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Lord Mandelson: When the noble Lord has quite recovered, perhaps I can point out to him that, contrary to the facts that he has just put to the House, in the recession of the 1990s, when, I remind the House, the noble Lord was in government, business failure and insolvency was twice what it has been in this recession. If we had seen the same job losses as we saw in the recession of the 1990s, four times as many people would have lost their jobs in the recession that we have

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just gone through, and housing repossessions are now running at around half the rate that they were in the recession of the 1990s.

This achievement is due not least to the measures and interventions made by this Government. The actions demanded even now by the noble Lord and his party would make matters even worse. In the Tory dash for cuts, the recovery under way now would be wrecked. That is the last thing that the people of this country need and expect, which is why I am sure that that stark choice will be influencing their decisions when the time comes later this year for them to put their votes in the ballot box.

Counterterrorism: Foreign Office Budget

Private Notice Question

11.53 am

Asked By Lord Wallace of Saltaire

The Minister of State, Foreign and Commonwealth Office (Baroness Kinnock of Holyhead): My Lords, the Prime Minister was entirely right when he said yesterday that our CT efforts in the Pakistan and Afghanistan region are a central part of our counterterrorism strategy. Our overall CT spend continues to rise next year and Pakistan has been and continues to be by far the largest single recipient of our CT support throughout this spending period, receiving more than a quarter of the CT budget. The budget for Pakistan managed by the FCO under the FCO's countering terrorism and radicalisation programme is expected to rise from £8.2 million in 2009-10 to £9.5 million in 2010-11. Although this is a smaller rise than we would have hoped, we are still spending more than ever on Pakistan CT. Pakistan remains a critical partner in our nation's security. A small number of projects that were not delivering CT objectives as effectively as other projects have been cut or scaled back. The noble Lord should note that the Foreign Office's CT programme is but one part of the Government's total effort in Pakistan, which includes the MoD, DfID and others. There is also a huge amount of political work and lobbying to help further our and Pakistan's CT objective.

Lord Wallace of Saltaire: I thank the Minister for that Answer to my Question. I recognise that it has two aspects: one is the continuing deep cuts in the Foreign Office budget and the other is joined-up government on Afghanistan and Pakistan. Can she confirm the story in the Financial Times at the end of December that American and European diplomats have been asking the Foreign Office how deep those cuts are and how much they will affect Britain's capacity

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to represent common western interests abroad? Can she reassure us that there is a coherent strategy, including a financial strategy, towards Afghanistan and Pakistan that goes across all government departments concerned?

Baroness Kinnock of Holyhead: I thank the noble Lord for his continuing interest in these matters. He and other noble Lords are well aware that the reason why the difficulties that the Foreign Office has had are having these effects is the fluctuation in exchange rates. We make our payments to the United Nations, the EU and others in their currencies, which has a huge effect because of the rate of exchange with the pound. As I think I said yesterday, the Foreign Office deals with something like 120 different currencies. The effect on our work is difficult to manage.

I do not think that this has an effect on the coherence of strategy. Across government, we are working on these matters, recognising that they are an essential part of the work that we need to do. These are the issues that concern our citizens and have a huge and important global effect. It is important that we work with our European Union partners, the United States and others and in the United Nations to ensure that we can more effectively deal with the threats that we face. That means dealing with them where they occur, as the noble Lord suggests.

I am not aware of any concerns that have been raised by the US or anyone else about the effectiveness of the British Foreign Office. It goes without saying that the British Foreign Office continues to have the great respect of the world for all the hard work that it does in representing Britain and pressing for the values and principles that we have in the United Kingdom.

Lord Howell of Guildford: My Lords, the Minister was very candid yesterday in telling us of all the substantial cuts that are being inflicted on the Foreign Office-perhaps she was a bit too candid-including the ones in the counterterrorism and counternarcotics strategies, among others. Can she tell us how this muddle happened? It seems that the refusal to compensate for the foreign exchange fall was a Treasury decision. We all realise that all departments have had to face, and will have to face, increasing cuts and economies but, in this case, it seems that a Treasury one-off decision is having a major influence on British foreign policy. That cannot be right. Surely it is important to bring to this House and to the other place an explanation of how this confusion came about and how we are going to redress the balance between existing limited funds to maintain an effective foreign policy and not, as we appear to be doing at present, to damage the central issues-in the words of the Prime Minister-such as counterterrorism in Pakistan and Afghanistan.

Baroness Kinnock of Holyhead: We are totally committed to the objectives on counterterrorism and working across government that the noble Lord outlined. Joined-up government is often raised by the opposition Benches. We are very aware of its importance in the work that we do and I think that we do it well in working on counterterrorism with the MoD and DfID. I do not think that pointing fingers at any department of the British Government does any good when we have these debates and discussions. The important

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thing is that we work together to ensure that our work can be effective and that we deal with the counterterrorism challenges that we face.

Lord Bramall: My Lords, since, as is obvious from the nature of the Question, dynamic diplomacy does or should have a vital part to play in all modern military operations, should the FCO budget be considered more in a strategic context and therefore await the outcome of the long overdue defence and security review, rather than being slashed unilaterally?

Baroness Kinnock of Holyhead: I reassure the noble and gallant Lord that that review will take place over the coming period. Like him, we look forward to discussing its implications.

Lord Anderson of Swansea: Does my noble friend recognise the danger that our foreign administration will be determined by currency fluctuations and not by a sober reassessment of our global role in the post-imperial world? I met our consul-general shortly before he was killed by an explosion in Istanbul. Can my noble friend reassure me that the current cuts do not affect the protection of our diplomatic personnel and buildings?

Baroness Kinnock of Holyhead: I can of course reassure my noble friend on that count. One of the increasing costs that we have faced is that of providing security in some of the more difficult situations in which we find ourselves working now. The cost of that kind of security is essential, but it places increasing pressure on the FCO budget.

Lord Patten of Barnes: I am sure that the Minister will recognise how much sympathy there is for the Foreign Office in large parts of the House. However, returning to my noble friend's question, could she explain how, given that 80 per cent of the Foreign Office budget is non-discretionary, the Foreign Secretary could possibly have agreed that the effective implementation of our foreign policy should, under this Government, have to be determined by the level of the exchange rate?

Baroness Kinnock of Holyhead: Those decisions were taken on the basis of what was best for the country and best for the way in which we manage our affairs. I can comment on that no further.

Baroness Falkner of Margravine: The noble Baroness has given us some figures about the potential increase next year; I calculate that it will be about 12 per cent. Is she aware that the current inflation rate within Pakistan and Afghanistan is running somewhere between 20 and 30 per cent? If these funds were to be spent in country, the potential increase that she describes is actually a decrease in the budget.

Baroness Kinnock of Holyhead: My Lords, I reiterate that the original CSR settlement is £35 million, £39 million and £53 million and that Pakistan has been and continues to be by far the largest single recipient of our CT support throughout the period. The FCO's countering terrorism and radicalisation programme fund has more than doubled since the last CSR period-up from

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£16 million in 2007-08 to £38 million in 2010-11-but I take into account the important point made by the noble Baroness.

Baroness Symons of Vernham Dean: My Lords, given the absolute priority given to the security and protection of the British people, can my noble friend tell us whether there is any plan to ring-fence the budget on security and protection, which is so important to the British people?

Baroness Kinnock of Holyhead: The noble Baroness raises a very important point. It was raised yesterday and we are going to look at it.

Royal Assent

12.04 pm

The following Acts were given Royal Assent:

Video Recordings Act,

Beverley Freemen Act.

Fiscal Responsibility Bill

First Reading

12.05 pm

The Bill was read a first time and ordered to be printed.

Business of the House

Timing of Debates

12.05 pm

Moved By Baroness Royall of Blaisdon

Motion agreed.

Nuclear Disarmament

Debate

12.05 pm

Moved By Lord Hannay of Chiswick

Lord Hannay of Chiswick: My Lords, of all the threats and challenges that face the international community at the beginning of the 21st century, none exceeds in risk and urgency the interlinked threats from nuclear weapons and from the fraying of the regime that prevents their further spread beyond the current eight or perhaps nine countries that possess them, and none has so far in the first decade of this century received a less effective reply.

The substantial reduction in nuclear arsenals that followed the end of the Cold War ground to a halt at the turn of the century, and was followed by a decade

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in which even existing arms control measures were dismantled. The Nuclear Non-Proliferation Treaty, which since the 1960s has been a pillar of international peace and security, is under challenge by North Korea and Iran. Some 23,000 nuclear warheads remain worldwide-enough to blow the world to pieces many times over, and far more than are needed to assure even the most extensive doctrines of deterrence.

To the risk of a nuclear exchange between states has now been added the nightmare scenario of a nuclear weapon, or nuclear material from which a dirty bomb could be manufactured, falling into the hands of terrorists for whom the whole concept of deterrence is alien and thus inoperable. That is the justification for our debate today, and I express my gratitude to my fellow Cross-Benchers for recognising it and for choosing to devote one of our two possible debates in the remainder of this Parliament to this subject.

The case for a debate is more powerful than that, however, because much has changed since we last held a debate on these issues a year ago. The momentum that began to build up with the Wall Street Journal article by Messrs Schultz, Perry, Kissinger and Nunn, and matched by similar statements by groups of statesmen here and in France, Germany and elsewhere, pressing for a resumption in multilateral disarmament negotiations, was given hugely added force when President Obama, in his Prague speech last spring, called for a world free of nuclear weapons and set out a detailed agenda for heading down that road. In September, the UN Security Council, under Obama's presidency, endorsed that agenda, and the US and Russia are currently negotiating a START follow-on agreement that would reduce their holdings of strategic nuclear weapons and launchers.

In 2010, we face two major multilateral conferences: in April, the Washington conference on nuclear security; and, in May, the quinquennial Nuclear Non-Proliferation Treaty Review Conference. These conferences have the potential to set the world on a completely new direction of travel and to begin to match words with action, so it is high time for us to debate what Britain can contribute to this process. The Government began this process last summer when they provided a White Paper, The Road to 2010, but, frankly, that White Paper was more of an atlas than a road map, and we now need greater precision on the objectives that are being pursued and greater top-level political will in pursuing them.

Britain has a great deal to contribute: as a nuclear-weapon state, as a founding member and depository of the Nuclear Non-Proliferation Treaty, as a permanent member of the UN Security Council, as one of the two nuclear-weapon states in the EU, and as a member of the board of governors of the International Atomic Energy Agency. However, we need to steer between two extremes. The first extreme is to argue that because our nuclear arsenal is the smallest of the five recognised weapon states, and because the US and Russia hold 95 per cent of those assets, we can take a pass on the whole process until it is at a far more advanced stage.

The second extreme is to overestimate our influence and argue that, by our own unilateral action, we can transform the global scene. That was always an illusion when it was widely held in the 1960s, 1970s and 1980s,

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and it is even more of an illusion now. Who can seriously believe that the nuclear policies of North Korea and Iran, of China, Russia and the US, of India and Pakistan, or of Israel will be crucially affected by the decisions we take on Trident renewal? What we can do-I hope that we will-is ensure that our policies are at all times consistent with the objective of moving towards zero and use all our influence in the many international forums to which we belong to press that agenda forward.

What needs to be done if the world is to move effectively towards zero is not much in doubt. Last month it was set out clearly and compellingly in the report of the International Commission on Nuclear Non-Proliferation and Disarmament, entitled Eliminating Nuclear Threats: A Practical Agenda for Global Policymakers, of which the noble Baroness, Lady Williams of Crosby-unfortunately she is not able to be here today-was a distinguished member. I hope that that report will come to be regarded as a kind of global White Paper on which future action could be based. My first question to the Minister is whether the Government intend to treat it as such-as, in effect, our White Paper-to sketch out the objectives we intend to pursue at this year's two major international conferences.

Of course, changing the direction of travel, vital though it is for future international peace and security, will not be easy. There is just too much ingrained distrust: for example, distrust between the two Cold War superpowers, which are now unbalanced in conventional weapons and in economic power, but still have matching numbers of nuclear weapons; distrust between disputing parties in south Asia and the Middle East; and distrust between developed and developing countries-the latter determined to secure their access to civil nuclear power, which is all the more so given its importance to achieving environmental targets. There are also too many technical complexities, and too many vital interests and national interests at stake, for that essential change of direction to be easily achieved.

The first test we face is under way in the ongoing US-Russian negotiations. The second will come in April with President Obama's nuclear security conference summit, which will deal with an important part-but only a part-of the overall problem. The need for more effective nuclear security in a period of expanding new civil nuclear capacity, and with terrorists determined to lay their hands on weapons-grade material, is obvious but not straightforward. I hope that the Minister will say something about the Government's objectives at this important conference, given that it was called only after the Government produced their White Paper, The Road to 2010.

The third test will come with the Nuclear Non-Proliferation Treaty Review Conference in May. This will need to cover all three main objectives of that treaty in a balanced way if it is to get anywhere and to avoid repeating the fiasco of the last review conference in 2005. The first of those is the commitments by the nuclear weapon states to move towards disarmament. The second is the strengthening of machinery to prevent proliferation and the third is the right of all states which desire it and which fulfil their obligations under the treaty to have access to civil nuclear energy.



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On the first objective, the 13 steps agreed to by the nuclear weapon states at the 2000 review conference, which remained thereafter a dead letter, will need extensive updating, revision and amplification if they are to regain credibility. Will the Government be ready to work on the basis of the Australia-Japanese commission's report, to which I referred a few minutes ago? It put forward 20 proposals which are now in the public domain. Are they giving active consideration to updating and strengthening the negative security assurances by nuclear weapon states towards non-nuclear states, which was first endorsed by the Security Council in 1995? Are they also considering how to move towards a "no first use" commitment or at least to a statement that the sole purpose of our holding nuclear weapons is to deter others who have them?

The second objective-strengthening the non-proliferation machinery-will surely require significant action too. The additional protocol to the IAEA's safeguards agreement, giving the agency much wider and more intrusive powers, clearly needs to become universal and may even need further strengthening in the light of recent experiences of evasion. How is this universality to be achieved? Is it by consensus and rapid implementation? We have been trying that for years and there are still a significant number of laggers. Is it by mandatory UN Security Council decision or by making it a condition for the supply of nuclear material by members of the Nuclear Suppliers Group? Also, surely it is high time that withdrawal from the non-proliferation treaty was made a costly and not a cost-free option. The International Atomic Energy Agency needs adequate resources, a matter where I fear that the recent cuts have left our record far from spotless.

Reducing the proliferation risk from the expansion of civil nuclear energy while ensuring its availability-the third objective-also needs some rethinking after the setback at the June meeting of the IAEA board of governors. A plethora of proposals is on the table for guaranteeing the supply of enriched uranium and reprocessing services. It is now urgent to begin implementing one or several of these in a way that will give confidence to developing countries that these multinational instruments are not devices designed to put them at a disadvantage or to deny them anything to which they have a right. How do the Government see the way ahead in this area?


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