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Lord McIntosh of Haringey: My Lords, on the first issue of whether we are expecting only one year of growth below trend, I am sure that when my noble friend has the opportunity to study the figures in detail he will see that we are indeed forecasting GDP growth to be 1 to 1½ per cent. in 1999, then rising slowly to 2¼ to 2¾ per cent. in the year 2000 and 2¾ to 3¼ per cent. in 2001. In other words, we will take three years to get back to the level which we are forecasting for 1998. So it is not a single year figure; indeed, it hardly could be so.

My noble friend's thinking on employee share ownership is another useful addition to the review which will take place between now and the Budget. We recognise the risk that share participation could reduce the ability and willingness of people to change jobs when that would be desirable. As far as concerns businessmen going into schools, I should point out to my noble friend that I do not believe I have ever used the term "businessmen" and I do not believe that I ever would. However, it is certainly not the intention that the increased contact between the world of education and the world of work should be by the top managers who, as he said, are responsible for our poor productivity. I believe that the contact must be at all levels in industry and commerce.

The Earl of Onslow: My Lords, I listened to a broadcast of the Statement of the Chancellor of the Exchequer on a radio programme. I thought to myself: "That is a very impressive man". He is producing a Statement which could have come from Kenneth Clarke, only it was delivered with a slightly different voice.

There are two points which I believe deserve clarification. The first is the assumption of a badly inherited economy. Indeed, if that was the case and the economy was in such bad nick, why did the Chancellor of the Exchequer stick to the same tax and spend rules and follow exactly the same rules set out by his predecessor? Secondly, mention was made in the Statement of the 40 per cent. productivity gap. In today's edition of The Times, Anatole Kaletsky, admittedly going on about the productivity gap, talks about the differences between productivity in Great Britain and the United States. He shows Great Britain as having a figure of 100 and the US with a figure of 137. Most of the other major economies are much below that, but of course some of them are higher.

Will the Government stop running down that which is good? By all means criticise that which is bad; of course we accept that. But when those two statements seem to me to be factually wrong, why go on about it? After all, according to the OECD, this country has the fourth biggest economy in the world and it is doing jolly well. It has done well since 1990 under both governments. It would be more gracious of the

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Chancellor to accept some of the good things which he inherited and then the criticisms of the bad things he inherited would carry more weight.

Lord McIntosh of Haringey: My Lords, I am truly sorry that it is such a universal theme on the Opposition Benches that they have to hark back over and over again to this so-called golden legacy which we inherited. The Statement sets out the position clearly and I have repeated it once already. We inherited an economy in which investment had been neglected for many years and in which the lack of decision-making on interest rates had led to an unsustainable increase in inflation. We inherited many good things too--no one is saying that everything was wrong--but perhaps next year or the year after we can get away from 1st May 1997 and we can start to talk about the present.

I have not read Anatole Kaletsky's article that the noble Earl mentioned; I have been reading the briefing notes rather than the raw material today, I am afraid. However, Mr. Kaletsky clearly confirms exactly what is said in the Statement; namely, that the difference in productivity between ourselves and the United States is something of the order of 40 per cent. and the difference in productivity between us and Germany and France is of the order of 20 per cent. Even if those figures are wrong--some of them are, of course, unknowable statistics--there is a serious difference which cannot be allowed to continue.


5.11 p.m.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, with the leave of the House, I shall repeat a Statement on Iraq which is being made by my right honourable friend the Foreign Secretary in another place.

    "Madam Speaker, with permission I should like to make a Statement on the latest developments in Iraq.

    "Last August Iraq informed the Security Council that it was suspending co-operation with UNSCOM and the IAEA other than on monitoring activities. The effect was to prevent both agencies from carrying out surprise inspections at sites which they suspected were part of a programme for weapons of mass destruction. The work of both agencies was confined to monitoring the status of sites which they had already cleared.

    "The Security Council responded with Resolution 1194 which provided both the penalty for this violation of Saddam's agreement and an incentive for him to comply. As a penalty we suspended the regular review of the continuing need for sanctions. As an incentive we offered a comprehensive review if Baghdad returned to full compliance. Nevertheless on Saturday Iraq notified the Security Council that it would no longer co-operate with UNSCOM even on such monitoring.

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    "As the outgoing President of the Security Council, Britain convened an emergency session which agreed to a statement condemning the Iraqi action. It records the view of the Security Council that the Iraqi decision is a "flagrant violation" of Security Council resolutions and of the agreement they made with Kofi Annan on his visit to Baghdad in February.

    "The Security Council's support for the statement was unanimous. It was fully endorsed by Russia whose spokesman said that Russia was deeply concerned about the Iraqi decision. Baghdad's attempt to close down the work of the inspectorates coincides with the evidence that Saddam Hussein continues actively to pursue his ambition to maintain his capacity to produce weapons of mass destruction.

    "Only two weeks ago a group of experts received the results of the tests carried out in French and Swiss laboratories to corroborate the US findings of traces of VX nerve gas in fragments of Iraqi missile warheads. The French laboratory found evidence consistent with the presence of nerve gas in the warheads, and both confirmed that Iraq had tried to decontaminate the warheads. For years Saddam has maintained that Iraq has never achieved a deliverable VX weapon. These discoveries expose his denials as one more lie.

    "The greatest anxiety relates to Iraq's programme for biological weapons. UNSCOM has concluded that Baghdad's most recent declaration of its biological weapons capacity fails to give a "remotely credible" account of the programme.

    "We are in close consultation with our allies to maintain a united front and to achieve the most effective pressure on Iraq. Today a resolution will be tabled in the Security Council which will demand that Iraq immediately restores co-operation with both UNSCOM and the IAEA. That strong resolution has been drafted by Britain and we shall be working to achieve unity around it. We want to find a diplomatic solution but we have always made clear that all options remain open.

    "The latest decision by Baghdad is particularly perverse as the Security Council agreed only last Friday on the terms of a comprehensive review of Iraq's compliance with its undertakings. Those terms held out the prospect of a time-frame for the completion of the work of UNSCOM and the IAEA, which could lead in turn to the lifting of sanctions on Iraq.

    "However, any such progress can be achieved only with the full compliance of Baghdad. So long as Baghdad continues to conceal its capacity for chemical and biological warfare and so long as it obstructs UNSCOM from revealing the truth about those programmes, there can be no progress towards lifting sanctions.

    "Our dispute is with Saddam Hussein. We have no quarrel with the people of Iraq. On the contrary we have grave concern for the suffering they are experiencing under Saddam Hussein. Only last month Max Vanderstahl, the UN special rapporteur on Iraq, presented his latest report which concluded that there

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    has been no improvement at all in the repeated violation of human rights by Saddam Hussein, including torture, summary execution, arbitrary arrests and persecution of minorities.

    "Britain took the lead at the United Nations in pressing for a doubling of the oil for food programme. As a result Baghdad can now sell over 10 billion dollars of oil per annum to pay for food and medicines, which are in any case exempt from sanctions, and other humanitarian goods. I am pleased to report to the House that the latest information available to the UN confirms that as a result there have been positive improvements in access to food and medicine.

    "Saddam Hussein appears to be gambling that the world will grow weary of his constant evasion and his repeated confrontation. His calculation is that we will eventually give up and abandon the sanctions regime without requiring him to abandon his ambitions for regional supremacy through weapons of terror. We must remain ready and resolute to prove him wrong. It would be too dangerous for Iraq's neighbours in the region to leave Saddam Hussein with the capacity to produce weapons that could wipe out whole cities. It would be too damaging for the authority of the United Nations if Saddam was allowed to break the current agreement he entered into with the Secretary General. He cannot and will not be allowed to win".

My Lords, that concludes the Statement.

5.18 p.m.

Lord Moynihan: My Lords, I take this opportunity to thank the Minister for repeating the Statement made in another place. From these Benches I confirm that, while we support all efforts to find a diplomatic solution to the present crisis, we also welcome the Government's determination to keep all options open, including military options, which, interestingly, even in general were absent from the Foreign Secretary's Statement on this occasion. Regrettably the events of recent days have proved once again that the only language Saddam Hussein truly understands is the language of diplomacy backed by the vocabulary of a commitment to force.

This is far from the first time that Iraq has severely tested the patience of the international community. Saddam Hussein is an expert player in a deadly game of brinkmanship and in brazen defiance of world opinion. Only nine months ago, in February, to avoid military action he undertook to "co-operate fully" with the United Nations and to provide immediate, unconditional and unrestricted access to the UNSCOM inspectors. It is that same undertaking which Iraq is now so blatantly flouting.

At that time the Foreign Secretary rightly told another place:

    "If Saddam were now to be permitted to set aside all those decisions of the UN, and if we were to walk away and to allow him to do so with impunity, there would be no point in invoking the power of the UN the next time we are confronted by a dictator threatening the security of his region or the lives of his people".--[Official Report, Commons, 17/2/98; col. 909.]
Does the Minister stand by those remarks today?

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At that time the Prime Minister said that only, "effective diplomacy and firm willingness to use force" brought about the agreement and that "nothing else" would ensure its satisfactory implementation. Will the Minister assure the House that the Government are prepared to display equal resolve through the international community now? Will she also comment on the deployment of British forces in the region, including the Tornado aircraft stationed there? Are there preparations to dispatch more British forces to the Gulf?

The Foreign Secretary's Office has rightly described Iraq's unilateral decision to stop UNSCOM carrying out its duty as "totally unacceptable". The Defence Secretary has said that Saddam Hussein should back down or "face the consequences". What discussions have taken place on the range of options now available to ensure Iraqi compliance with those UN resolutions agreed after the Gulf War? Does the Minister agree that, whatever options are chosen, they must end once and for all this dangerous see-saw of defiance which is so damaging to the authority of the international community? Furthermore, what information does the Minister have to support Richard Butler's belief that the present situation is the most serious confrontation between Iraq and the United Nations since the end of the Gulf War?

I welcome the Minister's statement that all options are being kept open. Will she confirm that clear strategic objectives will lie behind any threat of air-strikes? What discussions have been held with the other members of the Security Council on the military option, in particular with France and Russia? What indications are there that they would support the threat of such action? What steps will the Government take to ensure that a resolute stance against Iraq will be backed by the Gulf states?

I also wish to ask the Minister about allegations made by the Iraqi defector, Sami Salih. He alleged that there was wholesale breaching of UN economic sanctions; that Iraq never had any intention of complying with the terms of the UN weapons inspection teams; and that he had seen "missiles hidden all over Iraq". Following those allegations, what action did the Government take through the UN to ensure that economic sanctions are watertight and that arms inspectors could continue unimpeded?

Finally, will the Minister take this opportunity to comment on the resignation of Mr. Butler's deputy, Scott Ritter? In September he accused the British and American governments of weakness and duplicity; of creating an illusion of arms control in Iraq but in reality refusing to support planned inspections of presidential sites. In September, a Foreign Office spokesman responded to Mr. Ritter's accusations by saying,

    "it is not a question of going soft on Iraq. It is simply that new tactics are required so that we can achieve the desired result of disarming Saddam".
Will the Minister tell the House what those new tactics were, and, in the light of this week's events, what success they have achieved?

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5.24 p.m.

Lord Redesdale: My Lords, we on these Benches support the sentiment expressed in the Statement. It is totally unacceptable that the Government of Iraq should have weapons of mass destruction at their disposal at any time.

One position not stated was what steps the Government are taking to push the Secretary-General to intervene personally in this dispute. He was successful in February in bringing Iraq back into line on the question of monitors. Could the Secretary-General, after his trip to the western Sahara to examine the future of that country, be pushed to intervene directly in Iraq?

At present Iraq is suffering under the penalty of sanctions; the sanctions are biting deeply into the daily lives of those who live there. I supported the point made that the Government have no animosity towards the people of Iraq. However, it must not be forgotten that many thousands of children are dying through a lack of medicines and food. What position are the Government taking in order to ensure that food given to Iraq through the oil-for-food deal is being distributed equally? A body of evidence suggests that, while quite a lot of food is reaching the area around Baghdad and the north, far less is reaching the south of the country.

The military option seems to be touted as the only one open to us. Will the Government make sure that, before the military option is used, there is a clear purpose to any military action? The lessons learnt from the attack on Sudan are still fresh in the mind.

What ability do the Armed Forces presently have to mount significant attack? To what extent would it be necessary to wait for such forces to be available? I realise that the Minister may not be able to answer that question.

Finally, we should not forget the effect that military action would have on the Arab nations and on their viewpoint and support for Saddam Hussein. A strike without clear political and military objectives which was seen to hurt the Iraqi people rather than the Iraqi leadership could do far more damage than good among the Arab nations.

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