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9.4 p.m.

Lord Butterworth: My Lords, one is aware that in Britain today the essence of the Union or the Community is often considered to be the single market, in some places still referred to as the Common Market. However, the founders of the Union and most of the member states would go much further. They are convinced that by economic and monetary union and by political convergence a new realite politique will emerge, the "ever closer union" referred to in the original Treaty of Rome, gradually being elaborated and concretised through the Declaration of Strasbourg, the Single European Act and the Maastricht Treaty, a continuous evolution which will no doubt be pursued a stage further in the intergovernmental conference in 1996.

In considering what the United Kingdom's position ought to be in that field, I submit that we should take into account a change that has begun to occur. It began in the middle of the 1980s and has gathered pace. At this late hour that is the only point that I wish to make.

Britain's trade with Europe has constantly been expanding and the general expectation has been that our trade with Europe would continue to expand and that

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the bulk of our overseas investment would be attracted to the European market. In fact, while Europe has remained central to our economic strategy, the reality has worked out somewhat differently. Maybe because of Britain's imperial and colonial tradition, UK companies have a marked preference for a geographical spread of activities throughout the whole world to a much higher degree than is the practice in many other countries. Our direct overseas investment is not overtly influenced by geographic proximity. But United Kingdom companies, when choosing where to site their plants --whether, say, in Europe or the Pacific Rim--go for the site that promises the fastest economic growth, wherever it may be.

In considering Europe, labour costs are high, as are the burdens that flow from employment and social security legislation. Our industry and commerce look for lower production costs, especially labour costs. They also look for technological skills, freedom from regulation and red tape and a culture which encourages financial personal responsibility and the work ethic. It is the case that emerging market economies often fill the bill very much better than the Union.

In 1993, emerging markets attracted £62 billion, almost one-third of the total equity cross-border investment flow; whereas the Union attracted £23 billion, or 23 per cent. In world markets emerging markets now rank third after the United States and Japan; and in spite of the greater risks and the reduced liquidity of these markets, there is a widely held conviction that emerging markets will continue to grow. Some estimate that by 2010 no less than two-thirds of global output will come from these countries; whereas in the Union, as we have heard this afternoon, unemployment and fraud are unchecked. I have to add that the Union is losing market share not only in overall world trade but even, and particularly, in high-technology goods. Our Government are right to call upon the Union to reduce direct and indirect labour costs and to improve competitiveness.

If we look at the position in Britain in this area, our direct and portfolio investment overseas is now so considerable that it may well in the future influence both the character and the composition of our economy. United Kingdom direct investment overseas has a market value of £300 million. That is direct investment. When one adds the overseas portfolio investment, the total approaches £700 billion. That is equivalent to the total valuation of UK companies quoted on the Stock Exchange.

It began to happen in the mid-1980s. From that time onwards, the flow of inward and outward foreign direct investments has become so pronounced that it must raise the question of whether government and their departments adequately reflect the new balance which our industry and commerce are introducing in our whole relationship with the global economy. Europe must remain crucially important to us. But one must ask whether our present emphasis on European affairs is causing us to play down this important relationship with the rest of the world. Does it accurately reflect this country's role as a leading global trader?

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Perhaps I may give one final, and slightly different, example. Mr. Jamieson, the deputy City editor of the Sunday Telegraph, has suggested that, because of all that is happening, the remit of the DTI should be expanded to ensure that the invisible sector of the economy is properly represented by government. In fact, he suggests that it should become the Department of Industry, Trade and Investment. Certainly, the balance of our economy is changing. Inward and outward foreign direct investment flows are becoming increasingly important. Maybe vis-o-vis Europe our role should be not only to be a loyal and active member of the Union but to be a bridge between the Union and the rest of the world.

That brings me back to the point at which I began. Britain can only influence the future of the Union if it is clear about what the structure should be to achieve ever closer union and about the speed at which it should be developed. That is an issue that is likely to be high on the agenda at the inter-governmental conference in 1996.

9.14 p.m.

Earl Attlee: perhaps I should start by declaring my interest. I am a serving officer in the REME TA, as is my wife who commands a REME recovery company. I listened with interest to the speech of the noble Baroness, Lady Park, and I shall study Hansard carefully. I am not qualified to say that she is right, but I hope that she is wrong.

I echo the concerns of the noble Lord, Lord Vivian, particularly the requirement for higher level training FTXs at divisional level, and his comments regarding the need for training specific to UN operations. Having been protected by the British battalion group in Bosnia, I can confirm that our forces operate to the very highest standards. While protected by BRITBAT, I was never in fear for my own safety. I wish that I could say that for some of the other forces. I do not advise any British NGO to operate in Bosnia without the protection of BRITBAT in theatre.

The plans and legislation of the 1950s allowed for either total mobilisation of the TA for general war or very limited use of the TA. In other words, it was all or nothing. The requirement now is for much smaller numbers to be able to be called up at any one time. It is possible to call up individuals of the TA where their specific skills are required, but the procedure is complex. It is easier to remove a regular soldier with the required skills, if available, rather than get bogged down in staff work trying to use the TA. As a result, the MoD does not receive all the benefit that it could from the TA, and the regular units suffer from their soldiers or even sub-units being poached for special duties. That was referred to by the noble Lord, Lord Vivian. The TA suffers from the loss of opportunities and the perception that it is not effective. The Government are well aware of the difficulties and have in preparation an entirely new reserve forces Bill. They have consulted widely and the TA looks forward to the new legislation.

During the SDE debate last year, the Minister, the noble Viscount, Lord Cranborne, on 28th July (Official Report, col. 1364), confirmed the Government's

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intention to introduce legislation that would take effect in 1995. All members of the reserve forces will be very disappointed when they hear that there was no mention of any such Bill in the gracious Speech. I accept that there is great pressure on the parliamentary timetable. But can the Minister assure me that, if the Government's business managers were to offer him a slot next week for the Bill, he would have the Bill ready to present to Parliament? I look forward to hearing his answer.

The restructuring of the TA is to be announced shortly. It is understood that the size of the TA will be around 59,000. In other words, it will be a reserve of approximately 50 per cent. of the size of the regular Army. That is very welcome. There are some difficult decisions to be made against the background of a policy that all TA infantry battalions will be the same. Unfortunately, it is a levelling down exercise as some TA battalions had an Allied Rapid Reaction Corps role and had heavy support weapons, while others were purely for home defence. Now none will have its own support weapons. The TA parachute battalions are arguing the case to retain their own support weapons as their role is so specialised. They claim that a standard support weapons company could not effectively be parachute trained. I am inclined to believe that.

The London Regiment has only recently been formed from four London-based regiments. It has been very successful at adapting to its new order of battle. The proposal is that all TA infantry battalions should have only three rifle companies. Your Lordships will be well aware of the special significance of a regiment based on the capital but may not be aware of how damaging downsizing this regiment to three companies would be. Can the Minister assure the House that he will give very careful consideration before allowing this so recently formed regiment to be modified again and instead give a longer period of stability?

I also understand that there is a review in progress concerning the decorations available for reserve officers. I remind your Lordships that I do have an interest and I already have my TEM--Territorial Efficiency Medal--for my non-commissioned service. But the TEM is a medal and not a decoration and so post-nominals are not available. I am therefore envious of the many noble Lords who already have their TD. The current rules provide me and many other officers with a great deal of motivation to continue serving to the best of our ability and to earn our TD. As I understand it, the proposal is to downgrade the current reserve decorations, the RD, the TD and the AE, to one tri-service medal without post-nominals.

Is the Minister aware that any such scheme will cause serious damage to the morale of the TA? Is he further aware that there is already a shortage of experienced TA officers and that such a scheme would only make matters worse? I have served many years in the ranks and for the past few years I have been commissioned but I have never detected any discontent regarding the entitlement rules for the TEM or the TD. The Minister would be well advised to leave the current arrangements as they are.

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In conclusion, I am disappointed that there is to be no reserve forces Bill, but I look forward to taking part in the business of the House during the next 12 months. I shall now sit down and enjoy listening to the noble Lord, Lord Beloff.

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