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Too many people in Whitehall—politicians, civil servants and some military—believe that we can muddle through for a couple of years and return to the kind of life that existed at the end of the Cold War. I have spoken to senior officials who give the impression that Iraq and Afghanistan are short-term problems and who still fail to recognise the dangers we must face, and be prepared to face, in the coming years. This really is not a time to indulge in wishful thinking. Politicians have to realise that it is their duty to supply adequate, well-trained, well-paid and well-equipped forces. Politicians do not always have the luxury of choice that they think they have and the ability to remain aloof from crises. History will show that the peace dividend taken after the end of the Cold War was too large. The Army today is just about coping but is paying a considerable price. Certain parts of it will break if commitments continue and nothing is done about it. Reducing numbers in Iraq is very unlikely to be enough to rectify matters.

Training is being curtailed, as the noble and gallant Lord, Lord Inge, said. Unless a unit is warned to go to Iraq or Afghanistan its training receives a very low priority. Exercises in Canada, which are so important for war fighting, are being cancelled. Overseas exercises are removed from the calendar. This is serious and brought about because of lack of funds and lack of available units. We have so little in reserve

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that a new and surprise threat will cause grave problems. Many officers and soldiers have now not experienced brigade and divisional training as exercises at this level do not happen. Many senior commanders in the future will never have had the opportunity to learn how different parts of the Army work together. We are even finding the Army recruiting reservists but then being told there are inadequate funds to train them. It is not surprising that they become disenchanted and leave.

As far as equipment is concerned, there is certainly some very good news. Much of the Army’s equipment is first rate and as good as that of any army in the world. Of course, the Army has not got all it needs—it never will have—and there are severe problems with shortages in some areas. Certain equipment is desperately needed, such as helicopters and the new medium armoured vehicles. FRES—the future rapid effects system—is long overdue. The MoD has delayed its in-service date until 2012.

I congratulate the Minister, the noble Lord, Lord Drayson, on his energetic and determined approach to controlling the very difficult equipment programme. The defence industrial strategy should receive strong support. Like the noble Lord, Lord King, I found the Prime Minister’s statement that the Army would be given anything it asked for in Afghanistan astonishing, and it was greeted with hollow laughter by serving service men and women. There are no helicopters sitting on shelves, and trained air crews cannot be magicked up from nowhere.

Other speakers, notably my noble and gallant friend Lord Inge, have already talked about pay and allowances. I believe that we should spend a higher percentage of the defence budget on people and their conditions, and rather less on expensive platforms.

My last point is that we should recognise that medical support in Iraq and Afghanistan is quite outstanding. But there is real bitterness in the Army and among Army families about how the wounded are treated at Selly Oak and other Birmingham National Health Service hospitals. Nobody is in any doubt that the wounded receive quite excellent clinical treatment from National Health Service surgeons, doctors and nurses—I am in no way criticising them. But our servicemen need—and were promised—a military environment and military wards, and very little has happened to bring this about. Ministers accepted the defence case. The shortcomings of the present system have been widely reported in the press and elsewhere. The whole story is a sorry one. The previous Conservative Government ignored military advice and damaged the Defence Medical Services. Their successors have been constantly warned, often in this House, of the seriousness of the situation. They have had some 10 years in which to get it right. In fact, due to funding, the situation is now worse than when they came to power. Our wounded deserve better, and, as a country, we should be ashamed.

I have talked mostly about the Army, not because I am a general but because the Army today, supported by the Royal Air Force, bears the brunt of current

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operations and is likely to continue to do so. I am delighted that the Chancellor has been to Iraq to see for himself what is happening. I wish he had gone before and shown a greater interest in defence, but better late than never. It is good for the Prime Minister to go to Afghanistan. The Government should face up to some very difficult decisions quickly or they will preside over serious damage to our forces.

It appears likely that the Government will eventually keep the nuclear deterrent, and they have two options—to inject considerable money into defence or to reprioritise the budget and direct money to where it is most needed to counter current and foreseeable threats. Ideally, both should be done. More money and readjustment are what is really needed. We should avoid a policy of continuing to muddle through, but I have an awful fear that the Government will funk it.

7.43 pm

Lord Lyell: My Lords, we were given a small hint today that debate on the Middle East, Afghanistan and Iraq might be postponed until another day. That certainly has not stopped three noble and gallant Lords—I hope the House authorities will forgive me if I include the noble and gallant Lord, Lord Guthrie, in that category—together with two of my colleagues making some powerful speeches. We will get an opportunity to discuss the Far East, the Middle East, Afghanistan and Iraq at much greater length, but tonight I should like to concentrate on what I call the human raw material—the men and women in our Armed Forces. I call it human training.

The Minister has always been immensely helpful to me, not least earlier this year. Can he confirm that recruitment to the Army, about which I have had some experience, and the other Armed Forces, is still at the decent and desirable level that he and his colleagues believe is necessary to fulfil all the enormous programmes the defence forces are asked to carry out? Is the style still pretty well the same as it was for young guardsmen? One used to start—perhaps one still does—at Pirbright, going on to development at Catterick. Then, when one is fairly experienced, there is further training at lance-corporal or junior NCO level within one’s unit.

Perhaps many of us in the House of Lords Defence Group have been negligent in not going to places that I have heard many things about—Warminster and Brecon—where non-commissioned officers, future warrant officers and future very important pillars of the British Army are trained to an extraordinarily high standard. Can the Minister at some stage confirm that this still has an enormously high priority? Without that training, its constant updating and constant change of purpose, much of what has been spoken about by the noble and gallant Lords, Lord Inge and Lord Guthrie, will slip down the slope.

If soldiers have satisfactory training and feel that they have a decent career when they reach a fairly senior level, there should not be a problem with retention or career development. All the factors I have mentioned need, in the 21st century, to be coupled with family life. Our soldiers and all other members of

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the Armed Forces are not like Masai warriors who spend their life until 35 performing duties and then go home to retirement and a comfortable married life. The British forces do not work like that.

I see my noble friend Lord Astor turning in my direction. Thirty years ago I was pretty well in the same position he is. I remember making a speech, winding up for the Opposition; we heard much about “teeth not tail” and how the Labour Government of 1976 were concentrating on what the Armed Forces needed. I am sure that this Government are doing exactly that, but I beg them to remember that plenty of other aspects of the tail are also necessary.

On conditions in barracks, the House of Lords Defence Group visited the Royal Engineers in Chatham. I was amazed at what the young soldiers there put up with. They said that although the barrack room was perhaps not in the best order, they could wait because the Army was doing something about it. I also recall making a visit to the married quarters at Woolwich. I hope that the Minister will be able to reassure us that conditions there are being closely watched.

My noble friends Lord Luke and Lord Astor have accompanied me on two out of the three visits that the House of Lords Defence Group has made to Cyprus. I have my notes with me—at least there is some competence on the Back Benches—of our visit to Cyprus in 2003. There we found 22 Regiment Royal Artillery, which was performing in the infantry role, and 10 per cent to 12 per cent of them were reservists, about whom the noble and gallant Lord, Lord Guthrie, has spoken. In other disciplines—I hesitate to call them medical and technical—one would probably find a much higher proportion of reservists in the conditions required today, particularly with overstretch. With the commitments that have been made here and overseas, I believe that all the Armed Forces are in danger of overstretch.

I live in the lovely county of Angus, host to 45 Commando, who are away at the moment. Over my home fly many performing jets—I think they are Tornados—from Royal Air Force Leuchars where there are three squadrons, and they go elsewhere. I am very pleased and somewhat humbled to speak tonight, along with noble and gallant Lords and two of my kind colleagues from Northern Ireland who helped me and made powerful speeches. My noble friends Lord King and Lord Hurd made the kind of speeches that I one day dream of making.

In May, 1957—it is very nearly 50 years ago—I was a mere Army recruit, serving under Sergeant Kiwi Clements of the Coldstream Guards. I am sorry that the noble Lord, Lord Howell of Guildford, is not here, but I shall remind him—no doubt he will remember him. The sergeant turned me and 16 other young men into soldiers. We were made to take the first step towards the eminence and experience of the noble and gallant Lords who have spoken. Perhaps the motto is “nil satis nisi optimum”, which means “only the best will do”. That will certainly be known to the noble Lord, Lord Alton, and perhaps to many others—certainly the noble Lord, Lord Grantchester and my noble friend Lady Hooper.

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I believe that we have the best men and women in our Armed Forces. Perhaps I may as a Back-Bencher pay tribute to each and every one of them—to their skills, their courage and their service—from the mere recruit who is joining their regiment and taking their first steps into service life to those who are performing in Afghanistan, Iraq and elsewhere. We thank and salute each and every one of them tonight.

7.51 pm

Lord St John of Bletso: My Lords, when speaking in the foreign affairs debate following Her Majesty's gracious Speech in the past, I have always addressed my comments to the challenges and opportunities facing southern Africa. However, I was fortunate two weeks ago to join a trade delegation, led by the noble Lord, Lord Clement-Jones, to the Kurdistan region of northern Iraq. It was my first time there and I went with no prior assumptions.

I shall address my brief contribution today to the challenges and, just as importantly, the opportunities which face that region. If ever there was a forceful argument for a multi-region federal model to resolve the stalemate in Iraq, the Kurdistan region exists as an institutional reality, with its own government and legislature.

I was extremely impressed to see that the coalition of the KDP and PUK appeared to be working well, respecting the rights of minorities. I was impressed also by the high level of security and the ability of the local authorities to control insurgents coming into the area. One of my expectations before we went to Erbil, based on the travel advice which we received from the FCO, was that it was a high-risk area to visit. We had very limited security and certainly did not feel at all under threat.

The perceived threat has certainly been a major reason why British companies have not yet engaged in the considerable opportunities that are springing up in the region. Clearly, there was a great deal of desire to see British companies engaging there. The hotels in Erbil and Sulaymaniyah were packed with businessmen, predominantly from Turkey, Lebanon, Jordan, France and even Germany. Another deterrent to engaging with local businessmen was the difficulty that they were having in obtaining visas to visit the United Kingdom. I understand that the noble Lord, Lord Clement-Jones, will touch on this point in his speech.

Among the many infrastructure challenges facing the region is the lack of adequate power generators, with Erbil and Sulaymaniyah being restricted to only four hours of electricity from the local grids every day. Will the Minister elaborate on what is being done to encourage international reconstruction funds to engage in the region? Another challenge, and potential opportunity, is the totally inadequate banking system in the region, with almost no facility to use credit cards.

I had assumed from reading press reports that there was a tense stand-off between the Turkish Government and the KRG, but, from our discussions with various Ministers, it appeared that there was growing co-operation and consensus between the two

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regions. Certainly, the recent, acrimonious comments about the Kurds by Abdullah Gul, the Turkish Foreign Minister, which were widely publicised, were in Ministers’ opinion made more to appease the whims of his local constituency than to signal an act of aggression against the KRG.

The big challenge is the equitable distribution of Iraq’s oil revenues, which account for 95 per cent of Iraq's GDP. The current constitution provides that the central Government will continue to be responsible for the operations of established oil fields and infrastructure, with regional governments taking responsibility for managing new exploration developments. The KRG was and is in the process of tabling a regional petroleum law, which specifically provides for revenue-sharing with the rest of Iraq. Clearly, a formula needs to be agreed for redistributing revenues equitably across Iraq. A source of much frustration to all the ministries in the KRG was the fact that the Kurdish region receives only 7 per cent of the central budget, although 15 per cent has been allocated to it.

I would have liked to comment on the final goal of the KRG, which is to absorb the oil-rich province of Kirkuk and other disputed territories. The constitution calls for a referendum on the territories by the end of 2007. However, as I am a long way down the speakers’ list today, and we shall have a full debate on the Middle East and Afghanistan on 5 December, I shall conclude and, I hope, participate in that debate.

7.57 pm

Lord Clement-Jones: My Lords, it is a great pleasure to follow the noble Lord, Lord St John, who, as he said, was a member of the delegation of the Middle East Association which travelled to northern Iraq last week—and a valued member, he was, too. My previous speech in a foreign affairs debate was about the Kurdistan region of Iraq, shortly after I had visited it in 2004. I was pleased to see during our delegation’s visit last week how much progress has been made in that two-year period. It is an enormous amount of progress. Earlier this year, a new combined administration, in which the PUK and the KDP are co-operating extremely effectively, came to office. There is a strong element of minority parties, too. The Kurds are playing a strong part in the federal Government, which did not exist two years ago. President Jalal Talibani and others are determined to make the new federal constitution work, and many other senior Kurdish Ministers are in the Government.

As the noble Lord, Lord St John, mentioned, security is even better than it was two years. The region has gone forward while the rest of Iraq has gone backwards. A new investment law has been passed and an investment board set up. The noble Lord alluded to the draft regional petroleum law, which specifically provides for the sharing of revenues from new deposits exploited in the north with the rest of Iraq. The region has played a strong part in formulating the equivalent federal petroleum law,

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which provides for sharing of revenues from other deposits in the rest of Iraq.

The existing airport now provides regular international flights, and a new airport is due to open shortly. There will be direct flights from Europe. Austrian Airlines will start twice-weekly flights from Vienna to Erbil on 11 December. Companies from many countries are investing—predominantly Turkey but also China, South Korea, Germany and the Czech Republic. The list goes on. Starwood is building a new Sheraton in Erbil and a new Hyatt is planned; 300 companies attended the recent Sulaymaniya trade fair—but there was not a single British company at that fair. There is great investment in the offing from Lebanese interests, as well as from the UAE and Kuwait.

In the middle of those positive signs there are some major challenges—with revenue, for example, and the fact that under the CPA and the elected federal Government Kurdistan does not receive its fair share of federal revenue, as the noble Lord mentioned. That region gave up its customs duties from Iranian and Turkish border controls, but has received only half the amount of revenue that it should have done and as a result has been starved of investment for public infrastructure projects. That is noticeable; there is a big difference from two years ago: there is a major shortage of petrol, a lack of sufficient electricity generation and a very high rate of inflation.

One of the major issues alluded to by the noble Lord is Kirkuk, but the KRG are very hopeful that with the agreement on revenue sharing put forward by the two petroleum Bills, the outcome of the referendum next year will be seen as not threatening to Iraq’s neighbours or Sunni leaders in Iraq.

The noble Lord mentioned, too, the fact that banking in Kurdistan is still in its infancy; trade and investment banking is reasonably sophisticated, in fact, but retailing banking is in its infancy and no credit card is issued for use in Kurdistan.

Above all, there is the issue of relations with neighbours, especially Turkey—and I shall come on to that in a few moments. But the key issue for our delegation was, “Where is the British business presence in Kurdistan?”. I think that we concluded that it was hardly surprising that no British company was present in Kurdistan in the light of the FCO advice. I have a very high regard for those FCO personnel who serve in Iraq, especially those who work in areas such as Baghdad; but one has only to look at the travel advice from the FCO to see that British business is bound to be deterred from working and doing business in Kurdistan. The travel advice says:

That is absolutely correct. But the advice continues:

That is a complete blanket; it is as if Kurdistan did not have a completely different security situation from the rest of Iraq. The advice goes on:

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Again, no distinction is made whatever. It continues:

There again, absolutely no distinction is made. It goes on:

If a British businessman reads that advice, is it likely that he is going to go to Kurdistan, whatever the challenges, prospects and opportunities? One of the purposes of our trade delegation was to give the lie to that advice. What can business do in face of such advice?

As the noble Lord, Lord St John, said, we travelled around Erbil in a bus; British officials travelled in armoured land cruisers with security staff at their behest. The contrast was quite striking. We tried to tease out from FCO officials why they were so cautious, but it was completely incomprehensible; there did not seem to be any particular explanation why the security advice that we noticed on the ground, which we were given by the interior ministry in Kurdistan, was so very different from the advice that the FCO is dispensing.

We met the chambers of commerce, the Trade Minister, the investment board and Health and Education Ministers and the message throughout was exactly the same: there is a great desire to see British companies engaged. There is a huge amount of good will towards UK companies. Why is the FCO not engaging more? Despite a pledge last year, the consulate has still not been moved to Erbil and now it appears that the consulate will be moved to a South Korean army camp because of fears about the security situation in Kurdistan. That seems somewhat disproportionate. We need to recognise that the only place that business can be done in Iraq is in the Kurdistan region. There are many issues—with the visa situation, for example, because students and business people find it very difficult to get visas into the UK. There are all sorts of other issues.

I refer briefly to the Turkish situation. I believe that despite the public words of Mr Gul, the Turkish Foreign Minister, the Turkish Government are beginning to understand the advantages of an economically strong Kurdistan. I know Turkey extremely well and am a great supporter of its desire to enter the EU. Turkish businesses have invested some £1 billion in Kurdistan in recent years, and there is a huge mutual interest in ensuring prosperity and stability in Kurdistan. Both have secular societies and a strong common interest in not encouraging Islamic fundamentalism. The KRG—the Kurdistan Government—are co-operating with General Joe Ralston, the special envoy set to try to solve the PKK issue. There is good will on the part of the KRG and I very much hope that the Turkish Government respond to that and we can see a prosperous future for Kurdistan.

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