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Mr. Julian Amery (Brighton, Pavilion) : I congratulate my right hon. Friend the Secretary of State for Defence on making it clear that the reductions that he envisages will depend not just on agreement over Soviet withdrawal and disarmament, but on the achievement of what is agreed. May I also congratulate him on making it clear that British forces will remain in Germany? The presence of British and French forces in Germany is fundamental under the Brussels treaty to the maintanance of the European Community. Does my right hon. Friend agree that developments in the Gulf over the past few days have made it clear that we may well have to share responsibility for out-of-area operations?

Mr. King : I am grateful to my right hon. Friend for his kind welcome for what I have said today. With regard to the continuing presence of British forces in Germany, it has always been made clear to me by the German Government and NATO that stationed forces--those of the United States, the British and our other allies--are an important element in the cohesion of the alliance.

With regard to my right hon. Friend's second point about developments elsewhere, whatever implications such developments may have for us, in many areas the world is not a very steady and safe place at the moment. It is very important for the basic needs of this country, with its responsibilities, alliances, interests and connections, that we maintain an adequate defence capability.

Mr. James Molyneaux (Lagan Valley) : I welcome the undertaking to continue the commitment to Northern Ireland, but would it be possible to increase the number of specialist elements, including the supply of helicopters, which are urgently needed by the Regular Army, the Ulster Defence Regiment and the police, particularly in the light of yesterday's atrocity.

Mr. King : I am grateful to the right hon. Gentleman for noting that I confirmed our determination to maintain our contribution. We will certainly consider specialist aspects. There is always a steady stream of requests for one thing or another, as I know very well, wearing one hat or another. We will certainly seek to respond to those requests as effectively as we can.

Mr. Cyril D. Townsend (Bexleyheath) : May I commend my right hon. Friend on his timely statement and on appearing to get the balance about right in these crucial matters? I wish him well in carrying out the restructuring and making sure that we shift slowly towards a maritime strategy as opposed to a continental one. In that context, I note the considerable reduction in submarines.

I wish my right hon. Friend well in making sure that his future programme is led by strategic needs and not by the considerable pressures of the Treasury Bench.

Mr. King : My hon. Friend waited until my right hon. Friend the Chief Secretary to the Treasury had withdrawn before embarking on that brave sally. Certainly we have tried to strike a fair balance. I understand why my hon. Friend picked up my point about the change in submarine numbers from 27 to 16. The reduction appears bigger than the reality. The Soviet Union is reducing the number of submarines but introducing more capable, effective and modern submarines. That is exactly what we shall be doing.

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Mr. A. E. P. Duffy (Sheffield, Attercliffe) : Does the Secretary of State agree that the first challenge which faces him in his restructuring task is to preserve the high quality and motivation of British service men, who are so widely admired throughout the western alliance? His second challenge is to find the right strategic decision when no one can foresee the strategic shape of things to come. The right hon. Gentleman mentioned the lack of agreement on CFE and two-plus- four ; he might have mentioned instability in the Soviet Union. Therefore, he is quite right to resist the temptation to cut the services ruthlessly and arbitrarily. If the House is entitled to look for a peace dividend, the services are entitled to look for a services dividend. Will the right hon. Gentleman say a word about the force structure that he envisages for the strategic reserve division?

Mr. King : The whole House knows the keen interest that the hon. Gentleman takes in these matters. I am extremely grateful for what he said. Now that our words go rather further afield, I know that his comments will be deeply appreciated by our armed forces who serve in many parts of the world. On a day when two of them have just been awarded the George medal, it is a reminder of the professionalism and courage that they bring to bear in quite unexpected circumstances and of the debt that we owe them.

The exact structure of the strategic reserve division will require further consideration. I have tried to set out the elements that will be within it, and that work will now be carried forward.

Sir Antony Buck (Colchester, North) : Does my right hon. Friend agree that his statement today illustrates the fact that a multi-balanced force reduction approach is more appropriate than a unilateralist approach? He would not have been able to make reductions without reductions on the other side of the iron curtain. Will he say a little more about the future of amphibious capability, as many of us take the view that the Royal Marines and the flexibility they provide are particularly appropriate to modern defence?

Mr. King : I am grateful to my hon. Friend. I made it clear that we intend to maintain an amphibious capability in the longer term. Obviously, that includes the capability of marine commandos to discharge their amphibious work. The House knows that we are considering the vessels that are required for that, but it is important that we maintain that capability which provides the flexibility and mobility that will become increasingly important if we have lower force structures and levels.

Mr. John Cartwright (Woolwich) : In adding my welcome to the broad objectives of the statement, may I put it to the Secretary of State that, in an uncertain world, it is prudent common sense for Britain to maintain an effective minimum nuclear deterrent for the foreseeable future? As the sub-strategic systems are just as important as the four-boat Trident force, when will the Secretary of State be able to announce a decision on the weapons system to be carried by the Tornado?

Mr. King : I am grateful to the hon. Gentleman, who takes a close and well-informed interest in these matters which qualifies him to contribute to defence debates in the House. On the latter point, as he knows, we are considering two alternatives--the American and the

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French options. I cannot give him a precise date, but by the end of the year we hope to have formed a view on that. I cannot say anything more precise than that.

Mr. Robert Boscawen (Somerton and Frome) : Will my right hon. Friend accept that many thousands of people with the sort of experiences of my generation will regard this as a sensible package, above all because we retain the capability to meet unforeseen circumstances, albeit at a lower level? Will he ensure that the three services can, within the overall figures, make their proposals for reductions and give their ideas on the new form of services? Will he say how pleased many thousands of people will be that the Harrier and EH101 programmes are to proceed?

Mr. King : I am grateful to my hon. Friend, who has a distinguished record. Obviously, the House listens with great respect to his comments. He may be interested in the quotation that I found today, which says of the Korean war :

"It was a contingency which took the British Government and its military Chiefs of Staff by surprise ; the first of many in following years to make unexpected and irresistible claims on money and manpower."

We certainly hope that we shall not face anything like that again. My job is not to take risks but to ensure that, if what we do not want to happen occurs, we can defend ourselves. My hon. Friend knows the importance of that better than any. In answer to his two points, yes, I hope that that will be possible.

Mr. John McWilliam (Blaydon) : I welcome the Secretary of State's decision to make a statement before the recess, but may I press him for a debate when we return? Will he give the House the benefit of his thinking on the threat assessment, which led him to his conclusion to go ahead with the tactical air-to-surface missile? How many ships does he intend to decommission, given that we have about 40 frigates and destroyers? In view of the importance of the statement to the economy of the fourth poorest country in the world, will he reassure the House that today's announcement does not entail any change to his previous statement about the future of the Brigade of Gurkhas?

Mr. King : My right hon. Friend the Patronage Secretary has a good line to my right hon, and learned Friend the Leader of the House and he will have heard the hon. Gentleman's first comment. I would welcome the opportunity for a debate, the timing of which can be discussed.

The hon. Gentleman asked about the number of frigates. The current number is 48 and, as I said, it will decrease to about 40 through decommissioning or disposing of some older frigates. There will not be an equivalent reduction in capability. I am aware of the statement on the Gurkhas made by my predecessor in May last year.

Mr. Michael Jopling (Westmorland and Lonsdale) : Is my right hon. Friend aware that the most welcome part of his statement was the undertaking that the reductions are entirely dependent on successful CFE and two-plus-four talks, and the reduction of Soviet troops in eastern Europe? Can he assure us that he is aware that, at a time when he is reducing manpower in the services, it has never been more important to ensure that our troops are given

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the best possible equipment available in the world, whether tanks or whatever, regardless of where it is manufactured?

Mr. King : I again confirm that what I have said today is conditional on the developments going in the direction that we want them to go. We can change direction or arrest development and build back up if our hopes are dashed. The hon. Member for Sheffield, Attercliffe (Mr. Duffy) picked up the phrase "service dividend". I attach importance to that, as well as to any implication of savings called a peace dividend. In a service dividend I certainly include equipment which is reliable, which works and for which there are spares, so that we can ensure better equipped, even if smaller, armed forces.

Mrs. Margaret Ewing (Moray) : Will the Secretary of State, in simple and straightforward terms, tell the House exactly how much money the Government envisage saving as a result of his statement? Will he confirm that there will be an early opportunity for debate, particularly as the announcement that four Trident submarines will be based on the Clyde will be met with bitter resentment in Scotland? Will there be an opportunity in the course of that debate to explore why the Opposition Front-Bench spokesman did not carry through the clear declaration from the Labour party conference in Scotland that it did not wish Trident submarines to be based on the Clyde?

Mr. King : On the first point, which I sought to cover in my statement, I cannot give an answer to the hon. Lady, for the obvious reason that I have set out our policy. We believe that this is the right approach to the defence strategy of our country. We must now examine the matter in detail and cost in detail the implications of it. I have talked about an 18 per cent. reduction in the level of our armed forces, equivalent reductions in civilian manpower, the need to examine the support area for equivalent savings, and the need to examine our procurement budget and weapons system as well. The outcome of that will produce significant savings during the later part of the year.

As I have told the House, as for this year, I am facing serious problems with transitional costs and inflation. I have already announced to the House certain savings that we must make. We shall obviously live within whatever cash base line we have for this year. That is the answer to the first point about money.

On the second point, I do not want to intrude on private grief between the hon. Lady and whichever is the nuclear wing of the Labour party.

Sir Hector Monro (Dumfries) : Following my right hon. Friend's most constructive statement, will he give an assurance that the regimental system will be maintained and that the old regimental area and county names and Scottish regimental names will be retained? In view of the statement by the hon. Member for Moray (Mrs. Ewing), I assure my right hon. Friend that Scotland will play its full part in the defence of the United Kingdom with pleasure.

Mr. King : I am grateful to my hon. Friend, and I can give him that confirmation. Unlike the Opposition spokesman, we believe that the regimental system has real relevance and is a valuable part of our structure. I am amazed that the hon. Member for Clackmannan (Mr.

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O'Neill) should say that he no longer regards it as relevant. I have no doubt that he will live to regret his remark very much. Anybody who knows anything about the Army deeply believes in the importance of the regimental system.

Mr. David Lambie (Cunninghame, South) : When will the Government recognise that England is no longer an imperial power? Instead of continuing with the overseas commitments that the Secretary of State has announced today, in the present political and military climate, is it not about time that we withdrew completely from those commitments? Now that the Soviet Union has agreed to withdraw Soviet forces from eastern Europe within four years, why does not the Secretary of State announce that we shall withdraw British forces from the mainland of western Europe in the same time scale?

Mr. King : I am not pretending that we are an imperial power ; I am making it clear that we are a loyal member of an alliance. I am interested to know whether it is the hon. Gentleman's party's policy to dishonour an alliance and to betray the allies with whom we have stood for 45 years. If that is his policy, perhaps the hon. Gentleman will tell us.

Mr. Julian Brazier (Canterbury) : My right hon. Friend's statement will be welcomed for clarifying the future of the armed forces as well as the wider community. Will he give an assurance that the welcome plan to form the new division to bring together our various land and air capabilities will take full account of the present instabilities in the middle east, not only in the Persian gulf but in other parts of the middle east where there are considerable threats to security and the supply of oil to western Europe.

Mr. King : I am grateful to my hon. Friend. I commented earlier on instabilities in the world. Certainly we must recognise that the proliferation of weapons and the tensions combine in a worrying way at this time. We are certainly aware of that.

Mr. Bruce George (Walsall, South) : It may be possible in two years' time to cut even more substantially the present force levels. Most people would agree that, because there are so many uncertainties, prudence is necessary in the meantime. The cuts that have already been announced are substantial and will hurt deeply. If, as appears to be correct, the Soviet naval building programme continues and the Royal Navy is unable adequately to meet its existing commitments with about 50 frigates and destroyers, how can the Secretary of State believe that with about 40 frigates and destroyers there will be no loss of capability? I await anxiously his reply. I simply do not believe that it will be possible to cut to 40 without having to reduce capability. Is the Secretary of State considering reducing capability?

Mr. King : Our naval capability has to be matched to our assessment of the threat, as it has been in the past. As I have already made clear, the Soviet numbers are being reduced. However, as the hon. Gentleman knows, the enhanced capability and quality of the new submarines are high. Our changes are in much the same direction. We know the enhanced capability of our newer submarines. The reduction in submarine and frigate numbers relates to older boats. We shall seek to ensure that a balance is kept.

I ought to warn the hon. Gentleman--he may not be aware of this--that his hon. Friend the Member for Clackmannan (Mr. O'Neill), who is the shadow

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spokesman on defence, used the phrase, "This is something that we shall have to pay very close attention to," when referring to a new study, published today, that proposes that no more tanks, frigates or attack submarines should be bought. Apparently, the European fighter aircraft will be cancelled, but Trident will be kept. I do not know whether that is the new Labour party policy, but it shows how confused it is getting.

Sir Peter Emery (Honiton) : My right hon. Friend's statement will be admired well beyond the House. Within the NATO alliance, however, there are certain nations, and many more political parties, that wish more drastic cuts to be made in their national defence structures than that which my right hon. Friend suggests for the United Kingdom. Will he bear in mind the fact that the CFE negotiations in Vienna are not going as well as might have been expected? We hope that a treaty will be signed in December, but until it is signed, will my right hon. Friend make it absolutely clear in NATO that our defence structures must stay as strong as he has suggested and that we must not give way to demands for a peace dividend?

Mr. King : I am grateful to my hon. Friend. We are trying to get the balance right. There have been massive changes. Whatever happens in Vienna, it is difficult to believe that east Germany, Hungary and Czechoslovakia will shortly return as fully paid-up membes of the Warsaw pact, as they were, say, two years ago. The position in the Soviet Union is much more uncertain ; there are enormous tensions there. That is why I believe that the balance that I have put before the House today is the right one to strike.

Mr. Ken Livingstone (Brent, East) : Before the right hon. Gentleman's statement, Britain was spending 40 per cent. more of its gross domestic product on defence than West Germany, although West Germany is closer to the Soviet Union than we are. However, his statement means that we shall be spending a greater proportion of our gross domestic product on defence than West Germany. How does he justify that?

Mr. King : I am grateful to the hon. Gentleman for joining in the debate. We know that he speaks for the majority of Labour party members. At the Labour party conference, the hon. Gentleman, the hon. Member for Lewisham, Deptford (Ms. Ruddock) and Bruce Kent carried their motion by a 2 : 1 majority against the Opposition Front Bench, so he is entitled to speak, and he speaks with authority. He wants a £9 billion cut in the defence budget, so it is either the end of the Royal Navy, or the end of the Royal Air Force, or both.

My announcement will lead to a reduction in our armed forces from 310,000 to some 255,000. In Moscow, Chancellor Kohl announced a figure of 370,000 for the Bundeswehr in Germany. That is for a country that does not carry responsibilities that some other countries have to bear. I am not sure whether behind his question lies the proposal that we should shift to conscription. Anybody who examines the financial costs knows that one of the reasons why German costs could be lowered is that Germany does not have a volunteer army : it has conscription.

Dr. Charles Goodson-Wickes (Wimbledon) : I welcome the soundness of my right hon. Friend's statement, but will

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he confirm that the retention of trained personnel will be of even more importance in the future? Will he emphasise the role of the services in the peace dividend?

Mr. King : I am grateful to my hon. Friend. I hope that he understands that we shall approach that question positively. I am anxious that the consultation should be meaningful. I am grateful to have had the opportunity to set out the framework within which we shall work. We shall consider a number of suggestions, such as the one that my hon. Friend made.

Mr. Tam Dalyell (Linlithgow) : What was meant in the statement by "a detailed scrutiny of research and development in keeping with changed requirements"?

I acknowledge that it is a complex subject, that there are many contracts with people and that there is a great deal of talent in the research industries and establishments of this country, so could they not be put to use by British industry? Why is it that our industrial costs are so much greater than those of the Germans and the Japanese in terms of research expertise? Could not an imaginative plan be devised before September or October to help not only the universities but institutions such as the natural history museum, which is important for its research into global warming? We have obligations to skilled people. Can we honour them?

Mr. King : I am sorry to disappoint the hon. Gentleman, but the sentence means exactly what it says. It may lead in part in the direction in which he looks. We must examine the scale of research and development in defence and decide how much we can afford and what research and development is justified. If that means that we can release resources, they may be able to go to some of the institutions to which he referred.

Sir Jim Spicer (Dorset, West) : Does my right hon. Friend accept that both the Royal Marines and the Parachute Regiment will be delighted with the formation of the new division? I am sure that they will work in friendly rivalry within it.

In all that my right hon. Friend said there is the presumption that Germany will remain within the NATO alliance. However, he knows that there is a very outside chance that the socialists and the greens in Germany will win the election in December. Does he agree that, if that unfortunate circumstance were to come about, there might have to be yet another rethink?

Mr. King : I would have expected my hon. Friend's opening comments. I know of his great loyalty to and support for the Royal Marines and the Parachute Regiment. As for his question about Germany's membership of NATO, I have always believed that in the end the Soviet Union, whether reluctantly or otherwise, will be forced to accept the democratic decision of the people of East Germany and of a united Germany. It is important for the coherence of NATO that that remains the position.

Mr. John Home Robertson (East Lothian) : The statement is a welcome start, but the Secretary of State cannot be accused of seizing opportunities or grasping nettles, let alone of beginning to convert the defence industries. The right hon. Gentleman referred to the Select Committee's report. May I therefore appeal to him to pay particular attention to the cautionary remarks of the Select

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Committee about the danger of nuclear escalation through the deployment of tactical air-to-surface missiles? Would it not be a vicious irony if a conventional peace dividend were to clear the decks for a nuclear war?

Mr. King : I am not sure how the hon. Gentleman ended, because I lost the thread in the middle. Although he may think that my statement was modest, I assure him that its implications will be profound for both those in the armed forces and those who work in support industries. He should reflect on the implications of that. There will also be implications on the procurement side for some of the defence industries. I dare say that even in his surgery he may find people who will not believe that my statement was modest.

Mr. Peter Viggers (Gosport) : Will my right hon. Friend confirm that recruiting will continue at a sufficient level to maintain an appropriate profile of age and experience in the armed forces and to ensure that the armed forces continue to provide a worthwhile and rewarding career? Does he share my surprise, indeed incredulity, that the Opposition spokesman should express anxiety about pay in the armed forces when his party held down pay as a matter of policy? As a result, our first act in government was to increase armed forces' pay by 32 per cent. to bring it back in line.

Mr. King : Whatever the Opposition Front-Bench spokesman may say, I shudder to think what the hon. Member for Brent, East (Mr. Livingstone) would propose for armed forces' pay in view of his proposals for defence as a whole.

My hon. Friend's first point was an important one. It will be a challenge for us to ensure that the changes are made in a way that maintains the structure of the armed forces and a sensible age profile. I am under no illusions that that will be a real challenge.

Mr. Martin Flannery (Sheffield, Hillsborough) : Without casting aspersions on the morals of the Secretary of State, may I say that he sounds like a religious prostitute who said, "Oh God, make me pure, but not yet." [Interruption.] The House should not get so excited ; I have waited all this time. We are slower than any other major nation to realise precisely what has happened in the Soviet Union and eastern Europe. The Secretary of State and the Government act as if the Russians were about to attack next Thursday. In all conscience, why do the Government not realise that this is not only a militaristic matter? The poor, the sick and the old are waiting for the peace dividend, and it is time that we did something about the money. What does the Secretary of State intend to do, other than being so militaristic or conveying that impression? Do we always need an enemy? Will the enemy continue to be the Soviet Union, or could it be that we are getting weapons together like Gaddafi and others and that the Arabs are the real enemy?

Mr. King : I was in the House last week when the hon. Member for Wallsend (Mr. Garrett) had something to say as someone who had fought in the last world war. It was an attitude like that of the hon. Member for Sheffield, Hillsborough (Mr. Flannery) which made people believe that they could safely plan on the basis that there would not be a war for the next 10 years. It was the 10-year rule.

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That was carried through from a Cabinet to the defence chiefs in 1919 and it rolled forward to 1932. It resulted in soldiers having to exercise with football rattles instead of real ammunition and it left the country dangerously undefended. It is precisely that attitude--

Mr. Tony Banks (Newham, North-West) : My hon. Friend fought in the war.

Mr. King : --which assumes that there cannot be a risk in future from which--

Mr. Flannery : Do not be patronising. I was wounded in the last war.

Mr. Speaker : Order.

Mr. King : The hon. Gentleman talks about morals. Our responsibility is to ensure above all the security of our country.

Mr. Robert Key (Salisbury) : In congratulating my right hon. Friend on his courageous statement, may I ask him to take special care with the 173,000 civilian employees of the Ministry of Defence? Will he bear in mind the fact that health, education and housing costs for soldiers are borne at present by the defence budget but in future will be borne by the civil budget? Will he take particular care to consult the local authorities and the providers of those services?

Mr. King : My hon. Friend's point is beginning to sink in with some Opposition Members. It is that some of the changes may have greater impact in some constituencies than certain Opposition Members appear to appreciate. I certainly take note of the proper concern of my hon. Friend about the position that may arise in his constituency. I understand why he is anxious about it.

Mr. Bob Cryer (Bradford, South) : Does the Secretary of State accept that his decision not to cancel Trident and thereby save billions of pounds is immoral and outrageous? What will he say to the 139 non-nuclear nations which renounced the possession and deployment of nuclear weapons at the review conference? What does he intend to say in his pompous and arrogant tones? Will he say that, as Secretary of State, he is prepared to be disloyal and to dishonour clause 6 of the United Nations nuclear non- proliferation treaty, which his Government support, which successive Governments have signed, which commits us to getting rid of nuclear weapons and which he is betraying?

Mr. King : I am grateful to the hon. Gentleman for letting us hear the real voice of the Labour party.

Mr. Cryer : Tell us about the treaty.

Mr. King : The hon. Gentleman knows that what he said is not the view of any Labour Front-Bench Member or that of the leader of his party.

Mr. Cryer : Tell me the answer.

Mr. Speaker : Order.

Mr. King : I know that the hon. Gentleman holds that conviction passionately and sincerely. I happen to believe that he is profoundly wrong, and that at this very moment the lesson of history proves it.

Dame Janet Fookes (Plymouth, Drake) : Is it my right hon. Friend's intention to maintain or reduce the number

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of the Royal Marines, bearing in mind the excellence of that corps and its capacity to turn its hand to almost anything? May I point out to my right hon. Friend that the Government may be considering the amphibious capability but that they have been doing so for longer than I care to remember?

Mr. King : No. we are not considering it--we intend to maintain it. I make that absolutely clear. I ask my hon. Friend not to read anything specific into my statement. I made a broad statement of our approach. I have tried to give as much reassurance and clarification as possible.

Several hon. Members asked about the position and prospects of individual units. I do not anticipate any significant change in the position of the marine commandos. However, I want to have a genuine consultation exercise in which we can carry forward our approach and, under the broad structure that I have defined, consider what the future should be. I do not want to dictate it from the Dispatch Box. I want the people involved to take part in the process.

Mr. Tony Banks : Thank you for calling me, Mr. Speaker. At least I have been able to produce my own peace dividend by betting that I would be the last to be called!

The Secretary of State's statement tells me two things. First, it is a defeat for the Minister of State for Defence Procurement. Secondly, the Secretary of State has missed a wonderful opportunity. The people of Britain expect a peace dividend. The opportunities were there for the Secretary of State to cut defence by as much as 50 per cent. to allow the real problems, not the problems from the Soviet Union, to be addressed, including the education crisis in our schools, homelessness and poverty. We are left, as before, with the best defended cardboard cities and dole queues in Europe. The right hon. Gentleman has missed a wonderful opportunity.

Mr. King : The hon. Gentleman's oratory sounds impressive, but why has he totally failed to persuade the leadership of his party of the arguments that he just advanced? He knows that that is not its policy. I have sought to put before the House a sensible response to the changes that have occurred. It will maintain the security of our country against the unexpected. A defence policy must provide that insurance. The hon. Gentleman was wrong on his second point, and completely wrong on the first.

Mr. Cecil Franks (Barrow and Furness) : The majority of the House will welcome the commitment to a four-boat Trident submarine fleet. That is good news, not only for those who believe in a credible nuclear deterrent but for my constituents, even if it is bad news for the Opposition and the Labour party in my area.

Will my right hon. Friend clarify one part of his statement? He said that he envisaged a 16-boat submarine fleet, three quarters of which will be nuclear-powered. Will he elaborate on the future shipbuilding programme and, in particular, say whether there is to be a follow-on to the Trafalgar class submarine, a nuclear-powered submarine, the seventh and last of which is currently being completed in Barrow?

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Mr. King : For the reasons I gave in relation to the Marines, I hope that my hon. Friend will forgive me if I do not talk in detail about the programmes. We are looking at them now. As my hon. Friend rightly said, we are committed to a four-boat Trident programme and we are looking at the future programme. We see a continuing need for nuclear submarines and to maintain a modern nuclear capability. I would rather not go any further today than my statement.

Mr. Jonathan Sayeed (Bristol, East) : According to some newspapers, my right hon. Friend and the chiefs of staff do not see eye to eye. Is that correct, or do the chiefs of staff fully support his approach?

Mr. King : I read those reports, too, as did the chiefs of staff. If I failed to make it clear earlier, I reaffirm my deep appreciation of the work of the Chief of the Defence Staff, Marshal of the Royal Air Force Sir David Craig, and the chiefs of staff of the individual services. There is a new structure in the Ministry of Defence under the Chief of the Defence Staff which has been responsible for the work I have been able to announce today. Signals have gone out to all the individual services today, and I am pleased to see the positive approach that has been taken. I have referred to the concept of smaller and better. Throughout the services, I think that it is genuinely felt that this is an opportunity to reshape the services on a basis that can provide benefits, albeit on lower force numbers, for the services. I have been encouraged by the positive and helpful way in which the Chief of the Defence Staff and the chiefs of the individual services have responded to the challenge.

Mr. David Martin (Portsmouth, South) : With the reduction in the surface fleet, can my right hon. Friend give as much reassurance as possible to me and the people of Portsmouth about the future of the naval base there, the fleet maintenance repair organisation and other supporting roles within the naval base?

Mr. King : I am afraid that I have to give my hon. Friend the same reply as I gave to my hon. Friend the Member for Plymouth, Drake (Dame J. Fookes). There are some detailed issues that now have to be examined against the broad structure I have described. I do not want to go into that today. They are matters of concern to my hon. Friend, with his close interest in issues affecting his constituency, and we shall try to reach conclusions on them as early as possible.

Mr. O'Neill : Will the Secretary of State accept that his substantial statement today, much of which will have been welcomed by many in the House, will be largely meaningless if price tags are not quickly applied? We urge the Secretary of State to make available all the financial information as early as possible, so that the best and widest possible debate can take place.

Mr. King : That work is in hand now, but I cannot say when it will be ready. As I have said, in part it has to be incorporated within the autumn statement.

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Local Government Finance (Scotland)

5.2 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind) : With permission, Mr. Speaker, I should like to make a statement about my proposed financial settlement for Scottish local authorities for 1991-92.

This is the first year in which the Scottish announcement is in respect of the total level of local authority resources that are determined by the Government--that is, revenue support grant, specific grants and business rates. Collectively, those are known as aggregate external finance. In determining the settlement I have taken into account the views of the Convention of Scottish Local Authorities expressed when I met it on 6 July regarding the spending levels that it thought were required for next year. I have also had full regard to the additional burdens facing local authorities and to the scope that undoubtedly exists in local government for improved efficiency. I propose that aggregate external finance for 1991 -92 should be set at £4,338 million. That is £410 million higher than the corresponding figure for the current year. The House will realise that that is substantially more than the application of the normal formula rules to the comparable English settlement would produce. In addition, a further sum of £15 million will be provided for safety netting next year. This also will be the second year in which the safety net has been funded entirely by the Exchequer. So, overall, the settlement amounts to a total of £425 million. Proposals for the distribution of that amount to individual authorities will be announced in the usual way in the autumn.

In reaching this settlement, I have assumed that local authorities will contribute the sum of £10 million in the second year of the Government's policy of moving to a common rate poundage with England and thereby reduce the excess rate burden on Scottish business. I shall announce the total reduction that will be made in business rates next year at a later date, but the fact that the local authorities' contribution has already been taken into account in this settlement means that the reduction in non-domestic rate income will not require a reduction in aggregate Exchequer finance below the figure that I have just announced.

Overall, the settlement that I have announced today is a very fair one. Even if, as COSLA has forecast, authorities were to budget to increase their expenditure next year by as much as 9 per cent.,--that is, close to the current rate of retail prices index inflation--there should be no need for community charges to increase, on average, by more than that amount. And if, particularly with the expected fall in the rate of inflation, authorities increase spending by rather less than 9 per cent.--as I would hope they would--there should be scope for next year's charge levels to be lower in real terms. I hope that Scottish local authorities will also take into account their very high expenditure compared to local authorities in England and Wales. If local authorities in Scotland were to reduce their spending to levels closer to those elsewhere in Britain, there would be scope for large reductions in the community charge.

As hon. Members will know, I announced last Thursday a number of changes to the community charge. Those included major revisions to the transitional relief

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