coming to the end of the assessment phase too soon is that the programme is not sufficiently de-risked and you pay a heavy price further on when those risks emerge again and you encounter delay. With delay, of course, comes extra cost. We hope to be brave in saying on occasion that assessment phases must carry on until we have de-risked a programme sufficiently to move forward to the important main gate stage, when we sign the contract.
I turn briefly to the points raised on support vehicles. A prime contract is due to be selected in spring 2004, and the approved in-service date is April 2006.
I was going to talk about Operation TELIC. However, I want to say something about the budget in my remaining four minutes so I shall pass that by, save to say that good things were said in the report about what Her Majesty's Government did in relation to the operation, along with criticisms. We are not, I hope, too arrogant not to take note of those criticisms and to make sure that mistakes are not repeated. However, as I said, good things were mentioned in the report, which concluded by saying that deploying such a large force to the Gulf in the time available was in itself a significant achievement.
I shall move straight to budget issues. All departments have to deal with fluctuating pressures and to live within the resources allocated to them by Parliament. The Ministry of Defence is no different. There is a range of reasons why this is a particular issue for us at the moment. Only one of those reasons is that recruitment has been more successful than we had envisaged. That is good news generally but it puts a greater burden on the budget. However, I should point out that this year, 2003–04, has been complicated by the implementation of full resource accounting and budgeting which has raised new issues, in particular over how quickly we might use resources released by reducing our asset base to fund other activities.
To manage the in-year pressures, we have had to scale back cash expenditure across the department, in particular in the Defence Logistics Organisation and the Defence Procurement Agency. There remains some uncertainty about the size of the challenge we face over the next two financial years. It is clear that during both next year and the year after we shall continue to face financial pressures. We are conducting an assessment of where reductions in
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planned expenditure can be made in each of those years so that we can continue to live within our means. It is likely that we will need to make adjustments to our spending plans so that we can continue, as I say, to live within our means, but as well as looking to reduce costs, a key aim of this work is to allow us choice and planning flexibility.
So I am not in a position to be able to tell noble and gallant Lords and the House generally what figures are being bandied about, but I think that I have been fairly frank with the House in going as far as I have. I was delighted at what the Chancellor had to say about defence in the Budget. His positive remark obviously referred to the spending round that will be decided in July, saying that there will be a real increase in defence spending in that round. The three-year period will begin in 2005–06, not in any later year. It will cover the period 2005–06, 2006–07 and 2007–08.
I believe that we can contrast our view on increased defence spending—and I repeat that the last settlement was the best one that defence had had for very many years—with that of the party opposite. I am afraid that it has talked for a long time, in this House and elsewhere, about the need to increase resources for defence. But then, probably much to the disappointment of Front-Bench spokesmen on this subject both in this House and in another place, they have been told that there will be a freeze on defence spending that would last for two years if the Conservatives were to come to power at the next general election. That freeze would mean a cut of £1.5 billion. I think that we are entitled to ask where it is that the Conservatives, with their acknowledged interest in and respect for the subject of defence, intend to find that money. I hope and do not doubt that in due course we shall be given an explanation. However, I think the policy set out so far by the party opposite is one that will have disappointed many people involved in the defence field, many ordinary citizens, and a great number of Conservative voters.
I have ended on a party political note, but what I value about debates in this House on these matters is that, while the Government come in for a fair bit of stick, we are able to talk generously and openly about the problems affecting our country's defence. I am sorry if it sounds glib in the repetition, but the one thing on which we are absolutely united is our acknowledgment of the amazing work being done by our Armed Forces. I had the privilege of seeing that at first hand today, and everyone seeing it at first hand recognises that we have the best Armed Forces in the world.
Lord Astor of Hever: My Lords, before the Minister sits down, can I say that he put a wonderful spin on what my right honourable friend the Member for West Dorset was supposed to have said? I suggest that the Minister reads what was set out in the speech. He may then care to think again.
6.19 p.m.
Lord King of Bridgwater: My Lords, first, I thank the Minister for taking the trouble to sit right through the debate after what has obviously been a very busy

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day and probably a busy preceding night. He has replied as conscientiously as he could. I thought that he slightly lost it at the end because I heard the remarks of my right honourable friend. He read a prepared statement in which he said that further details of what we propose would be available, I think, later in the year. I have never doubted that a Conservative government will do what is necessary for defence. That was always my philosophy and was always reflected in the support that I received from any Chancellor and Chief Secretary with whom I had to deal.
I thank all noble Lords who have spoken. It has been a very sombre debate. We have had the benefit of the quite remarkable experience—which the other place is not able to contribute to a defence debate of this kind—of no less than four former Chiefs of Defence Staff, including the two most recent holders of that office, and, particularly importantly, of the chairman of the Armed Forces Pay Review Body.
I have tried to emphasise the importance of morale. For our homeland and our homeland security, we need morale in our homes and in our Armed Forces at the present time. The Government will have to nurture both through some very difficult times. I think the Minister understands that very well.
As to the present situation, I shall make only one comment. The Minister said that it was inconceivable that we would find ourselves in certain circumstances where the United States would not be with us. I merely warn him that it was my experience when I had any responsibility for defence that the inconceivable usually happened. We find ourselves now in places that no previous defence review anticipated we would be in; and in circumstances that no previous defence planner of some years ago anticipated would arise. So it is necessary for the Government not only to make sensible arrangements for what they think will happen, but to have something in the reserve for events that never occurred to them would arise but which inevitably will happen.
I am deeply grateful for the contributions that have been made. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Pensions
6.22 p.m.
Lord Fowler Lord Fowler rose to call attention to the case for encouraging occupational and personal pension provision; and to move for Papers.
The noble Lord said: My Lords, the debate is designed to call attention to the case for encouraging occupational and personal pension provision. King on defence and Fowler on pensions—it is getting rather like the old days on these Benches. Looking at the list of speakers on our side, I notice that you do not have to be a former Thatcher Cabinet Minister, but obviously it does help.
I congratulate the Minister on being in her place. That is more than the usual courtesy; it is a heartfelt welcome for her punctual arrival.
We last debated pensions in one of these debates in March last year. I said then that, given the current crisis in pensions, we would want to return to this subject. Perhaps I may gently remind the Minister, who seemed to be in some doubt about my position on the previous occasion, that I speak entirely on my own account from the Back Benches. Having spent 20 of my 31 years in the other place being constrained by the official policy of my party, I enjoy the freedom of the Back Benches. Perhaps I may add, in a spirit of across-the-Chamber friendship, that we look forward to the day when the Minister and her colleagues have that same enjoyment.
Since we last debated this issue there have been a number of new developments: first, we have had the publication of the Pensions Bill, and I shall touch on that later; secondly, last week in the Budget speech, we had the Chancellor of the Exchequer deciding that from April 2006 there should be a limit on the capital value of any individual pension provision of £1·5 million. How this will work and the number affected is still, to me at any rate, slightly unclear. Perhaps the Minister will give guidance on this in her reply to the debate.
Let me give an example of one person who is potentially affected; that is, the Prime Minister. Mr Blair has a half pay prime ministerial pension plus his parliamentary pension. He is due, therefore, a pension of about £100,000 a year. The capital value of that provision is, by the Government's calculation, put at something like £2.5 million. As I understand it, if he registers that amount on April 2006, then there will be no extra tax to be paid. But if he continues to accrue after that he will be taxed at a marginal rate of 55 per cent. So he has a rather important decision to make.
I tried to get guidance from the Treasury on this but, sadly, the only advice I received from the Chancellor of the Exchequer was that it would save a great deal of unnecessary trouble if the Prime Minister was to retire before the new system came into being. So I would be grateful for the Minister's guidance on the position.
There has been another development; a further change since last year. The Association of British Insurers is now measuring the public's view on pensions and pensions policy. I want to be fair to the Government because their position has improved. Whereas last year public trust in the Government's pensions policy stood at only 15 per cent, this year it has improved to 17 per cent of people who now proclaim themselves satisfied. If I may put it this way, the debate will therefore touch on the concerns of the other 83 per cent of the nation.
Quite seriously, there should be absolutely no doubt about the public concern that there is on pensions, particularly on occupational and personal pension provision. In 30 years of debating these issues, I cannot remember and have never seen concern greater than it is today—and with some cause. Only 19 per cent of employers now provide a final salary pension to new

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members; and 41 per cent of all companies operating final salary schemes have closed them to new members in the past 12 months. At the same time, personal savings are close to a record low. It is a dire position which all parties should want to improve.
Let me be clear: I do not blame the Government for each and every part of the pensions crisis—that would be the worst kind of "yah-boo" politics; I accept that—but I do blame them in a number of very important respects. I blame the government for imposing a £5 billion a year pension tax at the very worst time. As the markets went down, the Chancellor and the Prime Minister imposed this massive new tax. It will go down in political and social history as one of the most spectacular misjudgments any government have ever made.
I blame the Government for doing so little to encourage personal saving. As we have constantly pointed out, a simple change would be to end the rule that anyone with a personal pension must, as the rule stands at the moment, take an annuity at the age of 75. The Government persist with that policy in spite of the fact that annuity rates have halved since 1990. I honestly and genuinely believe that they underestimate the feeling there is on this issue among those who have saved all their lives for an adequate pension; and, perhaps even more, they underestimate how the rules now will dissuade other people from saving in the future. In the next few weeks, I hope to introduce a Private Member's Bill in precisely this area.
But, above all, I blame the Government for not having a strategy for occupational and personal pensions. What makes that so odd is that outside government some consensus on the way forward is now beginning to form. Let me give my view, on my interpretation, on where there is substantial agreement and where that agreement would be possible.
First, I believe that we should make the basic state pension as generous as possible. It is a well understood pension, which is more than can be said of so much of the other state pension provision, and it is capable of floating many, many people off income-related benefits. I congratulate my party's spokesman in the other place, David Willetts, on the brave step he has taken by promising an earnings-related state pension inside his pension policy, which I think is more relevant to today's needs.
Secondly, I have supported since the 1980s—and the Government continually quote my support—some form of pension credit. Having myself introduced family credit for families with children, my view has always been that extra help was necessary, particularly for those pensioners who, through no fault of their own, had not had the opportunity of building up their own pension. That was often because the opportunity simply did not exist for those pensioners.
I know that there were reservations in my party on the pension credit introduction, but I am very glad to see, to know and to understand that my party has now pledged to continue with the pension credit. That is good news. For although we all hope that as many
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pensioners as possible can be floated off income-related benefits, this will frankly not happen overnight.
Thirdly, and crucially, I believe that we should do everything in our power to encourage and help everyone to build up a pension of their own. Here I part company with the Government. They have abolished the state earnings-related pension scheme—SERPS—and I certainly agree with that policy; that will come as no surprise to the Minister. However, they have replaced it with an alternative second state pension, which is just as full of complexity as its predecessor. I wonder how many people covered by that second pension actually understand it. I remember carrying out a survey for SERPS; it was quite clear that the majority of the people who were covered by SERPS did not understand what it was about. Indeed, most of them did not know that they were covered by it in the first place. I do not think that that is a very satisfactory position for pension provision.
I would much prefer the second pension to be built up by the individual, with a fund of his own, outside the state organisation. Contributions from the employer and the employee, yes—but there is no reason why the Government cannot contribute to such a pension by matched contributions for low-paid employees and outright contributions for carers.
Let me say in parenthesis—and here I probably part company with both Front Benches—that I do not run away from the idea of a compulsory scheme. I am sceptical that we will ever persuade all those who should be saving to save. Currently, many who could be building up a second pension with matched employer contributions—such pensions are actually on offer—are not doing so. For those who say that this is a very startling proposal, let me remind them that nearly 20 years ago, in our 1985 Green Paper on pensions, the Conservative government advocated such a course, and no one backed that more strongly than the then Prime Minister, my noble friend Lady Thatcher. Sadly, the solution was too radical for those times, but I think its time may have come.
Of course, I accept, following everything I have said, that there is an implied and major responsibility on the private sector and the life insurance companies. Let me make my position on that absolutely clear: I have no sympathy whatever with companies which either knowingly or through incompetence fail in their duty to the public. All too often, the failures of the past 50 years have not been the failure of systems but the failures—and worse—of executives and salesmen who have exploited the public. That was certainly the case with the mis-selling of personal pensions, and it was quite right that those companies should have had to put the position right. So I will back any sensible measure of control and supervision in this area and also any watertight compensation arrangements where mistakes have been made. That is how I will judge the Pensions Bill—whether that protection is adequate or not.
However, such legislation is, by definition, for the future. We also have the present to deal with. We have cases in which a number of pension schemes have been

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wound up when companies have gone into receivership, leaving their members with very much lower pensions than they were promised. I have in mind the position of employees in ASW, Dexion, United Engineering Forgings and Blyth & Blyth. A typical example is of one man, now aged 59, who spent 38 years working for Dexion but now looks set to lose 80 per cent of his pension entitlement.
And of course we have the case of Equitable Life. I do not want to argue the case in detail—that has been done this afternoon in the other place. Suffice it to say that there are very few people who were happy with the Government's initial response to the Penrose report. My view is that the fault lies not so much with the regulatory system—pre-1997 or post-1997—but with the lack of action of some of the regulators and, most of all, with the company itself. I suggest that the question now is how we take that issue forward—how we restore confidence and how we find some justice for thousands of pension savers who have found their pension entitlements so cruelly reduced.
I have one suggestion to make, which comes from my misspent youth as a Minister. In the early 1970s, it became clear that action was needed to help railway pensioners because of the deficits in their funds. In an entirely bipartisan way, the Conservative Government of Ted Heath introduced legislation to make very substantial grants to the British Rail pension fund. That legislation was overtaken by the 1974 election and was reintroduced by the Labour government of Harold Wilson.
The only concern was that very big lump sums were being paid over to the British Rail pension fund. In my Transport Act 1980, I kept to the agreed policy of compensation but, in effect, paid on a pay-as-you-go basis when the liabilities became due. That seems to me a way forward that has the advantage that compensation, whatever was agreed, could be paid year by year and we could have the agreement of all the political parties to such a solution. In pensions, there is much to be said for bipartisan agreement, and I believe compensation is justified here.
The reason I advocate that course is that I think that natural justice demands that we should seek to help men and women who have saved for their retirement and done everything that successive governments have asked them to do. But I advocate that course for another reason: there is an urgent need to restore confidence. By any standards, the past few years have been extraordinarily difficult. Yet as people live longer, the need has never been greater than it is today that we should encourage provision for old age. That means that people should have the confidence to invest and to save. I want everyone to have a decent pension of their own—that, I think, should be the aim—but I fear that today, we are some way from that goal. I beg to move for Papers.
6.37 p.m.
Lord Brookman: My Lords, the subject of pensions is very high on the political agenda. We should all be
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grateful for this timely debate, initiated by the noble Lord, Lord Fowler, whose expertise and experience I must confess I am unable to match. I declare an interest, not only as a person who benefits from a final salary pension scheme but also as a former General Secretary of the Iron and Steel Trades Confederation, the community union. I was both an employee and an employer, so I had to administer a pension scheme.
I should like initially to refer to what I know best: the achievement—for it was an achievement of a final salary pension scheme for blue-collar workers in the steel industry. Thirty years ago in 1973—not very long ago—tens of thousands of workers were introduced into a pension scheme. When I started work in 1953 at the Ebbw Vale steel works in south Wales, I was amazed, not only by the adverse working conditions but the age profile of the employees. Many were over the age of 70. Why? I suggest that it was because there was no pension scheme and nothing there for them to retire on.
Only white-collar workers in the steel industry had pension schemes in my younger days. Staff workers had a pension scheme. My father was one, and one of my brothers, being a foreman, was another. But for me and my other brother—no pension schemes for us. So 1973 was a good year for the introduction of company pension schemes—at least, it was for me and for many thousands of others. As an aside, it was public ownership that introduced a pension scheme for blue-collar workers throughout the United Kingdom steel industry.
We are where we are, so I welcome the Government's introduction of the Pensions Bill. Following the terrible series of disasters with companies going into liquidation, and the subsequent effect on employees' pensions, the Bill will go some way to safeguard schemes for the future. However, I stress, that is for the future.
The noble Lord, Lord Fowler, rightly raised the issue of the plight of workers in serious difficulties as a result of companies such as Allied Steel and Wire and others going into liquidation. It has brought home to millions of our fellow citizens the weaknesses in protection for pension rights. I suspect that very few of your Lordships are unaware that 1,000 redundant workers in the steel plants in Cardiff and Sheerness, some with 30 years' service or more, face lives of penury as a result of the insolvency declared in 2002.
From my perspective, a pension is not just another financial commodity for which we pay now to use later. Millions of men and women employees, along with their employers, pay contributions to occupational pensions that build up entitlements. Such entitlements are part of their pay. They are not something special to them: but their pay. Their own money goes into the pension scheme. I suggest that it is part of the deal that resulted in their being employed in the first place. A company pension scheme is a good selling point for any company wishing to employ people.
Indeed, the law—many noble Lords are expert in this area—recognises that there is something special about wages. If a company becomes insolvent, employees' pay

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has the first claim on assets, and it is my understanding—I shall be corrected by the Minister if I am wrong—that the state steps in to make up shortfalls. Fortunately, as a general secretary, I never had to face such a situation, but I believe it to be the case.
A colleague of mine who follows these issues more assiduously than myself makes a valid point. He says that this is a case of basic morality. As a religious man, he quoted Leviticus and the epistle of St James as an injunction on employers to pay labourer's wages at the end of the day on pain of incurring heaven's wrath. It is a moral responsibility. It is a moral responsibility for banks and bankers. We read and hear about vast profits, mind-boggling salaries and, at the same time, the withdrawing of credit from companies such as Allied Steel and Wire, which eventually led to the current dilemma. Dilemma it is, because it now seems that the key unions at Allied Steel and Wire have started a legal claim against my Government stating that they are in breach of a European Union directive. The directive refers to governments having a formal obligation to establish and maintain arrangements to guarantee payments of pensions when companies go bust with debts to pension funds. That directive has been in effect since 1980. I need say no more.
The proposed pension protection fund is to be welcomed. However, it cannot be right that workers such as those in Cardiff and Sheerness will be hung out to dry. Some months ago, my noble friend the Minister indicated to me in reply to a question that there would be no retrospective legislation. Much has happened since then however. There has been much activity in another place. The Western Mail, a leading newspaper in south Wales, published an article on 16 March that referred to an "encouraging meeting" between the Prime Minister and Mr Kevin Brennan, MP for Cardiff West, which is welcome. I am also pleased to hear that, at Question Time today in another place, the Deputy Prime Minister gave a positive response to a similar question from the Floor.
This injustice should be addressed. Companies are winding up defined benefit schemes. Employees at Allied Steel and Wire in Cardiff are suffering. Some companies are using dreadful tactics whereby 12-month contracts are imposed, with employees incurring no benefits at all. The Pensions Bill is good news, but I want it to be stronger. I want it, as do many other noble Lords, I am sure, to safeguard workers' interests and help those who are currently suffering as a result of their companies going into liquidation.
6.45 p.m.
Baroness Barker: My Lords, I declare an interest as an employee of Age Concern England. I, too, thank the noble Lord, Lord Fowler, for the opportunity this evening to discuss again this important issue. The debate is timely, following as it does the report of the Penrose inquiry. It could be said of last week that it was a bad week to be an actuary.
I have been a Member of your Lordships' House since 1999, and I have noticed the frequency with which we politicians return to the subject of pensions
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policy. Perhaps that is because, unlike the Prime Minister, those of us who pursue our political careers in this House and who are not on the ministerial Front Bench receive no pension contributions for our efforts whatever. More likely, it is because, remarkably, pensions have shot up the political agenda in a way that few could have predicted in previous years. There are well known reasons for that, such as the economic reasons associated with the happy experience of the increase in longevity of most of the population, and changes in old-age dependency ratios coupled with changing employment patterns.
However, two important things have changed over the past five years. The first is the public perception that a growing older population coupled with a declining birth rate is an economic burden. That impression is frequently reinforced. However, as the Select Committee on Economic Affairs noted in its report in November 2003, many of the actuarial assumptions beneath that simplistic statement are open to challenge. However, one thing is clear: the structure of private and occupational pensions has appeared to change little to take into account those significant demographic changes.
The second thing that has markedly changed is the perceived attitude of employers towards occupational pension provision. In 1998, the report by the Pension Provision Group entitled We all need pensions stated:
"In addition to wanting to provide for their employees in old age, employers offer a pension scheme because they see it is in their own interest to do so. Most importantly, employers believe that the provision of a pension scheme will help attract, retain and motivate employees. They may also consider that providing pension schemes enhances their reputation in the community generally and avoids the bad publicity that can be associated with employees retiring into poverty".
However, as the noble Lord, Lord Brookman, said, five years on, in the wake of the collapse of schemes such as ASW's, which have left thousands of people facing a retirement in penury, everything seems very different. Rightly or wrongly, there is a perception that generosity of occupational pension provision is risky or unwise for an employer. The proposals for the Pension Protection Fund in the Pensions Bill can be depicted as a way of penalising good employers and bailing out the bad, which is not helpful.
One thing that employers have failed to reflect is the necessary change coming upon us in attitudes to work and employment. By December 2006, employers must be ready to implement the EU employment directive of 2000, which prohibits discrimination on grounds of age. To date, there is little evidence of companies abandoning employment practices that are based on age and few have abandoned arbitrary retirement ages. December 2006 is not very far away and it is of concern that, on the one hand, people are talking about the need to raise the basic state pension age and, at the same time, there is little evidence of employers taking on board the implications of such a move for them.
The title of today's debate does not include the basic state pension, but it is impossible to discuss private and occupational pension provision without making reference to it. Indeed, the Government's own strategy explicitly recognises that with the proposals in

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Clause 194 of the Pensions Bill for combined pension forecasts. Time and again, research into the low level of investment in personal pensions reveals that people have wildly optimistic expectations of the level of retirement income that they can expect from personal pension provision. People either have insufficient access to information, or their level of financial literacy is so low that they cannot understand the nature of different pension products. That situation is not helped by the complexity and uncertainty of the ways in which private and occupational pension schemes interact with the basic state pension.
I therefore noted with interest the recommendation of the Select Committee on Economic Affairs that the possibility of a national financial advice network provided by the voluntary sector should be explored. That said, I have strong reservations that any voluntary organisation would find itself able to undertake any such risk whatever. But I do believe that there is a case for private sector companies to consider whether they could be involved in voluntary organisations. From that I would exclude my own, as I refer to those that have a track record in provision of money advice. They are the organisations that the public trust to give them independent advice.
The noble Lord, Lord Fowler, was absolutely right when he referred to the gender discrimination in annuities having a huge impact, particularly given the way in which the change to defined contribution schemes carries on completely unabated in a way that five years ago was simply not envisaged. There really ought to be further research on that.
Finally, on these Benches we have consistently argued that the greatest need is among older pensioners. We believe that the longer the time since a person was actively engaged in the labour market, the greater the probability that they will have an inadequate retirement income. Efforts to enable people to stay economically active for longer, including changes which enable people to work part time and call down part of their pension entitlement, are to be welcomed. However, until the state pension system recognises the plight of older pensioners, of whom there will be many more, and until private and occupational pensions schemes similarly address that issue, in a way that is comprehensible to those who need to make the financial planning that the noble Lord, Lord Fowler, rightly called for, I believe that many of the changes that we are considering at the moment may be interesting academic exercises, but will leave most of the general public still facing an uncertain future.
6.53 p.m.
Lord Lea of Crondall: My Lords, first, I add my voice to those welcoming the initiative of the noble Lord, Lord Fowler, in introducing this debate. I add my support to the sentiments expressed by my noble friend Lord Brookman on the problems of ASW and other companies in similar positions, and hope that the talks to which he referred could lead to some accommodation being reached on that matter.
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I welcome the key features of the Pensions Bill, and shall pick out one or two points in it. I shall relate that to the collapse of confidence to which the noble Lord, Lord Fowler, referred, which is not principally a question of the government of either party but a collapse of confidence in the industry. "Independent financial advisers, are they all crooks?" is the type of sentiment that one hears expressed. There is a massive job to do, which I relate to the problem of advice about pensions. In that regard, the Government have been doing some very interesting things, from the Green Paper right through to what is happening directly in the Department for Work and Pensions.
Underneath all that, there are some fundamental questions to be asked about where we are going on the savings ratios in Britain. I know that people speaking for some other economies do not agree with what I am about to say, but I believe that our savings ratio in Britain—whether the household savings ratio or the national accounts savings ratio—is far too low. It is 5 per cent, broadly speaking, as compared with 15 per cent in France, Germany and Italy. Some people believe that because we have a high level of consumption, higher as a percentage of the gross national product than France, Germany or Italy, Britain is doing rather well and Germany, France and Italy are not doing so well.
It is a question of timescales and mortgaging the future. John Maynard Keynes said that in the long term we are all dead, but one certainly has to take a timescale of 20 or 30 years, when some people in this room may not be dead. Certainly, that is a timescale for which we must plan in the pensions industry. It is interesting and important that the terms of the debate are so similar to the remit of the Independent Pensions Commission, chaired by Adair Turner, which has been operating for about a year and has another year or so to go. He is working with two very distinguished colleagues, one of whom, Jeannie Drake, is a leading trade unionist.
I briefly remind the House of some of the matters that the commission is studying in great depth. Under the heading of demographics, it is investigating the potential demographics in 2050 of life expectancy, fertility, migration and other variables. The commission asks the question, which I rather like,
"whether there are any limits to the increase in life expectancy".
It asks about the implications of different demographic assumptions for annuity rates at different ages.
The commission also asks when and why people retire. That might seem rather a facile way in which to pose the question, but there it is. The commission focuses on trends in labour force participation rates, considering age, gender, ethnic and other categories. It asks to what extent so-called early retirement is voluntary or involuntary.
I wish Adair Turner and his colleagues all the best. They are a very distinguished team of three. They are going quite wide in their trawl, but it is essential that

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they do so. Another example of the width of their trawl is mentioned in their interim comment on what they are working on. It says:
"A crucial issue will be the implications of house ownership for `adequacy' of savings. This will depend on whether housing assets truly represent a releasable source of wealth and thus income in retirement, or whether for many people they are only relevant because they secure rent-free retirement".
Finally, the commission is considering not the state pension system itself but the likely consequences of the present and evolving state system for the levels of support that the state system will deliver in relation to the incentives for private savings.
I refer to two points in the Bill that are particularly welcome. The pensions protection fund is based on the fact that although in,
"the overwhelming majority of cases, promises made in defined benefit pension schemes are fulfilled … in some exceptional cases, a scheme will go bust with an underfunded pension and the workers lose out … This has shaken trust in pensions in general"—
trust that the Bill is "taking action to restore". The statement goes on to say:
"The PPF will be a compensation scheme protecting pension scheme members, so that if their employer goes bust, they can be reassured that they will still receive the core of the benefits which they had expected—protecting the pension promise. This is a huge step forward for pension security … [and] has been welcomed by the CBI, the TUC and the public at large".
It will give,
"100% of the original promise to people who have reached pension age [and] 90% for people below that age (subject to a cap of £25,000 per year)".
Then there is the pensions regulator:
"The new Pensions Regulator will focus on protecting the benefits of pension scheme members, concentrating its efforts on schemes where it assesses that there is a high risk of fraud, bad governance or maladministration … The Pensions Regulator will also have a specific function of providing information, education and assistance to certain categories of people involved in administering, advising and facilitating the operation of certain schemes".
So far, so good. We need to have some extra provision in the legislation to give workers the absolute right to be consulted about changes in pensions and it is important that provision is being made for Citizens Advice Bureaux to be given some assistance. As a credible part of the voluntary sector, I welcome the fact that they are gingerly moving into the field of giving pensions advice.
7 p.m.
Lord MacGregor of Pulham Market: My Lords, I think that this is the third time in less than a year that I have spoken in a pensions debate in this House and I again declare an interest as a trustee of a pension fund and as a director of a life assurance and pension provider.
I agree with the noble Baroness, Lady Barker, that the reason that we are coming back to this again and again is because pensions have gone right up the political agenda. They will be a major issue for governments of all persuasions in the years ahead and they must be must be got right in the long term. In seven minutes it is very difficult to cover this field and
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I shall therefore just highlight a few issues, to each of which I would like to have been able to devote a full half-hour, in the hope that we can come back to them later.
I remember that after I left the Cabinet, as my noble friend Lord Fowler indicated, and felt freer to talk on these matters, I was speaking and writing about pensions in the mid-1990s. The general theme that I was developing then was the pension time-bomb. Of course, I was then referring to demographic factors, with which we are all familiar, and to the fact that surveys and reality showed that many young and not-so-young people knew that they had to save more for their old age, because the state pension would not provide, but were not doing so. That was the worry then.
In the period since then, we have had many issues that none of us predicated at that time. At that time the atmosphere was still that we were congratulating ourselves on having the best funded pension provision in the EU and many pensioners and prospective pensioners were basking in the expectation of retiring at the age of 60 or even earlier and having a very comfortable retirement life for many years.
All of that has changed. I want to begin by asking the "what if?". What if the Government had not taken £35 billion already, and I gather will probably take £6 billion a year, out of pension funds, which has undoubtedly had a major effect on the black hole that we are all discussing? What if there had not been such a focus on mis-selling? I fully understand the point about pension mis-selling and if I have time I will return to it. But what if we had not had seven years of an atmosphere in which the bad news was always put forward in the media and there was constant pressure about everything that was going wrong in the pension industry? It is no wonder that the public's confidence has collapsed and even providers now feel beleaguered and uncertain of their future.
What if the Hyman case in the House of Lords in relation to Equitable Life had gone the other way? Instead of being 3:2 as it was, what if, with only one judge taking a different view, it had been 3:2 the other way? There would be a different debate going on at the present time.
What if the equity markets had not downturned? Most interesting of all, what if we had not moved into a low inflation and low interest period? I applaud that for all sorts of other reasons—we have all been endeavouring to achieve this in our lifetime—but let us be quite clear. It has a significant impact on the current debate on pensions because many pensioners are complaining about the low annuity rates they are getting, which are a direct reflection of low inflation and low interest rates. I remember in the 1970s when inflation was at 26 per cent and therefore the interest rate return that pensioners were getting on their bank deposits was fairly high that when inflation came down they were complaining that the interest rates had come down too. It was very difficult to get that realistic argument over. We are suffering from this not only because of the annuity position but also because, I

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suspect, low interest rates have a bigger influence than the current state of the equity markets in the actuarial calculations for pension funds. It is curious that the black hole would be diminished quite a bit if interest rates went up substantially, because of the way in which the liabilities are calculated.
All of these things have happened. If none of them had happened we would still be facing the demographic timebomb and other issues that I was referring to in 1975. But now we are in a climate where the position is very much worse.
I want to spend the last four minutes of my speech on a few reflections, I hope in the spirit of my noble friend Lord Fowler, trying to make the point that this is an issue that all governments must assess and therefore we should not be criticising each other all the time—although I am about to do that. I have to say that in relation to the new pension cap of £1.5 million, although I would have done it in a different way, I have a lot of sympathy with what the Government are trying to do and I do not have a great deal of sympathy for some very highly paid executives who are screaming about it. I make that point to show that I am approaching the issue in a bipartisan way.
I want to make a few reflections that I hope will feature in all our debates in the future. The first is that the Government must recognise that their policies over the past seven years are not working. It is not just the removal of the tax credit on the pension schemes—although that has had a remarkable effect, certainly as great as the effect of the equity markets and the accountancy changes—it is also that the flight from final salary schemes, which we all know is taking place on a massive scale, puts greater emphasis on personal pensions. Frankly, the Government's stakeholder pension scheme is not working to anything like the extent that they expect. It is also the case that contracting out of the state scheme is not now providing sufficient incentive for employers to promote occupational schemes strongly. All of these issues must be faced up to and we must find new incentives and new ways to encourage employers to continue with occupational pension schemes and to encourage individuals to take out personal pensions.
Secondly, on the state pension I agree with my noble friend Lord Fowler. I think that the situation has changed and that we need to reassess the role of the state pension. I am greatly impressed by the work that David Willetts is doing. He has given some brilliant and compelling lectures which, because they do not contain soundbites, are unfortunately not getting much attention at the present time. But they are well worth considering in a non-partisan spirit. I agree that the real problem that we face with the state pension is that in due course 60 to 70 per cent of all pensioners will be on means-tested benefit, which is no incentive to save.
Thirdly—and this is a very difficult subject to embark on for 30 seconds—we need to have a different climate in which to look at all this. Of course I accept that pension mis-selling took place and that it had to be dealt with. But if we are in a climate where we
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believe that there is no risk in long-term savings, if we are in a climate in which there will be constant blame and constant demands for compensation, which is the culture we now live in, we shall not get a balanced argument in debate on these issues. I shall take one example. If someone had an Equitable Life pension that had matured in 1999 and all the proceeds had been invested in the stockmarket at that time, that individual would be in a worse situation now than if he had remained an Equitable Life policyholder. That is because investments in PEPs or ISAs do not have an expected guaranteed return and it is understood that if you invest in unit trusts or PEPs or ISAs you must face the risk of markets going down. We seem to have lost all of that in the pension field. I wish I could have said much more about that issue.
Finally, I agree that unless we face up to some of these issues young people simply will not save. They believe that their investment in their house will in some form provide their pension in due course. Frankly, it will not. They are taking a huge risk.
So I come to the final two points that I want to make. I think that we may have to face up to the fact of the need for compulsory occupational pension provision before too long. It is important that we do not waste too much time not facing up to it and saying that we hope that the situation will get better. We ought to be having that debate now.
I go back to my position in my original timebomb article. We must recognise that perhaps the biggest factor of all, and the one that is causing so much difficulty for the providers of private pensions, is longevity, the fact that year after year we are all living longer. That is a very good thing from every point of view, except for pensions. We must now address the likelihood, in my view, that the state pension age will have to go up from 65 and the sooner we face up to that, the better. We must also face the likelihood that one of the things that is reducing the returns on occupational pensions is longevity and we must take that into account.
7.10 p.m.
Baroness Dean of Thornton-le-Fylde: My Lords, I, too, welcome the opportunity of this debate. I console myself with the fact that we have the Pensions Bill coming probably just after Easter and that we will all probably have much more time to debate the issues then. So, like the noble Lord, Lord MacGregor, I shall try to skate very quickly over some of the key issues.
I think there is wide cross-party support for the aim of the Motion. We have to encourage more people into occupational and personal pension funds because of the demographic time-bomb, which has been mentioned, and a host of other reasons including the savings factor. I think that two words will help—trust and confidence. When I was a young union officer in Manchester, both words were a given in company pension funds. Workers had trust in the funds and they had confidence that they would get their pension at the end of the day. I think that those have been severely damaged. I have great sympathy for the 60,000

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workers in the case mentioned by my noble friend Lord Brookman. I do not believe that we need to wait for the Pensions Bill to address that issue. The matter is so important that it should probably be dealt with in parallel with the legislation. I urge the Government to address it. I know that they are concerned about it.
The noble Lord, Lord MacGregor, took a little trip down memory lane, but it was a very limited memory lane. I should like to go a little further. I think that three Members present in the Chamber will remember our debates on the then Conservative government's Pensions Bill, when we sat on that side of the House and the noble Lord on this side. I think that the noble Lord, Lord Tordoff, was in the House then. My noble friend the Minister sat on the Front Bench and I was her humble number two in the debates on that legislation. I suggest that that Bill—nicknamed the Maxwell Bill because of the Maxwell scandal, which was why I was involved in the pensions discussions—was very badly flawed. It is also part of the jigsaw puzzle concerning the current lack of confidence in pension schemes.
Provisions in the previous government's pension arrangements allowed companies to take from their pension fund any surplus above 5 per cent. The trustees could do nothing about it. Removing money from the funds at a time of huge surpluses obviously had a direct impact on the funds. Moreover, the Act introduced in the mid-1990s encouraged people to pull out of occupational final salary schemes and go into money purchase schemes. That was the root of the mis-selling. It happened because the insurance industry had a clientele bonanza which it never in its wildest dreams expected. Another consequence of the legislation for occupational pension schemes was the drawing out of younger scheme members to whom money purchase schemes were more attractive. Those arrangements entirely distorted the profile of occupational pension schemes. That is sometimes forgotten. If we are going to have a debate, let us have a wide one.
There was another factor. At that time, my noble friend Lord Eatwell—who I am delighted to see in the Chamber—spent a lot of time arguing for what was called a central discontinuance fund. After Easter, when we get the Pensions Bill, we will be able to debate the pensions protection fund. If the Opposition Benches had listened then, perhaps we would not be in the current position as regards those 60,000 workers.
At that time, my noble friends Lord Eatwell and Lady Hollis also argued that the minimum funding requirement—which, it was said, had to be included in the Pensions Act—was too rigid and not sufficiently flexible and could severely damage pension funds. Both of those debates have come home to roost in the mature situation in the pensions field. We also argued—I say this as a side issue—that, on divorcing, women should have a fair share of the pension fund. It took a Labour Government to introduce that because the then Conservative government refused pointblank to do so.
I believe very strongly that this is a cross-party debate. However, let us not pick and choose which parts of the debate we want to talk about. I believe that
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the Pensions Bill will be helpful. It will be criticised, of course, but it goes a lot further than current arrangements to protect people and, we hope, to encourage them into pension funds.
One issue on which I strongly disagree with my own Government and strongly agree with the noble Lord, Lord Fowler, is that of annuities. The argument that annuities affect only a small group of the highly paid will just not run in the light of current demographic changes. The Association of British Insurers has published a survey showing that people are taking annuities before 65 as though they welcome it. I think that it is a slanted debate. People like to arrange their affairs. They like to know where they are and the point they have reached. We also read in the press that returns on annuities are decreasing. Therefore, many people believe that they should get in now before they lose yet more money.
I strongly urge the Government to readdress the annuities issue. I gather that the age limit of 75 was established when people could expect to live to 70, so only a few reached the limit. I believe that we have to protect the government of the day against a situation in which we must look after and fund those who have used the sum or given it to their families. We have to ring-fence a sum to protect their pension income.
I welcome this debate. The issue could be, and should be, a cross-party one.
7.16 p.m.
Lord Freeman: My Lords, I declare an interest as chairman of the pension fund trustees of an industrial company's defined benefit scheme.
I congratulate my noble friend Lord Fowler on introducing this debate. Indeed, I am getting used to following him and my noble friend Lord MacGregor. I agree with what both have said. I shall not repeat their arguments, save to remind my noble friend Lord Fowler of his remarkable achievement, 20 years ago, of introducing the personal pensions legislation. It has had its problems, but it was a great initiative. He will not remember that, 20 years ago, I introduced a 10-minute rule Bill on the same subject. Of course it failed, but afterwards he came up to me and said, "Well done, my boy; you'll go far". I have tried to follow in his footsteps ever since.
We are witnessing the slow demise of defined benefit schemes. Most of them are closing to new entrants. In 20 or 30 years' time, they will all effectively be closed-end funds with no new active members. Some 10, 20 or 30 years ago, our defined benefit schemes—our final salary schemes—were the envy of the world. For a variety of reasons, and I am not going to play party politics, we have seen their demise. I very much regret it. It is in sharp contrast to the public sector where the Government are the sponsor and guarantor of public sector final salary pension schemes.
I am looking very much indeed to the introduction of the Pensions Bill. Under the leadership of my noble friend Lord Higgins on the Front Bench, I look forward to burning the midnight oil with the Minister. However, I should like to put up three small red flags

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about the Pensions Bill. As the noble Baroness, Lady Dean, said, this debate is, in a sense, a trailer to that important Bill.
The first point is on the pensions protection fund. This is not a small point but a point of some seriousness. Of course the fund must be welcomed. I think that all noble Lords who have spoken in this debate have welcomed its introduction. However, it is effectively a payroll tax on employers. That is how it will work. We will debate what proportion will be flat rate and what proportion will be risk proportioned, but—at £300 million it is a payroll tax.
I have reread what the Minister said in a debate a year ago on this subject and her more recent comments on the Green Paper. I just do not believe that the savings that were mentioned by the Government to offset the £300 million cost are justified. I do not think that there is any credibility to the figure of £370 million claimed as an offset by limiting the price indexation cap to 2.5 per cent. We already have inflation at about that level and I do not see where those savings are going to come from. I also do not see where the £100 million of benefit is going to come from by dropping the MFR and therefore expecting funds to move from bonds to equities. In fact, just the opposite is the case.
First, if the Government are saying, "Here is a protection fund", if a company wishes to continue providing a defined benefit scheme—I hope that they will still continue for existing members—it must pay into a protection fund. With this additional net burden, some accruing benefits may well be lost. I believe that employers will inevitably look to offset some of that cost. I believe that the solution is for the burden to be shared more broadly. I argue that public sector pension funds should be included within the ambit of the protection fund, and hence the Government, Her Majesty's Treasury, will effectively make a contribution.
My second point concerns the excellent Paul Myners report. He made a number of recommendations to the Government about the role of trustees, all of which are very important. I welcome the recommendation in the Bill being debated in another place that there must be a continuation of member nominated trustees. That is democratic and right. However, we need more professionalism and perhaps more independent trustees to bring their outside experience to boards of trustees. I plead with the Minister not to introduce legislation concerning the role, the responsibilities and training of trustees. Let us have a jolly good code based on Myners and let us bring up the standards of most pension funds to the best.
I very much welcome the Government's initiative in taking powers to ensure that everyone in the country has adequate pension provision. I suggest that on people's 30th, 40th and 50th birthdays, they should be reminded of how much they have already set aside for their future pensions. I am amazed to find a growing consensus on both sides of the House in favour of some compulsion in this regard. Our savings rate is far too low. I would support a government initiative in
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co-operation with employers but funded by the Treasury to ensure that information was provided more generally on what people have saved.
I find myself in disagreement with some members of my party who have welcomed the Government's intention to remove employers' responsibility at least to offer additional voluntary contribution schemes. For heaven's sake, if we are trying to improve the rate of savings, to throw away the responsibility on employers—frankly, it is a relatively light responsibility—at least to offer employees the chance to save more seems to fly in the face of the logic of the arguments advanced by the noble Lords, Lord Brookman and Lord Lea of Crondall, the noble Baroness, Lady Dean, and those who have spoken on this side of the House. I am afraid that in coming years some degree of compulsion will be needed to raise the retirement provision of our population.
7.23 p.m.
Baroness Turner of Camden: My Lords, I welcome the opportunity to participate in this debate. I thank the noble Lord, Lord Fowler, for introducing it.
Those of us who were members of a final salary scheme who are now receiving pensions from such schemes are fortunate. Others may not be so lucky. Final salary, or rather defined benefit schemes are becoming a rarity, particularly in the private sector. Many firms are closing them to new entrants who are being offered—if they are offered anything at all—membership of money purchase or defined contribution schemes where the final result is often not known, where the employee takes the risk personally and where few people seem to know just how much has to be contributed to enable them to qualify for a reasonable pension on retirement.
The sense of crisis has arisen because in a number of firms that have become insolvent, scheme members have seen their eventual entitlement substantially diminished, even after 30 years' membership. Those cases have led to an enormous amount of public concern and a further lessening of trust in pension providers. What most concerns pension scheme members is the security of their investment. Until quite recently it was commonly felt that security was guaranteed by membership of a final salary scheme. That sense of security has been eroded. That is the latest event in a catalogue of concerns about pension provision affecting occupational as well as personal pensions.
I still strongly believe that the pension structure put in place under a previous Labour government by my late noble friend Lady Castle of Blackburn was probably the best we have ever had in this country. SERPS had flaws but they could have been put right. But instead that structure was destroyed by subsequent administrations. Moreover, in its attempt to "individualise" pension provision through the promotion of personal pensions, the government of the time contributed to a further lack of trust in the purveyors of pensions and compensation had to be paid to those who had been misled into leaving good occupational schemes in favour of poor personal provision. According to research undertaken by the ABI, 8 million working people are now not saving for

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retirement and a further two million are saving at too low a level to provide an adequate retirement income. Some 46 per cent of women are non-savers.
Clearly the Government are taking steps to deal with some of these problems and we await the new Pensions Bill to be debated in this House. One of the most discussed elements in the Bill—it has already been referred to several times in the debate—is the proposed pensions protection fund designed to provide compensation for members of schemes wound up in deficit after the insolvency of an employer. The PPF will be funded by a levy on DB schemes. The PPF is a very welcome new idea, but problems remain. The scheme will not come into operation until April 2005 and there is no retrospection. That means that employees who have lost out recently—some of them within sight of retirement—and have lost absolutely everything will be left in a truly dire situation.
The Government are saying that the PPF is an insurance scheme and there can therefore be no retrospection. Unions representing members in that situation refuse to accept that nothing can be done and are pressing for provision for retrospective cases. I was very interested in the scheme to which the noble Lord, Lord Fowler, referred in his opening address. There is also the fact that the compensation the PPF will provide is limited initially and potentially can be varied during its operation.
Furthermore, the statutory inflation proofing ceiling for pensions, called limited price indexation, will be reduced for all schemes from 5 per cent to 2.5 per cent. I am opposed to that. We have no idea that the present low level of inflation will persist; the signs are that it could increase. The measure, if carried through, could mean a worsening of standards, particularly for older pensioners.
I agree with the concept of a new pensions regulator to replace OPRA. The new regulator is, apparently, to have greater powers than previous bodies of a similar kind—certainly more powers than the Occupational Pensions Board, of which I was a member, and more powers than OPRA.
It is proposed that all schemes must make provision that at least one-third of the trustees must be member nominated. There will be a code of practice for that requirement, but, of course, it will not be legally binding. My union has suggested that one-half should be member nominated. Criticism in the past of member trustees has been in my view undeserved. Many are very fully committed people who often become extremely knowledgeable about their own scheme and pensions legislation generally. Of course, there should be training. That is already provided by many unions.
However, the difficulties experienced by some schemes in recent years have not been the fault of trustees. They were often opposed to contribution holidays taken by some employers in the good years, but had to go along with them after being told by actuaries that eventual pension entitlements were fully protected. Moreover, they were not responsible for the Chancellor's move on ACT which netted very substantial sums indeed for the Treasury and which led to a reduction in pension fund assets.
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On the issue of stakeholder pensions, it does not seem that these have been as successful as the Government would have wished. I think that the reason is fairly obvious. The legislative requirement on employers is simply to provide access. There is no requirement for employer contributions. Practically everyone with an interest in pensions agrees that in cases where the employer does contribute, membership of stakeholder schemes increases dramatically. I hesitate to use the word "compulsion", but could not more be done to ensure that employers accept responsibility to make a contribution on behalf of employees?
Finally, I quote the ABI, which said:
"A successful private pension system can only work if it sits on the foundation of a strong and viable state pension system—yet our current state pension system is over-complex, sends out mixed messages about whether saving for retirement is the right thing to do and will result in over 60 per cent of the population being reliant on means-tested benefits by the middle of the century".
I agree with that view. Low-paid workers, including large numbers of women, can look forward to only the state pension. As that is dependent on the contribution record, which may well have been interrupted by spells spent caring for others—children, partners, elderly relatives and so on—the level available for many women is one which inevitably results in poverty in old age, although I agree that the pension credit was intended to deal with that situation. However, it of course relies on means-testing.
Incidentally, I am glad that the Opposition now support the idea that the basic state pension should be substantially increased and thereafter linked to the wages index.
We need to look seriously at all the problems not completely addressed in the Bill which will be before us shortly, but we must remember that genuine and lasting pensions reform demands that there should be as wide a consensus as possible among the major political parties.
7.31 p.m.
Lord Hunt of Wirral: My Lords, I congratulate my noble friend Lord Fowler on a most impressive and effective opening speech, and thank him for giving us the opportunity to have an important debate on pensions. I was also very pleased to follow the noble Baroness, Lady Turner of Camden, with whom several of us serve on the All-Party Group on Insurance and Financial Services. I should mention that I am a former chairman of AIFA, chairman of Beachcroft Wansbroughs Consulting and senior partner of Beachcroft Wansbroughs.
I would like to concentrate on personal pensions and the smaller group personal pension schemes. In the recent Budget, it was pleasing that we saw some signs that the Government had recognised at last the need to create better opportunities for people to save for their retirement. But sadly, they seem ready to come forward with proposals that benefit only the much better-off in society. Their priority should have been to bring forward credible proposals for the majority of people who are not that well off but are still able, reasonably, to save for their retirement.

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Unfortunately, the debate has become confused by the seeming wish of the Government to put in place mechanisms allegedly to improve, as the first priority, the efficiency of the industry. Sadly, further down the agenda is the need to secure outreach to middle-income savers. So, since 1997, the only initiative in operation has been the so-called stakeholder pension. Notwithstanding the usual defence of its position by the Government, that has not been the wonderful success claimed. No objective observer would regard the initiative as anything other than a miserable failure.
One major life and pensions company invested more on TV advertising of its stakeholder pension than did the Department for Work and Pensions. It is now withdrawing from the market rapidly. Why? First, saving for retirement out of limited incomes is always going to take a significant amount of budget planning and personal sacrifice for individuals and families in a world where most advertising extols consumption now. Secondly, without any serious market research, the Government imposed a price cap of 1 per cent on an industry which globally has an expense ratio of nearer to 2 per cent.
Indeed, international comparisons would have revealed that the UK industry was no less efficient than any other. Distribution is expensive because pension saving runs against the consumer tide in developed economies. Therefore, it seems perfectly reasonable for any multinational life and pensions provider to remove its risk capital from the UK and use it in markets which, even on a risk-weighted basis, offer a much bigger return.
The question of efficiency simply does not go away. Some observers have noted that under conditions of low inflation, the industry cannot take 2 per cent from the yield if equities yield no more than 7 per cent. To do so would leave the investor with 5 per cent—little better than they could achieve with a very low risk investment such as gilts. The industry needs to develop an effective answer to that challenge, and I will not dispute now the Government's right to be interested in the efficiency of the industry.
The lines of argument that the Government have put forward seem rather thin. They would do well to consider the market failure that gives rise to the controversy and their difficulty over pensions savings. Consumers do not shop around for savings products. That transfers market power away from them and towards others in the market. The product providers have also exercised weak market power because of severe competition among large numbers of them. I must add that that dynamic is changing fast as the number of providers falls quite rapidly.
Market intermediaries have exercised strong market power, reflected in the levels of remuneration they receive. I am sure many will wonder at that remark, given my past affiliation. It is, however, nothing more than market forces working together to create some form of equilibrium—in this case, putting substantial resources at the disposal of those who must spend
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considerable time persuading and genuinely advising reluctant savers that they need to save, or need to save more. I do not deny that commission-driven selling is to be criticised where it damages the interests of the consumer, but the reality is that outreach has to be incentivised in some way. Salaries that do not reward results are inefficient and FSA research shows that many consumers are not ready to pay fees for advice.
It is easy to pour scorn on that outcome, but I remind the Government that there are two types of consumer detriment. The first arises from buying the wrong product, or the right product at the wrong time. The second arises from not buying the right product at the right time. In their endeavour to avoid the first type of detriment, they are simply creating the second. They do so through simply failing to analyse the structure of the market when the price cap is set. Simply, there cannot be an intermediated market for pensions at 1 per cent, and we must presume that that is the Government's misguided aim.
No doubt some will point out that part of the market works at 1 per cent. That is where employee-benefit consultants advise large employers. I am afraid, however, that that is rather like saying that everyone should enjoy the same bulk discount as a car-fleet operator enjoys when he buys 1,000 cars, although most of us can buy them only one at a time. Not everyone who needs to save works for a large employer.
Several noble Lords have mentioned the ABI. Its director general said in a speech at a conference this morning that equities and other traded assets continued to offer the best prospect for investment growth over the long term. The ABI produced a document last year entitled Better pensions for all, which sets out 10 steps to better pensions. I commend it as very simple, sound and clear advice.
Finally, I turn to the Sandler group or suite of products. Mr Sandier saw three ways to simplify the product; I will not go into details, because we know them already. I remind the House that the market failure that we are addressing is on the demand side; consumers just do not shop around for pensions. The FSA's conduct of business regulatory regime does not address that as such. Rather, it creates a countervailing force by controlling supply-side consequences. Price caps clearly reveal the Government's lack of confidence in that countervailing force, as they introduced another. Mr Sandler skilfully points out that the first countervailing force must be reduced if the second is to operate satisfactorily. But I gather that Mr Sandler is already concerned that the FSA might not create a sufficiently reduced light-touch regime.
I conclude by saying that there is a need to work together to create a real and effective solution.
7.38 p.m.
Lord Lucas: My Lords, I found that a most impressive speech. My noble friend draws attention to a very major problem at the heart of personal savings for pensions, which is that the necessary costs, if one is going for individualised private pensions sold in the market, are such as to eliminate all the additional

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return that one might expect from equity and similar investments. That simply makes the product not worth while for the people who are supposed to be investing in them.
I have long had a hankering to look at things a different way—as my noble friend said, to move to the pooled-fund concept. Those of us lucky enough to have pensions from employers use that. We do not go out and get our own pensions; they are provided as part of a big pool. One thereby gets much cheaper costs of management and much lower costs of marketing.
I do not see any reason why we should not have a national invested pension fund—run not by the Government but independently—managed competitively by fund managers so that one would introduce the market at that stage, in the same way as big companies. There would be proper professional management, offering different funds that people could swap around as they wished, but with different ways of limiting that to ensure that one never ran into illiquidity or the "Equitable Life" problem of people receiving more out of the fund than was deserved. It would address the cost problems and we should look at that, if we were to go down the route of compulsory saving. Otherwise, all that we are doing is defrauding people.
We have really been defrauding people over many years with defined benefit schemes. The noble Lord, Lord Oakeshott of Seagrove Bay, and I had desks next to each other for a while in this business. I remember—and it is a long time ago—how conscious one was of the iniquities of defined benefit schemes. They were extremely unfair and severely penalised people who changed jobs. At the end of the day, as has been noted by several noble Lords on the Benches opposite, the real iniquity is that the pensioners do not own anything. They do not own any of the assets, merely a promise—and in many cases that promise is broken. Defined contribution schemes are closer to pensioners owning real assets. That would also be taking an honest view of the risks of investment. There is no such thing as a safe, high-return investment.
The pattern of performance of stock markets down the years is such that, looking at their history, in any 30 or 40-year period—which is what one is contemplating with regard to a pension fund—a third of the time markets will underperform their trend rate by more than a third. In other words, there are bound to be long periods of substantial underperformance from markets relative to peoples' expectations. There is no way that employers can make up for that. The resources do not exist and one will merely penalise the current workforce for the sake of leaving one's pensioners in comfort. That is not fair. We have to recognise the inherent risks in investment and share them fully.
Tracker funds are also not to be encouraged. All they do is destroy the market. They mean that people are not taking market decisions based on the worthiness or otherwise of the companies concerned, but merely on whether they are in the index. If there is too much of that, one will shift the benefit of market movements to the likes of hedge funds, so that all of the
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profits will start accruing to people other than the pensioners—those who are using the newer financial instruments—and the price signals, which the market is supposed to offer to the companies within it, are destroyed. That is an entirely destructive approach. We must all recognise that investment is a risk and people must take that into account in their decisions.
Returning to the main issue—how we encourage occupational or personal pension provision—we cannot do that by threatening people with the thought of penury in old age. No one believes that anymore, although it may be true. People are not reacting to that as a stimulus. We need to offer them the confidence that if they put money aside now, they will be able to enjoy a significantly better standard of living when they retire. It is important that all governments stick to that. My real difficulty with the Chancellor's £5 billion raid on pension funds is that he broke that implied promise. If we are to have a system where a significant proportion of pensioners will be in the benefits system, we must ensure that those people who have saved see themselves as substantially better off than those who have not. The taper on the benefits system has to be generous. Otherwise, why should a person on a low income scrimp and save and put together in the course of their life a fund of, say, £100,000? Think about all that they have foregone to put that money together, yet in the end it is worth nothing because they have had to buy an annuity which then deprives them of state benefits, leaving them no better off. We cannot make people face that prospect and expect them to save.
We must deal with the annuity problem, as some of my noble friends have said. It should not be imposed on people as long as they have enough income to be out of the state net. In contrast to my noble friend Lord MacGregor, I believe that we have to allow for the fact that people will regard their houses as the substantial part of a pension. The pattern of living in houses fits extremely well with a pension—one downsizes to a smaller property when one starts becoming feeble and eventually one uses equity release. We ought to regard that as part of pension provision.
My time is up. We will continue the debate when we consider the Pensions Bill.
7.46 p.m.
Lord Oakeshott of Seagrove Bay: My Lords, I thank the noble Lord, Lord Lucas, or Ralph Palmer, as I knew him, for making my declaration of interest for me already as a pension fund investment manager for the past 28 years. I do not remember thinking that we were defrauding pensioners, if that is what Ralph thought at the time. Indeed, we were working on making small company investments for the National Coal Board pension fund, which is a good example of how the separate, ring-fenced British pension fund has worked well. There is now no coal mining industry left, but the pension fund is in good health.
I am also delighted to respond to my noble neighbour—if I can call him that—the noble Lord, Lord Fowler, who sets a great example to us all of active retirement, both in this House and as he strides along Seagrove Bay on the Isle of Wight.

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To a remarkable extent we have spoken with one voice in this debate. The most eloquent on the Benches opposite were the noble Baronesses, Lady Dean and Lady Turner, and the noble Lord, Lord Lea of Crondall, who in particular described the collapse of confidence in private pensions and the scale of the problem that we face to rebuild it. One voice also from my noble friend Lady Barker and the noble Lord, Lord Fowler, who attacked the disincentive that the Government's heavy and growing reliance on means testing provides for private saving for old age.
Today's debate is typical of the wider debate on the future of pensions. Almost all serious commentators who are pensions professionals agree that present pensions policies are not sustainable. The all-party report, Aspects of the Economics of an Ageing Population, published in this House by the Select Committee on Economic Affairs, makes that clear in its devastating and comprehensive analysis of present policy. But, like little Johnny in the column of soldiers marching over the bridge, the Government still insist that they are the only people in step. The committee concluded that,
"the proposed reform to the regulatory and tax environment of occupational pensions will come too late to reverse, or even stem, the tide of closure of defined benefit pension schemes".
Pension scheme closures are not all the fault of this Government or previous governments. The Treasury was too keen to stop surpluses accruing in pension funds in the fat years; and it seems to see tax avoidance around every corner, when that was not the case at all. Since 1997—as the noble Lords, Lord Fowler and Lord MacGregor, and the noble Baroness, Lady Turner, have pointed out—the Government have year by year eaten away at pension fund solvency with their dividend tax.
Last week's Budget changes on pensions taxation were a useful improvement on the Chancellor's first shot over a year ago. He backed down in four separate ways on his original proposal of a £1.4 million lifetime savings limit, under heavy fire from these Benches, the CBI, the entire pensions industry and, ultimately, no doubt, the Prime Minister. Mr Brown has cut the marginal tax rate on pension savings over the cap from 60 per cent to 55 per cent; he has put that off for a year; he has lifted the limit to £1.5 million, rising to £1.8 million over four years; and in practice, because of the way he has fixed the multiplier, he has lifted the cap for people retiring from defined benefit schemes to about £2 million. The National Audit Office concluded that twice as many people would be caught by the cap as the Treasury claimed and described the Treasury estimate for future numbers being affected as having "a thin evidential base". I rather like that. Next time, the Chancellor should bluster less and consult more.
Simplified rules for pension taxation help only people who already want to save. The real problem is the millions who have lost confidence in the private pensions system altogether, or who never joined it in the first place, as is the case in particular with so many of the young today. I still remember the blank look from my daughter when I tried to talk to her about
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pensions when she started her first, quite well-paid job last year. "A pension, Dad?", she said. "Get real, I'm 21!". Our parents' generation had savings books; our children's have credit cards.
So the pension protection fund is the centrepiece of the government's efforts to encourage occupational pension provision, together with their Pensions Bill, which we look forward to scrutinising and revising with vigour when it reaches your Lordships' House.
Let me make it crystal clear from the start that we on these Benches support the fund. Why, incidentally, does it have to be based in southern England, as the advertisement in the Sunday Times for the new chief executive and chairman stated? I can tell your Lordships that there is no shortage of top-class actuaries and lawyers in Leeds, Glasgow or Edinburgh. But we support it and we have been moved by stones such as that told by the noble Lord, Lord Brookman, about the ASW members who paid into their fund for many years only to lose most of their benefits just before they retired. That was partly because of the unfair order of priority on wind-up, which we are waiting to have sorted out.
I saw a particularly shocking example this week, not of a struggling steel company but of a highly profitable multinational company, Felix Schoeller, which makes photographic papers on seven production sites in Germany, Canada and the United States. It did a really brutal asset strip on the Glory Paper Mill in Wickham. It bought the mill in 1995; closed it in 1999; moved the machines to East Germany; wound up the pension scheme in 2002; left 350 members with a £12 million deficit; and then flogged off the site for housing and a luxury health club. That was a particularly vicious and wicked example and I am not surprised that the chief executive of OPAS called it scandalous.
I do not have time to go into the details of that, but the clear message is that the law must be changed to stop firms, British or foreign, walking away from under-funded subsidiary pension schemes for at least five years after they have sold them. The "moral hazard" will be dealt with when the PPF comes in, but this sort of exercise is widespread and almost a part of the way of life of American sharp financiers who leave the environmental liabilities with the state and the pension liabilities with the pension benefit guarantee corporation. We need to be careful to avoid that.
We need the PPF, but we equally need to get it right at the start when we set it up. The Government plan to set it up with all funds, strong and weak, prudent and profligate, safe and risky, paying the same flat rate per member—a poll tax on pension funds in fact. They plan to duck the hard job of getting the balance right between what different funds pay to the board of the PPF a year or more after it had got going. I am afraid that that is not good enough. That really is asking Parliament to approve a menu without prices. It is not a minor job to be left to the technicians later. We must get a real feel for how the risk-based levy will work, what the weaker firms will have to pay and fund, to

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judge whether the whole scheme is viable on the basis the Government propose. There is, remember, no government guarantee of any kind.
The Government stand behind the Pool Re reinsurance scheme, which provides insurance cover against terrorist incidents. Why is it unthinkable for them to do that in the case of the PPF? Public confidence in savings really would collapse once and for all if the Government ever allowed the PPF to default on its obligations. Why not build in a contingency plan now to avoid that disaster rather than have an inevitable panic reaction, back-of-the-envelope rescue by government, which we all know would happen?
Let me conclude with a brief welcome and a warning about new vehicles for pension savings in property. As regards commercial property, with well-spread portfolios of different commercial property, that is welcome. But the proposal to select investors for individual buy-to-let houses or flats, or even their own second homes, into their tax-sheltered pension funds could be playing with fire in an over-heated housing market and wide open to abuse. The concentration of risk involved, when you have already got most of your assets in one house and then having one more house, does not bear thinking about. No one who advised people to put all their pension funds into two single shares would be other than guilty of the most gross mis-selling. I strongly advise against that.
Given that in the debate we have heard of the depth of concern about the future, although we all want to work together to solve it, let me make clear that in my view we will never be able to build a solid private pension structure on top of the morass of means-testing in public pension provision. As the Select Committee put it, the Government's heavy and growing reliance on means-testing the pensioner population is regrettable because it sends a clear signal to many current workers that it is not in their interests to save for their own old age.
7.55 p.m.
Lord Higgins: My Lords, I, too, congratulate my noble friend Lord Fowler both on providing a debate for us on the subject and on the way in which he introduced the proposals. As has been pointed out, there have been a considerable number of debates on the subject over time. Nearly all the usual suspects have managed to arrive on schedule, but we are also joined today by the noble Baroness, Lady Dean. We listened with great interest to what she had to say. Also my noble friend Lord Hunt, who does not always participate on these occasions, made some interesting points.
In winding up a debate on pensions, one is seriously up against time. I was inclined not to spend much time on the Pensions Bill provisions because I assumed that we would have reasonable time in this House to deal with them in due course. However, I express the hope that the other place also has adequate time and is not programmed out of existence as has been the case with previous pension Bills. They must be able to scrutinise it properly before it arrives in your Lordships' House.
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Almost half of those who have spoken today have spoken about the Pensions Bill, including the noble Baronesses, Lady Barker and Lady Dean, and my noble friend Lord Freeman. I do not want to anticipate the debates on that Bill, but I want to make one or two particular points. A serious moral hazard argument is involved. Less sensible companies may well tend to take risks they ought not to take if they believe that at the end of the day the protection fund will pick up the pieces for them. A number of people, including the noble Baroness, Lady Barker, stressed that it may well be unfair on prudent companies because they will be paying into a fund and not claiming on it when less prudent companies reap the benefit of the protection.
I have a great deal of concern that this ought to be risk-based; there ought to be a risk component in the contributions. It is unfortunate that the Government have said that that will not be the case for the first year. I would almost rather see the provision delayed and then start on a risk-based system because I have a nasty feeling that it will continue as it began and never be risk-based.
In addition, the proposals in the Bill may result in some companies which have defined benefit schemes deciding that they would rather not join in this operation and therefore change to a defined contribution scheme. It is therefore likely to be a deterrent to good pension schemes, rather than the other way about.
A number of other points have been made, particularly on the savings ratio which has been halved. A point which no one has mentioned is that in recent years many people have invested in PEPs or ISAs rather than pension schemes because of the considerable advantages in terms of liquidity and so forth. It seems to me extraordinary that, when under this Government the pensions ratio has halved, the Chancellor of the Exchequer chooses this particular moment to reduce the tax benefits on ISAs and to reduce the amount which can be invested in t hem. That seems an extraordinarily paradoxical way to go about things.
Other noble Lords have commented on the decline in the number of final salary schemes. My noble friend Lord Freeman referred to it as a slow decline. Alas, I fear that it is anything but; it is a massive and rapid decline which gives considerable cause for concern. In addition, a number of Members commented on final salary schemes in the public sector. I noted with interest a few days ago that for the first time since the 1970s the number of people participating in public sector defined benefit schemes exceeded the number of people in the private sector participating in private sector schemes. There is growing concern at the disparity which is becoming apparent between those schemes, which gives rise to considerable disquiet.
I was fascinated by the remarks of the noble Lord, Lord Brookman. As changes have taken place, there has been an increasingly active interest on the part of trade unions. They have always had an interest but the pensions issue has not been in the forefront of their minds in the way that it is now. I welcome that; it is of tremendous importance. However, it has to be done sensibly.

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In my previous role as chairman of a pension fund I was rather disturbed when this issue arose. I managed to persuade the company concerned to retain a defined benefits scheme. However, on grounds of costs it decided either to increase the contributions paid by the employees and by the company or to say that they would contribute the same amount and keep the same benefit. As chairman, I thought that the important point was that they should be given the choice. I am glad that the leaflet issued by the National Association of Pension Funds refers to that particular case. I was rather disturbed that the British Airways union has been proposing to take industrial action even in the face of being given that choice. That company has very large pension liabilities at present.
Many noble Lords referred to stakeholder pensions. Given the amount of time we have spent on this, the fact that 90 per cent of those have no members, assets or contributions but are mere shells is as big a disappointment to me as it must be to the noble Baroness who is to reply to the debate. My noble friend Lord Hunt pointed out that one of the reasons for that was the very stringent restriction on the 1 per cent rule which the Government imposed. However, the fact that these are just so many empty boxes is obviously very worrying.
I am concerned at the way in which the Government are pushing stakeholder pensions. To some extent, that is a mis-selling operation. On previous occasions the noble Baroness and I have discussed how much of a savings fund one needs to ensure that one eventually receives some benefit and that it is not all means tested away. Over time we have had some dispute as to what is the exact figure. However, is it not true to say that if someone has accumulated a stakeholder pension but no other pension provision, of say £30,000, all of that is likely to be means tested away—perhaps not means tested away but they will not receive any benefit as a result of it? The way that the means testing system works remains a serious deterrent.
I was going to make a speech on Equitable Life and the Penrose report. I was going to be very rude about a number of people including, I confess, Lord Penrose, who in his postscript seemed to me to have missed the object of the exercise, and also to attack the Parliamentary Ombudsman, who was being very wishy-washy on this issue. We have reached the stage where that matter should go to the Parliamentary Ombudsman. Despite her reluctance and the way in which she and her predecessor have behaved, it really should be the case that that should be resolved in that way.
In conclusion, I merely take up the point made by the noble Lord, Lord Lea of Crondall. He quoted Keynes saying that in the long term we are all dead. That is so, but, if we are lucky, before then we may draw pensions. That at least explains the great concern which exists on this issue.
8.6 p.m.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, I deeply regret that with such an interesting debate we are confined to two hours and do not have an extra half hour. That means, for example, that I have only 15 minutes and I am not sure that the noble Lord, Lord Fowler, will receive even one minute. I must therefore endorse even more than usual my apologies for any discourtesy in not seeking to address issues and questions. Like the noble Lord, Lord Higgins, I too was expecting to say rather more about the Pensions Bill. I have dumped all of that. I have taken about three-quarters out of my speech and perhaps I can do more if I go faster.
This is a welcome debate, and I am glad that we have had it. I am amazed at how much of the speeches from the Opposition Benches I find myself agreeing with, particularly the description by the noble Lord, Lord MacGregor, of the landscape, to which I shall return. That was particularly enriched by the role reversal which was going on in which nearly everyone from the Opposition Benches called for compulsory pensions which apparently did not cross the Government's agenda or papers in their long years in power and responsibility. However, I suppose that the privileges of opposition allow a loosening of such mental structures.
I shall start with the points made by the noble Lord, Lord MacGregor. I agree that the landscape we face, which he described very accurately, is one of stock market pressures, although recently they have somewhat abated. That is affected by the demographics of rising longevity: 18 months to two years for every decade that we progress, and by labour market mobility, which is increasing among those in their twenties, though not so much by older people.
I was curious that none of the noble Lords opposite remembered that the situation has also been made worse by the severe and growing inequality that occurred among pensioner incomes between 1979 and 1997. We know that during that period real wages rose by 36 per cent and pensions rose by some 64 per cent—I pay tribute to the previous government. But that concealed widening inequality among pensioners, of whom the bottom one-fifth saw their incomes rise by only 30 per cent, while the incomes of the top one-fifth rose by 80 per cent. This Government face pensioner poverty, market problems as regards confidence in second pensions and issues of longevity.
Central to seeking to meet those very real demographic, economic and social justice challenges, we must give people the information and confidence that they need to plan for their retirement and the flexibility to do so in a changing environment. Our informed choice agenda will ensure that all people of working age have access to personalised information tools, web-based retirement planners and pension forecasts to help them to understand what they need. I agree with everything that noble Lords have said: only when people realise just how little income their savings may buy them will they be tempted to put more aside.

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Our Pensions Bill will improve confidence by strengthening the protection offered to members of pension schemes. The PPF will mean that for the first time ever individuals in DB schemes based in the UK will know that they will receive a meaningful pension, even if their company becomes insolvent and leaves the pension scheme underfunded. Like my noble friend Lady Dean, I am delighted that the current Government are at last responding to the calls which some of us were making in 1994 for provision such as central discontinuance funds, on which the noble and learned Lord, Lord Mackay, outvoted the Opposition Benches—although I should like to think that he did not out-argue us.
However, a number of noble Lords, particularly the noble Lords, Lord Oakeshott and Lord Higgins, and the noble Baroness, Lady Barker, were concerned that PPF increased the risk of moral hazard. I wish to make two points. First, the risk-based levy is designed to address that. I share with the noble Lord a wish that we could have gone immediately into a risk-based levy assessment. But we are dealing with 10,000 DB schemes; it takes time; and the alternative would have been to leave other schemes without the sort of protection that my noble friend Lord Brookman called for so movingly for people whose pensions are at risk.
I shall make one further point on moral hazard. There are sometimes calls for the Government to stand behind such a pension protection fund. That would invite every marginal employer to know that the Government would pick up the pieces. Put another way, if the Government were to pick up the bill for asbestosis claims, you could be damn sure that no employer would seek to improve protection for employees against asbestosis. We all understand the moral hazard issue. That is why the Government believe it right that the industry should be helped to police itself within the framework laid out by the pension regulator.
The Pensions Bill will also enable greater flexibility by replacing the inflexible minimum funding requirement with scheme-specific funding requirements, as my noble friend Lady Dean said. That will allow schemes the freedom to adopt the most appropriate funding strategy within a rigorous—that is part of the EL debate that we are not having tonight—regulatory framework of risk analysis, rather than chasing nugatory offences as at present. I was told by the chairman of OPRA that around 50 per cent of offences involved chasing employers who were three or four days late in paying their contribution. If we could get rid of some of that graffiti, if you like, and get into the real issue of addressing companies at risk, we could more honourably serve the needs of people in DB schemes.
We need to ensure that people will be confident in our pension protection fund schemes. My noble friend Lord Lea was absolutely right on that. I am glad that, for the most part, the schemes have been welcomed tonight. I wish to address the four main comments and criticisms that I think noble Lords have made. First, there has been a bundle of comments on the wider points about the savings regime, including the savings ratio, ACT and capping. Secondly, there have been comments about the structures of our current systems,
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with regrets expressed about moving from DB schemes to DC schemes, issues about annuities at age 75 and stakeholder pensions. Issues have been raised about regulation, particularly ASW and Equitable Life—I shall not speak to that, as noble Lords did not particularly address EL tonight. Finally, there were calls for an increased, strengthened basis in state provision. I think that it would be fair to say that nearly all the comments raised by noble Lords have fallen under those four broad headings. I wish to have a go at responding to them.
I turn first to the savings ratio. My noble friend Lord Lea of Crondall, and the noble Lords, Lord Freeman and Lord Higgins, said that the savings ratio in this country has halved over recent years. It is worth taking a moment to deconstruct that argument. What do we mean by the savings ratio? It is not what most of your Lordships assume that it means. I hope that people will not continue to use this as an indictment of Government policies.
Precautionary savings, bank account savings, building society savings, stocks and shares are included in the savings ratio. However, pensions, by far the most important form of saving for retirement, are only included in the savings ratio as a net concept, once pensions in payment have been deducted. Pensions savings—people's deferred income for their old age have only a modest effect on the savings ratio. Most private pension provision, which is what really matters, is not central to the savings ratio at all. It is determined in the work place, it is employer-driven, and its contributions tend to be stable. Occupational pensions coverage has remained stable, and I would be surprised—although we still need to do further work on this—if the proportion of GDP reflected by occupational pension contributions has changed much over the past 20 years or so.
That is one of the key assets that we take into old age. The second key asset is the value represented by housing. In this country, 71 per cent are owner-occupiers, compared to 45 per cent in France. That too is a significant asset not included in the savings ratio. The savings ratio only reflects the difference between the denominator and numerator, the income and expenditure on pensions, together with precautionary savings. Those precautionary savings fall if people think that they do not need to take precautions because they are confident about the economic situation, as indeed they are.
When we come to talk about the savings ratio in the Bill, I hope that your Lordships will concentrate instead on what seems to matter to me, which is what assets people take into their old age in order to ensure that they have a comfortable life accustomed to their expectations. The savings ratio is possibly the least useful indicator of that when people enter their old age. I have spent a little time on this, but it seems to be a source of much misunderstanding. No doubt we will explore it when we come to the Bill. I hope that we will concentrate on what really matters, which is the pension asset and possibly even the housing asset.

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Precautionary savings is a relatively modest player in terms of the comfort with which people go through to old age.
We have heard some fairly predictable points about ACT. We disagree on that, and I will not repeat the arguments. Myners said at the time that the quality of management was probably 10 times more important than any tax defamations, which is what we think ACT did, by encouraging companies to go for dividends rather than reinvesting in their company. The Government's view on that has not changed.
The current cap for the year 2004–05 is £99,000. The DB scheme is two thirds of that, which is what the normal DB scheme might represent, £66,000. Multiply that by 20 to get to the £1.5 million that the Chancellor adopted before the Budget. Therefore, the lifetime's earning is effectively meant to be a straightforward read-across from that grossed up sum. The noble Lord, Lord MacGregor of Pulham Market, made a general point, and I agreed with him. There is no reason on God's earth why people should not save in vehicles other than pensions. I do not see for the life of me why someone with a pension fund worth £1.5 million, or in time £1.75 million, should also expect a further 40 per cent on additional savings courtesy of taxes paid by the rest of us. They can continue to save—what they want is tax provision of 40 per cent on top. I do not see why we should be particularly sympathetic to that plea from the best-off to have additional payments from those who possibly do not even enjoy pensions in their own right.
The old chestnut of annuities at 75 was pressed by the noble Lord, Lord Higgins, and others. If one were to take out, as I think everyone would accept, the value required to float off IRBs, whether that is £100,000 or a higher or lower figure depends on assumptions that one makes about housing costs and so on, and whether one is in a couple, if one then stripped out the tax privileges, which one would have to do, worth on average 30 per cent, and if it was then further subject to an inheritance tax at 40 per cent, I wonder whether the siren calls for removing the 75 rule would be so seductive. I will move on to some other issues. DB to DC scheme closures are a source of much regret by the noble Lord, Lord Freeman, and my noble friend Lady Turner of Camden. Yet, providing, given a mobile workforce, the level of contributions is broadly similar over time and is adequate—those are important provisos—DC schemes can be at least as good, and for many people, preferable to DB schemes. They help those who are mobile and those who are unlikely to gain from late career progression, which tends to be middle aged, middle class, middle salary men.
We should think of the money lost, as my noble friend reported, when there were contribution holidays on DB schemes. With DC schemes, there would have been no such contribution holidays, and the funds might have grown accordingly. I take the point about risk, but the level of contributions is at the core of the matter. DC schemes are not helped when—if GMB's figures are correct—a major food supermarket produces a DC scheme that is 2 per cent plus 2 per cent or one of
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our leading chain chemists companies has a DC scheme of 3 per cent plus 3 per cent. Such sums will lift nobody out of poverty in old age.
It is true that stakeholder pensions have not had the success that we would have hoped for. Some 1.8 million schemes had been bought by December 2003. There is the issue of charges, and there is, above all, the issue of employers' contributions. If employers contribute, stakeholder pensions are a success; where they do not, they are not.
I shall not go into Equitable Life, except to say that I am persuaded that the regulatory regime did what Parliament intended and ensured the solvency of the company in meeting its guarantees. At the time, Parliament did not intend that the regulatory regime could appropriately go beyond that. Only if there was a fault in the process of the regulatory regime could any charge of maladministration leading to compensation arise.
I shall take a minute to talk about the Tory Party's policies on the basic state pension. We all accept the need for a basic state pension that is a firm building block. I disagree, however, with the current Tory proposals to link the basic state pension to earnings, while tying the pension credit to RPI, in effect freezing it. That is deeply regressive. It would mean, for example, that women—only 14 per cent of whom go into retirement with a full basic state pension—would not gain from any earnings link and would lose the pension credit because it would have been frozen. It would mean that I and others in your Lordships' House would get a better basic state pension, while women forced to depend on pension credit would see those sums frozen. The sums would not be caught up by the basic state pension for something like 14 years. I hope that, on reflection, your Lordships will not find that to be the way to go.
There is a tension between helping the poorest pensioners, which needs to be done through income-related benefits, and encouraging people to save. That is why I think that the pension credit squares that circle elegantly, with its guarantee on one side and its savings element on the other, which will benefit people who have modest pots of £30,000 in their DC schemes. Only if a government can get it right and deal with the poverty of pensioners while rewarding saving can we have a future in which comfort lies in reliable, robust and adequate private pensions.
8.22 p.m.
Lord Fowler: My Lords, I thank the Minister for her reply, and I thank everybody who took part in the debate. It has been extremely useful and extremely good. There has been no substantial disagreement about the fact that we face a pensions crisis and that we must restore confidence.
The Minister has offered no hope of compensation, either in the case of companies or in the Equitable Life situation. However, I agree with all those who said that we should aim for as much cross-party agreement as possible. There will be differences, and I have just set

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out two of them. We all agree on the fundamental importance of good pension provision. With that, I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Local Government in Scotland Act 2003 (Destination of Fixed Penalties in Scotland) Order 2004
8.23 p.m.
Lord Evans of Temple Guiting Lord Evans of Temple Guiting rose to move, That the draft order laid before the House on 25 February be approved [11th Report from the Joint Committee].
The noble Lord said: My Lords, with the permission of the House, I shall take the two orders together and—also with the permission of the House—speak to them in the reverse order from how they appear on the Order Paper.
The instruments are to be made under Section 104 of the Scotland Act 1998. Where such instruments amend primary legislation, as both do, the Scotland Act requires them to be subject to affirmative resolution in both Houses. The instruments were considered and approved in the other place on 16 March.
As is usual with affirmative instruments of this type, copies of the explanatory memorandums on each are available in the Printed Paper Office. Instruments under Section 104 are used when changes that would be outside the legislative competence of the Scottish Parliament need to be made. I should like to stress to noble Lords that these changes are consequential. They are a matter of good housekeeping by ensuring that the relevant statutes are up to date after the Scottish Parliament has exercised its legitimate power to legislate in areas of devolved competence.
The instruments before us are two in a series of consequential amendments being made in relation to the Primary Medical Services (Scotland) Act 2004 and the Local Government in Scotland Act 2003. The Scottish Executive has been making its way through these consequential changes and agreed with the relevant Whitehall departments—in this instance, the Department of Health and the Treasury—that these orders be laid for consideration so as to come into force by 1 April 2004. The orders are an example of the partnership between the Government and the Scottish Executive that continues to make devolution work so successfully.
The draft primary medical services order is being made in consequence of the Primary Medical Services (Scotland) Act 2004. As set out in the explanatory memorandum accompanying the instrument, the services provided by general practitioners to the NHS in Scotland are provided at present in one of two ways: either by way of a statutory arrangement between the health service bodies and the GPs called "general medical services" under Section 19 of the National Health Service (Scotland) Act 1978 or by way of an arrangement called "personal medical services" under Section 17C of the 1978 Act. These services are in
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substance the same, but are given different labels according to the arrangements under which they are provided.
That old regime is being replaced by amendment of the 1978 Act as set out in the 2004 Act of the Scottish Parliament, which brings all these services under a single label—primary medical services. It puts a duty on health boards to provide or secure what are to be known as primary medical services. The boards will be able to provide these themselves or secure the services by making arrangements with a GP or GP practice. The boards can choose which arrangements they make if they wish to secure the services from others. They are not limited to the particular arrangements for which detailed provision will be made in the 1978 Act.
However, two sorts of arrangement are set out for their use. These are, first, a general medical services contract under new Section 17J of the 1978 Act, inserted by the 2004 Act and replacing the current Section 19 arrangements, or, secondly, arrangements under Section 17C of the 1978 Act, as amended by the 2004 Act. Sections 17C and 17J of the 1978 Act, along with all the provisions about primary medical services, will be found in Part I of the 1978 Act. Previously the provisions about general medical services were found in Part II of the 1978 Act.
The new primary medical services regime for Scotland will come into force on 1 April. Therefore, the references in legislation to the existing regime, including general medical services under Part II of the 1978 Act, and personal medical services under Section 17C of the 1978 Act require to be dealt with. Otherwise the legislation that contains them will either refer to the incorrect regime or contain spent references to a redundant regime.
The exercise could not be undertaken in the 2004 Act of the Scottish Parliament as it involves the modification of the law of England and Wales (and Northern Ireland, where appropriate) as well as modifications of reserved law. Accordingly, it would have been outside the legislative competence of the Scottish Parliament to make such modifications. Therefore, in order to ensure that the statutes continue to work and to remove references to the old regimes from the statute book, the amendments set out in the schedule are required.
The second instrument is being made in consequence of the Local Government in Scotland Act 2003. This instrument provides for a simple, technical amendment to Section 95 of the Road Traffic Offenders Act 1988.
Section 95 concerns the destination of fines imposed in respect of certain road traffic offences committed in Scotland. This order will amend Section 95 to provide for fixed penalties imposed for the offences listed in Section 46(2) of the Local Government in Scotland Act 2003 to be paid into the Scottish consolidated fund. Section 46(2) of the 2003 Act concerns speeding and red light offences in Scotland.
The background to Section 46 of the Local Government in Scotland Act 2003 and the proposed Section 104 order relates to the funding of safety

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camera partnerships in Scotland. In 1998 the Treasury announced that revenue from fixed penalty notices issued to drivers caught speeding on camera or passing red lights could be used to fund the installation, where this is justified, of the camera equipment. The revenue could also pay the operating and administrative costs arising from enforcement. The initial pilot projects went live in April 2000, and since April 2002 safety camera partnerships have been established widely across the UK.
The schemes were set up on the understanding that there should be specific statutory powers authorising retention of the income from fixed penalties for the purpose of the scheme, essentially ring-fencing the money raised from receipts. Until such statutory cover could be provided in Scotland, the funding arrangements for the schemes to enable ring-fencing were dealt with on an administrative basis. In England and Wales, the pilot projects had interim legislative cover under the Appropriation Acts and provision was included in Section 38 of the Vehicles (Crime) Act 2001 which empowered Ministers to make payments to authorities in connection with the provision and operation of safety cameras.
In Scotland, the statutory cover was to be provided through a three-stage legislative process. First, a tailored funding power would be provided through Section 46 of the Local Government in Scotland Act 2003, which closely mirrored that already in operation in England and Wales through the Vehicles (Crime) Act 2001.
Secondly, as a consequence of the Local Government in Scotland Act, clarification that the moneys from these fixed penalty notices should be paid into the Scottish consolidated fund. This amendment was necessary because at present there is no provision in the Road Traffic Offenders Act 1988 requiring fixed penalty receipts to be paid into the Scottish consolidated fund. The subject matter of the Road Traffic Offenders Act is reserved by the Scotland Act 1998 and it would therefore be outside the legislative competence of the Scottish Parliament to amend it. The proposed order before the House will make this amendment to the reserved 1988 enactment.
Thirdly, an order under Section 64(5) of the Scotland Act 1998 would allow the Scottish Executive to keep the moneys from the safety camera partnerships. This order is necessary because at present the Scotland Act 1998 (Designation of Receipts) Order 2000 designates all fines, forfeitures and fixed penalties for the purposes of Section 64 of the Scotland Act. This has the effect of requiring Scottish Ministers to pay such receipts to the UK consolidated fund. The new Section 64(5) order will allow the receipts from these fixed penalty notices to be excluded from this requirement. Scottish Ministers will therefore be able to distribute the receipts retained in the Scottish consolidated fund in terms of Section 46 of the Local Government in Scotland Act.
The Section 104 instrument is therefore part of a three-part package to enable the funding of Scottish road safety partnerships to be constituted on a statutory basis. As noble Lords will have noted, this would have been outside the legislative competence of the Scottish
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Parliament and the Government therefore wish to make this technical amendment to support the work of the Scottish Executive in this area. I commend the order to the House.
Moved, That the draft order laid before the House on 25 February be approved. [11th report from the Joint Committee.]—(Lord Evans of Temple Guiting.)
The Deputy Speaker (Lord Tordoff): My Lords, although the Minister spoke to the orders in reverse order, I intend to put the Motions to the House in the order in which they appear on the Order Paper. Therefore, the Question is that the Motion relating to the Local Government in Scotland Act 2003 (Destination of Fixed Penalties in Scotland) Order 2004 be agreed to.
The Duke of Montrose: My Lords, I am happy that we can discuss the two orders jointly, as we are all agreed on the subject. I am grateful to the Minister for the way in which he has brought these two instruments before the House. My impression is that he has been able to make their meaning even clearer than when they were presented in another place.
I know that some may have misgivings when the words "Scots" and "money" come in close proximity. I hope that we shall not go down the road of that ancient series of calumnies which was rendered as: an Englishman is a self-made man who worships his creator; a Welshman prays on his knees and his neighbours; an Irishman may not know exactly what he believes in but he is willing to die for it; and a Scotsman keeps the Sabbath and anything else he can lay his hands on. But I have to admit that the Scots are always interested in whose pocket the money lands up.
The Minister began by considering the primary medical services order. I know that he explained to us that it was purely consequential, but I also note that during the process of scrutiny both in the Scottish Parliament and in another place concerns were expressed about how the new GP contracts are seen to be working, particularly in rural areas.
Does the new arrangement do anything to reduce the amount of paperwork and improve the morale of those working under such conditions? At present, that problem seems to show itself in understaffing and people seeking early retirement. Can the Minister comment?
Turning to the order concerning local government in Scotland, it is obviously to be welcomed if a way can be found to simplify the transfer of money in order to achieve some useful purpose. The Minister explained that the order relates to the funding of safety camera partnerships in Scotland and that it is to be ring fenced. Can he explain how that will occur?
Noble Lords would be interested to know whether, on current experience, the amount of money is expected to increase. Exactly how many safety camera partnerships are operating in Scotland at present? Is the sole criteria in the placing of those cameras the reinforcement of public safety; and is there any danger that the number may not simply be increased until they can provide finance for as many activities as can be swept in under the heading that the Minister mentioned?

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If, on the other hand, the money exceeded that requirement, what is the arrangement for dealing with any surplus? Can the Minister assure us that this cannot be seen just as a way of making money? The measures have generally received quite a good welcome from all sides, but I think the House could be more reassured if the Minister felt able to answer those questions.
The Earl of Mar and Kellie: My Lords, I am grateful to the Minister for explaining to us the purpose of these two orders. I am completely content with the narrow purpose of the primary medical services order. Like the noble Duke, the Duke of Montrose, I am well aware that the National Health Service in Scotland is a devolved matter, but there is undoubtedly concern about the delivery of rural GP services under the new contract. I cannot let the opportunity pass without mentioning what seems to be the collapse of the NHS dentistry almost everywhere—not just in rural areas. Can the Minister say something definitive about the description, "primary medical services"? That would be helpful.
Turning to the destination of fixed penalties order, I am, again, content with the narrow purpose of the order. It is devolutionary in nature not just because it transfers the proceeds of traffic fixed penalties from the Treasury to the Scottish Parliament but because it provides the opportunity to end the rumour or belief that fixed penalties are there only as a central Government cash cow. To do so, the Scottish Executive will need to propose that these proceeds are applied to transport and traffic issues and the Scottish Parliament will need to agree to that. Can the Minister clarify the simplicity of the new system?
I end on a constitutional point. These Section 104 orders are good ones for constitutional anoraks in that they are related closely to Acts of the Scottish Parliament but are evidence of the need for this United Kingdom Parliament to legislate on very narrow points to complete Scottish legislation. We must clearly watch out for these Section 104 orders in the future, not that they threaten us too much.
Having sat through the whole of the Scotland Bill, I do not remember Section 104 and its consequent orders being drawn to the attention of the House. These orders are, of course, the embodiment of the co-operation required to make devolution work—so much so that I wonder whether we would have any real right to reject them if we wanted to or felt that we needed to.
Lord Evans of Temple Guiting: My Lords, I am grateful to the noble Duke, the Duke of Montrose, and the noble Earl, Lord Mar and Kellie, for their questions. I shall attempt to answer them. I shall write to the noble Lords on any point that I do not answer.
I was asked what is actually meant by a primary medical service order. Primary medical services are those services normally provided by a GP, such as the treatment of patients who are ill with conditions from which recovery is generally expected, contraceptive services, maternity services, child health surveillance and the treatment of minor injuries. They also cover
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opportunistic health promotion, referring patients to an acute sector and continuing care after a patient has been discharged from an acute sector.
Both noble Lords asked how primary medical services will work in rural areas, an issue raised in the other place. They will understand that this is not the purpose of the order before us, which is needed to ensure that legislation that makes reference to expired provisions is brought up to date. However, as I said, this issue was raised in the other place and the Scottish Executive has helpfully provided me with information on this issue that can be shared with noble Lords.
The Scottish Executive Health Minister recently informed the Scottish Parliament that the new general medical services contract is supported by a 33 per cent increased investment in primary care over three years, allocated through a funding formula designed to respond to the needs of remote and rural communities. The contract guarantees that patients across Scotland will continue to be offered at least the range of services they currently receive and the contract's quality and outcomes framework will incentivise practices in all areas to improve these services.
A number of questions were asked in relation to the local government in Scotland order. Given that the order simplifies the administering of the transfer of money, I was asked whether the Government have figures to back up the assertion that the revenue distributed in this way is not substantially increasing. The amount of revenue generated will, of course, depend on how many people are caught by speed cameras and thus have been breaking the speeding laws.
It is important to note that noble Lords are here to determine where the money goes once it has been raised, not how much money is raised, but, if it helps, I can give the historic figures from the Glasgow pilot. Between 2000 and 2001, £450,000 was raised, which increased to £850,000 between 2001 and 2002. But it is important that I make it clear to the House that the Government believe in the use of safety cameras to minimise casualties, not to maximise income. That point applies to Wales and England as well as Scotland. We stand firmly by the maxim that the most effective safety camera is the one that raises no revenue at all.
Concern has also been expressed about the administrative arrangements for the transfer of funds and why there is a need for change. The receipts from safety camera partnerships are currently collected by the district courts, passed to the safety partnership treasurer, which is the lead local authority for the partnership, and then passed to the Crown Office. This, in turn, is passed to the UK Consolidated Fund and remitted to the Scottish Executive under the Appropriation Acts.
Under the proposed new arrangements, the money would pass to the Scottish Consolidated Fund and would be available to the Scottish Executive for approved purposes only, effectively ring-fencing the receipts to pay for the administration and operation of safety cameras.

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The legislative basis for the current arrangements are the Treasury's Appropriation Acts and the Scottish Executive appropriation orders. As a matter of good practice, these should only be used to support financial arrangements on a short-term basis, where no other legal mechanism exists. At the outset of the Scottish safety camera programme, the Government agreed that a specific statutory footing should be introduced at the earliest opportunity. The order before us is the second stage in this process.
I believe that I have answered the questions that have been asked.
On Question, Motion agreed to.

Primary Medical Services (Scotland) Act 2004 (Consequential Modifications) Order 2004
Lord Evans of Temple Guiting: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Primary Medical Services (Scotland) Act 2004 (Consequential Modifications) Order 2004 laid before the House on 25 February be approved [11th Report from the Joint Committee].—
(Lord Evans of Temple Guiting.)
On Question, Motion agreed to.

Harbours Bill [H.L.]
8.47 p.m.
Read a third time.
Clause 2 [Amendment of procedure where harbour revision orders are made by the Secretary of State of his own motion]:
Lord Davies of Oldham Lord Davies of Oldham moved the amendment:
Page 3, line 24, after "relevant" insert "nature"
The noble Lord said: My Lords, this amendment, in the name of my noble friend Lord Triesman, is a technical amendment to correct an error in Clause 2, page 3, line 24. The reference to "relevant conservation body" should read "relevant nature conservation body".
Although this is a minor amendment, it gives me the opportunity to apologise for the fact that my noble friend is not able to be present to move the amendment himself. He has played a full part in the passage of the Bill, on which I congratulate him. It is a minor but nevertheless extremely useful Bill and the Government are very pleased with its progress through this House. We wish it well when it appears before the other place in due course. I beg to move.
On Question, amendment agreed to.
Lord Berkeley: My Lords, I beg to move that this Bill do now pass.
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I thank all noble Lords who have taken part in the various stages of the Bill and for the good advice that we have had from the noble and learned Lord, Lord Donaldson, the noble Lords, Lord Greenway and Lord Bradshaw, the noble Viscount, Lord Astor and many other noble Lords. As my noble friend Lord Davies said, this is one of the first Bills since the noble Lord, Lord Triesman, joined your Lordships' House. He has been terribly helpful and everything has gone extremely well. We have not wasted too much of your Lordships' time. I hope that we have also satisfied the concerns of the Royal Society for the Protection of Birds.
Like my noble friend, I believe that the Bill will make a small contribution towards simplifying, reducing the cost of and speeding up the small changes required under the Harbours Act 1964.
Moved, That the Bill do now pass.—(Lord Berkeley.)
On Question, Bill passed and sent to the Commons.

Goods Vehicles (Licensing of Operators) (Temporary Use in Great Britain) (Amendment) Regulations 2004
8.50 p.m.
Lord Bradshaw Lord Bradshaw rose to move, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 27 February, be annulled (S.I. 2004/462).
The noble Lord said: My Lords, I would like to ask the Minister several questions about the regulations. This seems an obscure piece of legislation, but it has significant consequences for road haulage and road safety in this country. The Minister may be able to put my mind at rest, because there is little in the regulations to describe their effect.
Why are the regulations necessary at all? Must we have them, or are they the result of representations received by the Government? I am not advising the Minister to take trips to various far-flung areas of Georgia, Croatia, Macedonia or Moldova, but what do the Government know about the licensing regimes for vehicles in those countries and for drivers who are based in those countries?
What records are kept of accidents and known breaches of regulations of drivers and the vehicles registered other than in the UK? I understand that no records are kept by the police because there is no space on the forms that they use at the sites of accidents or checks to record whether a foreign vehicle is involved or one based in the UK. It is important to know about the behaviour of vehicles registered abroad.
I appreciate that vehicles from most of these countries have not yet arrived here, but plenty of vehicles from Italy, Spain, Portugal and other places are here. When penalties are imposed on such vehicles, are they paid here or to the government of the country where the vehicle is registered? What evidence do we have that any penalties or notices of prosecution given

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here actually result in justice being administered here or abroad? Does giving people penalties have any effect whatever?
I have looked at the history of the enforcement efforts of Thames Valley police. I know that the police obviously target the most suspicious vehicles—they do not stop vehicles from Sainsbury's because they know that the transport manager would get the sack if anything were wrong. However, I was surprised to learn that, of the vehicles stopped, 34 per cent, 52 per cent, 37 per cent and 55 per cent were found to have defects or to have committed an offence.
It occurs to me that I should be asking whether the Minister is satisfied that sufficient resources are being targeted at the problem. Only five checks are planned this year in the whole of the Thames Valley area—and we cover a lot of motorways, including the M4, the M1, the M40 and the A34, which are significant roads carrying a large proportion of the country's traffic. The checks reveal quite a lot of criminal intelligence as well as offences relating to the vehicles or drivers themselves. Should we be making more checks? I believe that it is the case that the industry itself has said that it would pay for more checks through operator licences—provided that the Government undertook to devote the money raised by such an increase on actual checks. Those vehicles operating at the fringes of the law undercut the whole business and drive down the prices in the business.
Knowing the Minister's background, I wonder to what extent he believes that the low wages in the countries on the fringe of eastern Europe, where wage rates are very low, and possibly the low standards of vehicles of those foreign-based operators—the maintenance of vehicles, the operation of tachographs, the use of untaxed fuel and so on—undermine our own laws relating to wages, vehicle suitability and so on.
Is there any evidence that vehicles such as heavy lorries driven from the left-hand side are involved in more or fewer accidents than those driven from the right? I am not sure that that is recorded, but it appears to be a subject that should be recorded, because it is a matter of concern.
Lastly, I understand that it is a fact that in the accession countries—although I accept that some of the countries mentioned in the regulations are not accession countries the average fatality risk that is attributed to heavy lorries is three times greater than the EU average and five times greater than that in the UK. One's chances of being killed by a lorry from one of those countries appears to me to be very substantial. Are the Government right in exposing UK citizens and road users to those risks, when I am sure such things would be unimaginable in aviation or the railway industry? I beg to move.
Moved, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 27 February, be annulled (S.I. 2004/462).—(Lord Bradshaw.)
8.56 p.m.
Lord Berkeley: My Lords, I have a lot of sympathy with the comments made by the noble Lord, Lord Bradshaw. I see why the regulations might be necessary to apply to accession countries—the 10 that will be joining the European Union on 1 May. The figures that the noble Lord gave for road accidents applicable to those countries, saying that there is a five times greater risk of an accident than in the UK, are very serious. I suspect that if one extended that comparison to Macedonia, Georgia, Croatia and Moldova, which are the four countries listed in the regulations that are not among the accession countries, one would find that the accident rate was even greater there. That is pretty serious.
I cannot understand why we have to have these agreements with those four countries, which are not joining the European Union in the next month. Have all the other member states of the European Union brought forward similar regulations with respect to drivers from Macedonia, Georgia, Croatia and Moldova? If not, why have they not? Is it the usual business that we are complying with perceived European regulations and nobody else is?
I support what the noble Lord, Lord Bradshaw, said about the industry offering to pay for more checks to ensure safer lorries here. It is a serious problem, and I hope that my noble friend the Minister can put our minds at rest, particularly with regard to the countries that are not accession countries. Frankly. one could easily extend that list to the rest of the world. No doubt they all have equally efficient DVLAs as we have in Swansea. Where do we stop?
There is also the question of driver rates. It is unfair on UK drivers when people coming from these countries not only come here with loads but then probably play cabotage for quite a long time, whether they are allowed to or not. I know that this was a big problem in Germany a couple of years ago when a company called Willi Betz apparently more or less decimated the German truckers market. There are some serious questions to be answered and I look forward to my noble friend's response.
9 p.m.
Earl Attlee: My Lords, I am grateful to the noble Lord, Lord Bradshaw, for introducing his Prayer this evening. I declare an interest as president of the Heavy Transport Association. I was a little surprised by the slightly xenophobic attitude of the noble Lord, Lord Bradshaw, because these countries may have their own reservations about our lorry drivers driving over there.
My first observation is about the complexity of the order. Why are there different rules for different countries? Why do we not have one standard rule for countries with which we want to have an international transport agreement? The Explanatory Notes are not very illuminating or helpful in that regard.
The noble Lord, Lord Bradshaw, mentioned the effect of competition. It is important not to underestimate the effect of one or two very low cost operators on the market rate for international transport. The noble Lord

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also mentioned the difficulties of driving a left-hand drive vehicle in the UK. I think that we need to be careful here because we are the odd man out in Europe as we are driving our right-hand drive vehicles on the Continent, although it has to be said that many of our international operators buy left-hand drive vehicles for international operations. But I think that we need to be careful about that criticism. I am proud of my small part in introducing impounding for illegally operated good vehicles. It was targeted at UK-based cowboy operators and a particular concern was tipper vehicles. At one point after we introduced this legislation I became concerned about cowboy operators using vehicles with Irish registrations. The problem was that UK authorities might be unable to determine whether a vehicle stopped at a multi-agency check was covered by an Irish operator's licence. I am not now aware of problems with Irish vehicles and hope that, due to the effective action of VOSA, the problem has disappeared. But I want to know how the UK authorities—VOSA—will be able to determine whether one of the vehicles covered by the order is covered by an operator's licence from, say, the Moldovan authorities.
I expect that local EU authorities—France, Germany and Belgium have close co-operation on "O" licence data with our authorities. But if, say, a Moldovan vehicle is stopped at one o'clock in the morning Moldovan time, will VOSA be able to find out from a database whether that vehicle has an operator's licence? If it does not have an operator's licence then that vehicle can be impounded. If we need to have access to a foreign "O" licence database, we will have to offer the same facilities to them, and online. That would involve the TAN21 database—it may have changed its name, but I think that we know what we are talking about. I do not see any arrangements in the order for sharing data on whether operators have a licence. The noble Lord, Lord Bradshaw, expressed concerns about accidents and vehicle defects. Those points were well raised and they are an anxiety for me.
I am a Tory Euro-sceptic but I am not a Euro-phobe or a xenophobe. However, I hope that the Minister has more confidence in the Georgian vehicle operator licensing system than he does in their election system.
Lord Roper: My Lords, I had not intended to intervene in this debate, but it is none the less a matter of some importance. Having listened to the interventions of my noble friend Lord Bradshaw, the noble Lord, Lord Berkeley, and the noble Earl, Lord Attlee, I have one or two questions.
It seems to me that the Czech Republic and Slovakia—which are of course accession countries that are coming in on a straightforward basis—fall into one group. Having visited Moldova, which is an interesting but not totally developed country, and having heard a little about some Georgian practices, I have to ask why it is that the UK develops its own policies towards these countries. Unlike the noble Earl, Lord Attlee, I am not a Euro-sceptic, but it seems to me that this is the sort of area where the European Union ought to be developing a common policy so that
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we approach them together. I am glad to see that on this issue I have persuaded the Euro-sceptic, the noble Earl, Lord Attlee, to see the value of the European Union. This is an issue on which a common policy seems to have some value. I look forward with great interest to the Minister's reply.
Lord Davies of Oldham: My Lords, I am grateful for the opportunity provided by this short debate to consider the safety of lorries on British roads and other related issues. I thought that the noble Earl, Lord Attlee, was a little savage on the noble Lord, Lord Bradshaw. I think that "xenophobic" is putting things a little strongly. "Illiberal", perhaps; or "a lack of understanding of the mutuality of benefit from these regulations and arrangements" may have been an appropriate charge.
Earl Attlee: My Lords, I did qualify my comments with liberal use of the word "slightly".
Lord Davies of Oldham: I must have missed that, my Lords; it sounds a little like an afterthought. However, I have no doubt that the noble Lord, Lord Bradshaw, is suitably chastened, even in such a mild form.
The first and most important question is why we need these regulations and why they are framed as they are. The regulations cover three states that will be joining the European Union and four which are currently not client states. However, I begin by welcoming the noble Lord, Lord Roper. He makes a most welcome contribution to our deliberations and speaks from a position of great authority on the European Community. The simple fact is that the European Community has not made sufficiently rapid progress in standardisation of these issues. It has plans to do so. The noble Lord was right, of course, that a desirable benefit of the European Community would be standardisation of policy right across all member states. If that were the case, tonight we would be discussing the issue with regard only to the four states that are not applicant members. However, we are not presently in that position. Individual states sign these bilateral agreements and the United Kingdom follows that pattern.
We sign bilateral agreements because, believe it or not, British lorries go abroad to these countries. There are conspicuous advantages in having agreements that aid our operators going to those countries, just as there are in aiding and regulating operators who come to this country. So the basis is one of mutuality. Why are the regulations being considered now? We are doing so now only because they represent consolidation and make British law compliant with treaties signed over a number of years. The effects of the treaties come into force in each signatory country when the treaty is signed. We are in a sense with this measure consolidating practice that Britain already applies, as does Moldova and other states. However, we need the regulations to ensure that United Kingdom law is compliant with treaties that have been signed. We need to ensure that agreements are fully enforced. That is the central question. It also explains

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why the measures do not contain an immense amount of detail. The detail is contained in the relevant treaties. The regulations merely give effect to the treaties.
Noble Lords are fully entitled to ask questions about the implications of the treaties that are now consolidated into law, assuming that the noble Lord, Lord Bradshaw, does not propose to annul the regulations. I give way to the noble Earl.
Earl Attlee: My Lords, the Minister is being extremely helpful and I am grateful to him for giving way. However, the noble Lord, Lord Whitty, signed an agreement with the Slovak Republic on 11 January 2001. Why has it taken several years to come up with the order?
Lord Davies of Oldham: My Lords, the noble Earl may have noticed that the order does not concern just Slovakia; it concerns seven countries. It takes time for all of the issues to be brought together. The noble Earl will recognise that for general convenience we have brought together all seven countries into a single order. It would not be an appropriate use of parliamentary time to lay in the form of an order before the House every treaty that was signed on a bilateral basis. Many bilateral measures exist that go way beyond the realms of those concerned with goods vehicles. I believe that we have quite enough secondary legislation without seeking to multiply it several times. If the noble Earl had his way, every time such a treaty was agreed, we would produce further legislation. I should point out that we gain benefits from the treaty as soon as it is signed.
A number of other questions were raised. As regards whether I would be enthusiastic about visiting some of the countries that we are discussing, I had the enormous pleasure of visiting Slovenia immediately after the army of the former Yugoslavia had withdrawn and in so doing destroyed practically everything in its tracks. I considered the country staggeringly beautiful and a wonderful tourist location then. I have no doubt at all that in the intervening years it will have improved beyond bounds. If noble Lords opposite are eager for me to go there and are prepared to produce the necessary funds to enable me to do so, I assure them that I would go with the greatest enthusiasm. I would address myself to the lorry issue once I was there and even report back. However, whether I would report back from this Dispatch Box in those circumstances is a different matter. The issue of why some of these countries are not in the European Community is merely a question of the signatories of the relevant treaties; they all raise the same issues.
A question was raised that referred to supposition rather than the use of statistics. I think the noble Lord who raised the matter would say that he did not have statistics because we are not particularly prone to publish such extensive statistics. I emphasise that on the whole, so far as law enforcement in this country is concerned, overseas lorries pose a very limited problem. The noble Lord will know, with his vast experience, what difficulties we have had on compliance issues for lorries as a whole. We know that the situation has improved significantly,
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and the House will be aware of the measures that the Government have brought in in recent years to enhance enforcement.
I hasten to emphasise that if European lorries, from whichever country, fall foul of the law, they pay their punishment here. We are the beneficiaries of fines paid, just as the noble Lord would expect that a British lorry driver guilty of breaking the law in Moldova would pay the price of the law there. I seem to recall that when lorry drivers have been caught in very unfortunate circumstances indeed in other countries, we have been all too well aware of the fact that they have been in prison there, no doubt entirely rightly in most cases. Noble Lords will recall one or two cases when lorry drivers who were innocent had been in prison for a considerable period abroad, and we were under great pressure as a government to do our very best to see that justice was done. In one or two cases, we had to intervene very effectively.
The question of the database was raised. Of course we hope, through modern technology, to be able to exchange levels of information. It will be recognised that we ourselves need to improve the quality of our information on accident statistics and so on. Noble Lords have an entirely valid point when it is stressed that it would be helpful if we were able to exchange information. Whether we would be doing that at one o'clock at night Moldovan time, I am not clear. However, I am not so sure that Moldovan time is that far out from British time; if it is inconvenient for the Moldovans at one o'clock in the morning, it might be pretty inconvenient for the British at eleven o'clock or whatever time in the evening here. Normal hours operating, I concur with the general proposition that we ought to take advantage of the opportunities to exchange information.
I hope that I have reassured noble Lords about the issues. I am not in any way suggesting that safety is not of very great importance. Concern over the use of mobile phones while driving was partly triggered off by the absolutely horrendous example of a German lorry driver causing the deaths of several of our citizens. He caused a horrendous accident while on the telephone back to base in Germany. The case attracted a huge amount of attention, and there are many other reasons, in terms of our own safety, why that issue has changed the law of the land.
We benefit from having mutuality of legal provision between countries. I understand when it is said that some of the lorries come from countries that have nothing like the per capita income that this country has. It is a fool, however, who puts an ill equipped lorry on to the roads for a journey of 50 miles in the UK. It is some really stupid operator who intends to send the same lorry 2,000 miles across Europe to come to the United Kingdom. Therefore, if one sends lorries over such distances, the tendency with international haulage is for the lorries to be rather better looked after, equipped and maintained than lorries that do the daily round over shorter distances, where risks might be taken and sometimes are, but ought not to be.

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We cannot see the issue of foreign lorries, in terms of safety in the United Kingdom, as outstandingly difficult. In so far as it is difficult and needs to be controlled, the fact that we have reciprocal treaties—I hope that they will be consolidated in UK law if the Motion is withdrawn is of advantage to us all. I therefore hope that the noble Lord, having made his points, will withdraw his Motion.
Lord Bradshaw: My Lords, I thank the Minister, the Captain of the Yeomen of the Guard, for his contribution, with which I go along to an extent. I still believe that we are probably extremely attentive to our duties in passing these matters into law. I imagine that that is not the case in many other countries. However, I still have reservations over the safety of lorries. Generally, I am not picking out foreign lorries, as the noble Earl, Lord Attlee, suggested, because I am equally concerned about British lorries. But, I hope that the Minister will accept that I will occasionally
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bring to him evidence of lack of safety and non-compliance with the law. I hope that when I do that, it will be treated seriously and not brushed aside, because it will be solid evidence—not my wanderings in the night, as it were. It will be evidence that I have gathered from roadside checks, and so on. I believe that there is a serious mismatch between the safety record on the fringes of road haulage and other transport operators. Having said that, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

European Parliamentary and Local Elections (Pilots) Bill
Returned from the Commons with a Lords amendment to a Commons amendment disagreed to with a reason for such disagreement; the Commons reason was ordered to be printed.
House adjourned at twenty-one minutes past nine o'clock.