I see that my time is up. I do believe that we have the wrong culture. Unbelievable expenses are placed on SMEs. It may take a generation for the culture to change and become what it should be. But at this time of severe crisis when most of Europe has rendered itself uncompetitive, now should be the moment to change the way we do things; now would be the moment for Ministers to insist that public servants put themselves at the disposal of the public, as some of us older people remember that they used to. Even if a start was made at removing the worst of these burdens, even if the flawed culture begins to move in the right direction, then the SME sector stands ready to respond and will, I am confident, lead us out of these dark days to growth, prosperity and full employment.

2.18 pm

Baroness Warwick of Undercliffe: My Lords, I am grateful to be permitted to speak briefly in the gap in what has been a really stimulating and erudite debate. I will make a simple point, which has been referred to tangentially by several other noble Lords in today’s debate. The Government are looking for trade and export-led growth, and a key sector for such growth is higher education. Indeed, there is a Lords Select Committee currently looking at SMEs and growth that is highlighting the HE factor as an essential component.

Depressing figures on growth are regularly quoted in the media and, indeed, in this House. I need to avoid being a Pollyanna, but there is a mechanism with a proven track record that deserves support in the current climate. I am talking here about the role played by the UK’s research base and our higher education sector in contributing to the international

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competitiveness of the UK. Noble Lords will have seen for themselves the calibre of research taking place up and down the country, the extent of collaboration and knowledge transfer, and the success of our research clusters in attracting inward investment.

While we are undoubtedly in difficult times, it is worth saying that the UK has one of the strongest university research sectors in the world. Our research activity both attracts inward investment and generates export income from a global market. Many global companies—I think immediately of BP, Siemens, GlaxoSmithKline, Boeing and Rolls-Royce—have established successful collaborative research partnerships with UK universities. Our world-leading institutions have a crucial role to play in helping the UK survive the economic downturn and work its way back to economic growth. One example is that the Technology Strategy Board has just announced that one of its technology innovation centres, for stem cell therapies— I declare an interest as chairman of the Human Tissue Authority—will be established at Guy’s Hospital in London because of its credentials as, among other things, a large research and teaching hospital and its access to world-class universities. The UK will be ideally positioned to gain a substantial share of this young industry, due to its leading position in the science of stem cells and regenerative medicine. The noble Lord, Lord Kakkar, gave many more such examples in his tour de force of a speech.

The Universities UK report, Driving Economic Growth, makes the case that higher education is a “core strategic asset” to the UK. I was pleased to see last week that, as part of its response to Sir Tim Wilson’s recent review, the Government announced the creation of a new national centre focused on strengthening the strategic partnership between universities and business, with a view to driving economic growth and recovery.

My plea to noble Lords and the Minister—my friend—is to ask: what further support can be given by the Government to university and business leaders as they work together to address the challenge to the UK of the global economic downturn?

2.21 pm

Lord Stevenson of Balmacara: My Lords, we are grateful to the noble Lord, Lord Jenkin of Roding, for giving us the opportunity for an economic debate this afternoon.

The eyes of the public may well be on the Commons and the ongoing question of how best to review the latest banking scandal, but the issues raised in the Motion are very important. It will be in all our interests as a nation if we can improve the international competitiveness of UK industry, stimulate more inward investment, grow our exports and create jobs—and thereby end this double-dip recession made in Downing Street.

We have had a very good debate, with strong contributions from all sides. As has been mentioned, there is great expertise in your Lordships’ House. Much of that has been on display to great effect today. Any debate containing an erudite, literary and amusing contribution from the noble Lord, Lord Brooke of Sutton Mandeville, has to be cherished.

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The noble Lord, Lord Jenkin, asserted that there was a growing consensus that technology and innovation would be the key driver in an export-led recovery by our manufacturing companies. I assume that in saying that he was echoing, at least in part, the recent remarks of the Secretary of State for BIS when he complained to the Prime Minister that this Government have no,

“compelling vision of where the country is heading”,

that their actions were piecemeal, and that they had no,

“clear and confident message about how we will earn our living in the future”.

After all, reading from a Library note which was prepared for this debate, and which contains a lot of very useful information, the situation is far from being satisfactory. The ONS reports that the deficit in net trade was £3.7 billion for quarter 1 of 2012 compared with £2.2 billion in quarter 4 of 2011, and that the month-by-month changes to the balance of trade provide a challenging outlook for the health of UK trade. On FDI, the ONS says that 2010 was a “relatively quiet year”, with,

“flows of both outward and inward at their smallest for several years”.

Generally on the state of the UK economy, the OBR said in March 2012 that it expected UK exports to continue to be supported by the depreciation of sterling which began in 2007. Of course, however, that beneficial situation has now reversed, largely because of the euro crisis.

The OECD describes the recovery of UK exports after 2008 as “disappointing”, particularly in light of the depreciation of sterling. On job creation, unemployment is now 2.61 million, or 8.2%. As the noble Lord, Lord Sheikh, said, it is over 20% for 16 to 24 year-olds; and the headline figure is up 0.5% over the year. As my noble friend Lord Liddle said, we seem to have wasted the opportunity created by our ability to devalue our own currency, so as to grow our exports. We have stifled domestic demand, and we have massively increased social costs because of increased unemployment. It is not a pretty picture.

We are also living through a period of seismic, rapid, global and technological change. The Government, as outlined in the last Budget, seem to be relying on a single policy, one of increasing exports,

“as companies capitalise on global opportunities”.

This will be tricky if, as the last OBR report predicted, there is lower than expected growth in the world economy. So what can we do? There needs to be a twin-track approach, boosting the UK’s capacity to export goods and services, which we would all like to see, with an active government approach, as outlined by my noble friend Lord Liddle, and—this is also very important but rarely discussed—focusing on reducing our dependence on imports.

As many noble Lords have said, our chances of success in the global economy will not come from being quite good at lots of things. There is a premium on being the best. We must develop our areas of existing strength—sectors, technologies and services—where we are already world-class, such as the advanced manufacturing, aerospace and automotive industries,

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business services, life sciences, the creative industries, higher education, and, yes, financial services. Do the Government accept that they need to get behind these sectors, and do whatever they can to ensure that they prosper and can sell their goods and services abroad? Can the Minister update us about the current BIS schemes which support and underwrite our exports? Also, in response to the question from the noble Lord, Lord Jenkin, can he let us know what the department are doing to help SMEs in particular export more?

Other countries are already pursuing active government approaches. We need to match the best of what is out there. Just because the Americans preach a gospel of free markets does not mean that their Government have not made huge interventions in markets through vehicles like DARPA, the Small Business Innovation Research programme and the National Institutes of Health. Look at Germany with its national investment bank, KfW; its centres of technical and vocational training and research, the Fraunhofer institutes; and its network of 426 local banks providing credit to businesses, the Sparkassen. Look at SPRING Singapore. Can we not match these activities? Institutions like these support business development and growth, provide stable finance, allow for information to be shared, foster innovation and encourage its dissemination, and develop the skills base on which businesses can build. We do not seem to have these institutions in the UK, and BIS does not deliver these services at present. That is why we on this side are looking at plans for a British investment bank.

This is not only about getting individual parts right. It is about the whole. It is about competition policy being reinforced by procurement policy. It is about taxation and regulation reinforcing the strategic direction agreed with business. It is about ensuring that the finance, education, training and skills and infrastructure are there for businesses of all sizes. I hope that when he comes to sum up, the Minister will reassure us that he shares this vision of an active Government working together with businesses large and small across the country. In so doing, he will want to pick up on a number of the points raised by noble Lords in this debate. I have a long list here. I would like him to focus on four or five; perhaps he can deal with the others in correspondence.

The noble Lords, Lord Paul and Lord Jenkin, have also mentioned this: our training problems are long-standing and have never been resolved. There is no coherent plan, particularly for the 50% of people who leave school and do not go on to university. Where are the integrated procedures, and who is responsible for ensuring that these people move forward to proper jobs and have a training for life?

There have been a lot of comments about UKTI, many of them complimentary, but there were questions asked about whether it could do more in-country work. There was also a question about whether it would move away from the point-of-sale promotion which it currently engages in, towards bringing new companies and their products to world markets. There is also an issue I would like the Minister to respond to at some point if he can, which is whether we could build more concern for human rights in business into the work which UKTI does.

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We heard a lot about the need to stimulate innovation; we also heard some good stories of work going on, both from the noble Lord, Lord Kakkar, and from my noble friend Lady Warwick. Again, this needs more government support and activity, particularly as we think about the way e-commerce can help. We were all impressed by what the noble Lord, Lord Kakkar, said about telemedicine. The noble Lord, Lord Paul, and many others, talked about the finance requirements for SME growth, and there was a general concern about the way in which money was not flowing yet from the banking system to support our industries.

We also heard about the need for spending on infrastructure to support our work across the various activities that have been referred to. These are matters which we hear a lot about, but again there are no plans coming forward.

Finally, I argue that we also need to focus on activities on which the UK has an opportunity to reduce its import dependency, and in so doing assist the development of a more equal society, as mentioned by my noble friend Lord Haskel. According to a recent report from the Centre for Research on Socio-Cultural Change, the pigmeat supply chain is going through a prolonged and unresolved crisis. The size of the national pig herd has declined by around 50% over the past decade, while over a similar period the UK has gone from 80% self-sufficiency in pigmeat to less than 50% self-sufficiency. Clearly, this worsens the UK’s trade deficit and diminishes UK employment. This is a classic example of UK failure in tradable goods against north European competitors. The UK’s growing volume of pigmeat imports come not from low-wage eastern Europe or from Asia, but from northern European countries, which now provide more than 50% of the UK’s bacon, despite their wages being almost double and their labour market being much less flexible.

The authors of the CRESC report argue that because the UK Government take a narrow “competition is best” policy, UK policy interventions have always been limited to a series of unsuccessful voluntary initiatives that did not recognise that the form of competition being practised in this market is, in fact, the problem. In Denmark and Holland we find that government support for the creation of co-operatives and assistance with marketing for artisanal producers has transformed the capacity of their producers to negotiate with the supermarkets, and has stimulated them to export to other markets like the UK. Changing the food processing industry in the ways suggested increases margins and reduces costs, and society gains through reduced import dependence, higher wages and more stable employment. I hope that this morality tale about restoring the great British bacon sarnie commends itself to the Minister. I look forward to his response.

The noble Lord, Lord Paul, called for a common cause on this issue and I agree. We can surely all get behind a sustainable initiative in this area because the prize is a UK economy that is richer, fairer and more productive, positioned to succeed in the growing markets of the future with the right capabilities to do so.

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2.31 pm

The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Green of Hurstpierpoint): My Lords, I thank my noble friend Lord Jenkin of Roding for initiating this important debate and raising the issues with such clarity. Strong trade and inward investment are of course vital to our economic success going forward—on that the whole House seems to be agreed. I thank my noble friend, too, for his kind comments about my role. It is perhaps worth noting that I have spent a fair amount of time in recent weeks and months travelling to 40 different countries as well as continuously around this country. This is not just industrial tourism; this is about understanding the issues that businesses face at this end and at that end in order that we can plan appropriate support going forward.

One lesson we all learnt from the 2008 crisis was that the old growth model is bust. In the run-up to the crisis there was too much growth based on domestic consumption fuelled by debt, and we know that we cannot continue to drive growth in that way. We also know that we cannot rely on government spending also fuelled by debt to drive growth either. The economics textbooks tell you that there are only two other sources of demand in any economy that can drive growth and create jobs—they are, of course, investment and net trade. I would like to talk briefly about each of those.

First, on investment—and focusing especially on foreign direct investment, which plays a key and strategic role in the UK economy—nearly half of total output in this economy is supported by foreign direct investment, a figure which is significantly higher than in France, and much higher than in Germany, America and elsewhere. It is a clear source of competitive advantage to us that the UK is, and has been for many decades, so open to foreign direct investment. It is a cultural orientation which has enabled—famously—the regeneration of the UK automotive industry since the 1980s by Japanese, German, American and now Indian investment. Iconic British brands such as Jaguar Land Rover, the Mini, the Rolls-Royce and the Bentley have been strengthened and revitalised by investment from Germany and India. Innovative cars are being developed and built in Britain now and exported around the world. One-quarter of all of Ford’s engines are built in the UK. The Japanese investor Nissan builds cars in Sunderland and exports some of them to Japan. An impressive 83% overall of cars built in the UK are now exported. The link, therefore, between foreign direct investment and exports is clear.

It is important, however, to remember that it is not just the automotive industry that we can use as an example here—the aerospace industry is another case in point. Airbus and Bombardier, to name but two examples, play a part in an industry that has a 17% global market share. Another recent example of a different kind of openness to foreign direct investment is the China Investment Corporation’s investment of 8.7% of Thames Water. The interesting point about that investment is that it has caused so little comment or nervousness in the British public domain. Can you

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imagine the same being true if a Chinese sovereign wealth fund invested in the water supply of either New York or Paris?

It is important that we remain an attractive destination for FDI, which means ensuring that our tax regime is attractive, that we minimise unnecessary red tape and that we have a planning regime that is fit for purpose. I know that the whole House will agree with me when I say that a lot of work needs to be done, and is in hand, under those three headings. The headline rate of corporation tax is the most visible sign of how competitive a country is and we are cutting that to 22% by 2014. That will be the lowest in the G7. We are supporting innovation through the patent box and R and D tax credits, and high-growth companies with programmes such as the enterprise investment scheme.

A crucial area where we need to attract FDI is not only in productive activity but in the public economic infrastructure. A number of noble Lords have referred to that issue. The kindest friends of this country would not accuse it of having a world-class public economic infrastructure. Infrastructure UK, a body started by the previous Administration and continued and developed by this one, has been developing increasingly specific project-based plans for investment in transport, energy, water and broadband networks which we will need if we are to compete effectively in the 21st century. It is estimated that around £250 billion of investment will be required between now and 2015, the bulk of which will, of course, have to come from private sector capital working in harness with the Government. That capital will come from foreign institutions, from domestic institutions and also from sovereign wealth funds. A lot of work is being done on that. This is a long-term programme that we have to keep at.

Our regulatory environment is another important signal for overseas investors in this country. We are often, quite rightly, very critical of ourselves, but actually we have a strong reputation overseas for transparency, predictability and the rule of law, and we must never lose this. According to the World Bank, the UK ranks seventh in the world for the ease of doing business and second only to Denmark in the EU. The UK has the fewest barriers to entrepreneurship of any country in the world. It takes 13 days to set up a business here, which is two days fewer than in Germany and almost a third fewer than the international average and a fraction of the time that it takes in some of the fastest-growing, emerging markets around the world.

We have to do much more especially to tackle bureaucracy that is holding businesses back. I note the point made by a number of noble Lords that this bears down particularly on SMEs. It is a continuous challenge. I suspect that if we are standing here in 10 years’ time we will still be pleading for an attack on unnecessary regulatory bureaucracy on behalf of small businesses. But we are working on it. That is why we have introduced the Red Tape Challenge and are seeking to simplify planning procedures—one in, one out on red tape; and the new National Planning Policy Framework creates a presumption in favour of sustainable investment, reducing some 1,000 pages of planning guidelines to just 52.

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Secondly, I should like to comment briefly on trade. Historically, our performance has been weak. In fact, since the 1960s, trade has tended to be a drag on growth rather than a driver of growth in this economy. We also have had a burgeoning balance of payments deficit, although that seems to have stabilised in the past year or two or three. The fact, however, is that over the long term we have to find a way of paying our way in the 21st century. We have therefore set an ambitious target of doubling exports to £1 trillion by 2020, which requires growth of a little over 8% per annum compound. Last year we achieved 10.5%, so we are on track, but we have to keep that up, not merely to 2020 but beyond that. To achieve this, we need to look at where we stand in terms of market share. In most markets we lag behind Germany; in many we lag behind France, and in some we lag behind Italy too. I mention those three countries because in some ways they are our most obvious direct competitors.

The rise of the global middle class is a huge opportunity for all of us. As the emerging markets take their place on the world stage—or, in some cases, retake their place on the world stage—what you notice is that everywhere the appetite for the sort of goods that we take for granted is exactly the same, and as strong, as ours. So the opportunities are there. But if our exports do not keep pace with the rates of growth of those emerging markets then we will fall behind the competition. Our challenge is to get more companies exporting and to increase the amount that we export outside of the European Union.

Central to implementing this strategy is UK Trade and Investment. I would like to spend a few moments discussing how UKTI has been reorganised and refocused to meet the challenges we face. We have appointed a new chief executive and renewed the top management team, bringing in people with strong private-sector enterprise. Our UK-based trade advisers now work on incentivised contracts and so do our inward investment services.

In overseas priority markets we have set up a new group to identify so-called high value opportunities—contracts for major infrastructure projects, whole new cities and so forth, which create opportunities so long as we showcase the British offer cohesively and effectively. This is methodical work. We have identified in particular 60 top priorities. For each one of those we have an action team led by someone from UKTI, drawing in industry representatives from the relevant sectors. In some cases they are helping consortia to form; in others they are providing a cohesive offering, in particular creating the framework within which SMEs can access these enormous project opportunities which can seem so daunting to an SME working on its own. As just one example, in Malaysia, UK firms, including some small ones, have won business designing train stations and providing engineering consultancy for the country’s largest infrastructure project, worth over £10.5 billion, in mass rapid transit.

We have also introduced best business practice by strategically managing relationships with our leading exporters and leading investors so that they no longer feel that they have to run from pillar to post when trying to deal with government. This is beginning to

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produce benefits, although I am confident that this is, again, something that we have to keep up over the long haul if we are really to gain the benefit of providing a cohesive presence for inward investors and large British exporters to deal with. It is showing benefits.

Perhaps our most important task is to help more and more SMEs into the export markets. We have set a target for UKTI of doubling its client base from around 20,000 currently to 50,000, between now and 2015. Of course the vast bulk of that client base is already, and will continue to be, SMEs. We have a new team in UKTI headed by a new executive with strong personal business experience leading the charge on this. We have put in new programmes, and I am pleased to report—because this struck me almost from day one when I got into the job—that we have reversed the downward decline in trade access programme support. We have pushed the budget up this year, and if I get my way we will push it up next year too.

We have introduced new programmes of e-connectivity designed to help SMEs talk to each other and share experiences, because there is nothing so powerful as an SME talking to another SME about the practical challenges of getting into the international markets. We have introduced a new, more flexible approach to charging for market introduction services. I believe that there was too much of a confusion of ends and means, as the budgets for selling these services became the end. No, they are a means and not the end itself: the end is to serve clients and help them get into the export markets.

UKTI is also working much more closely with UK Export Finance, formerly known to many of us as the Export Credit Guarantee Department, which can now for the first time in 20 years offer services to companies of all sizes. For the past 20 years it has in effect been providing services only in the form of big-ticket, long-term credit guarantees for the defence and aerospace industries. We now have a range of products in place which are relevant to an SME in the smallest possible denominations.

Moreover, we know that exporting helps companies to grow. We know that businesses that export do better with the help of UKTI and UKEF. We know that on average companies that work with UKTI go on to win overseas sales of over £100,000 within 18 months. We know that this is value for money from the point of view of the taxpayer. However, I think that it is important to stress a theme that has come through this debate already on several occasions; that is, that the Government cannot do this alone. You will no doubt hold the Government to account for the quality of the services they deliver through UKTI and UKEF and through the Foreign Office and its work through the missions and posts overseas. However, even if you scored us 10 out of 10 on all of those dimensions, it still will not be sufficient.

There is a key role for the supporters and networks of SMEs to play as we help small companies face the often daunting challenge of getting into the export markets for the first time. I am working as closely as I can with, for example, chambers of commerce, including the British Chambers of Commerce, the Confederation of British Industry, the FSB; and also with banks, lawyers and accountants—all of whom are clearly

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critical to the prosperity and growth prospects of small companies—as well as with trade bodies such as the Energy Industries Council, which my noble friend Lord Jenkin mentioned and with which we do indeed co-operate on many levels, just as we do with a number of other such institutions representing industry interests and needs. The sector groups include the aerospace, defence, security and space industries; the BBA; the Law Society; and the Institute of Chartered Accountants, which I believe is playing an extremely valuable role in helping its members—who have so many SME clients—understand the opportunities.

I have also been working with honourable Members from the other place in a cross-party initiative to encourage them to seek out businesses in their constituencies. If you divide the target that the Prime Minister set of 100,000 new companies into the export markets over the next few years by the number of constituencies in the UK, it works out as just two or three dozen businesses per constituency per year. Put like that it does not seem as daunting as the figure of 100,000. The critical point is that this is a collective effort. Again, a number of noble Lords have raised the possibility of the roles that Members of this House can play, and one or two Members have already referred to missions led by Members of this House. I would be delighted to work with any of the noble Lords in this House who have links to business groups or know particular places well, to find ways of engaging them in what I believe is a collective challenge.

Turning to the various comments made in the extremely interesting and very wide-ranging interventions by noble Lords, I have to say that I will not have time to do justice to all of them. This was a very wide-ranging debate covering many of—essentially all—the issues in the economy today. I will attempt to focus on some of the major themes and commit to writing to noble Lords where I am not able to address particular points.

My noble friend Lord Jenkin mentioned three things in particular. The first was the issue of the awareness of UKEF and, come to that, UKTI. There is work to be done on this. It is clear that not enough of their potential customer base knows of their services and how to get to them. We need to work hard on that. We are putting a lot of effort into this. In particular, in the case of UKEF we are appointing representatives into all of the UKTI offices around the region. I have regularly, as I mentioned, been around the regions meeting with businesses, holding events and so forth. This is continuous work and we have to keep at it.

My noble friend also mentioned the question of life sciences, the importance of the life sciences initiative and the need to ensure that we showcase what we are seeking to do, as well as the need to get on with it— I think that that was really the thrust of the point. I resonate with the point that we need to make sure that the world beyond our shores understands what a telling proposition we have to offer. This is simply one of the best centres for life sciences development and investment anywhere in the world and we need to work to showcase that as effectively as we can. I would like to take away the thought of having some form of group of ambassadors from the industry to work with us in showcasing these opportunities. I believe that we

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have done that increasingly successfully in healthcare services, a related area where, for example, the noble Lord, Lord Darzi, has led both missions and a working group for us in helping us to showcase UK healthcare services more effectively.

I will move on, if I may, to comments from other noble Lords. The noble Lord, Lord Liddle, made a number of points about the importance of skills investment and the linkage between research in the universities and commercialisation thereof. A number of other noble Lords made similar points. The role of catapults will be extremely important in this.

The term “pea shooter” was used to suggest that we were not doing enough. This gives me the opportunity to make a general statement in response to a number of comments, including those of the noble Lord, Lord Stevenson. It would not be fair to characterise what the Government are doing as merely using a pea shooter. Extensive investments are going on, for instance in apprenticeships. The Government will spend £1.4 billion on start-ups, which this year will involve something of the order of 450,000 new apprenticeships. What we are doing was started by the previous Government and has been continued and ramped up by this one. We are rebuilding an apprenticeship system that fell into disrepair in the 1970s, 1980s and 1990s. We need to rebuild it. I will repeat something that I have said once or twice already. We must stick at this over 10 or more years before we get back to where we should be—with a skilled industrial base for this country. Along with all noble Lords in the House, I look forward to the report of the noble Lord, Lord Heseltine, on the competitiveness of the UK economy.

A number of noble Lords raised the question of Europe. I will dwell on that for a moment or two. It is clearly the case that, whatever the uncertainties about the way forward for the eurozone, we are involved in Europe. We are a member of the European Union, 45% of our exports go to the eurozone and half of them go to the European Union. We are impacted by the European Union. It is absolutely in our interest to continue to press for full implementation of the Single Market Act. The services directive and the digital single market are areas that will make a huge difference to Europe’s competitiveness globally, and to the opportunities that our companies will have in global markets. The Government are fully committed to arguing continually and loudly for Single Market Act implementation.

I am reminded that we are running out of time. This reflects the extensive nature of the debate. We have covered many topics. I would love to have had more time to talk about energy reform and its implications, and to respond to the point of the noble Lord, Lord Paul, about the importance of getting energy policy right for industry, for consumers and for long-term security. This is a difficult and complex area. As noble Lords will know, a Bill on this is being scrutinised in the other place at present.

In general, the message is clear. This is a collective effort. We need to work away at encouraging more companies into international markets. This is not a one-year fix. It is not a programme that we can conceive

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of implementing only for the lifetime of one Parliament. We will be living with this for a generation as we rebalance the economy away from excessive reliance on domestic consumption towards international engagement.

I will make one final comment. I promise to write to noble Lords whose points I have not been able to address. The more we succeed in this, the more we will not only repair our balance of payments position but contribute to growth. Very important research shows that SMEs in particular that get into international markets enjoy very considerable productive efficiency gains quite quickly—something like 30% gains in the first year or two of taking the first steps into the international market. That goes on as they spread their wings into new markets. It leads to higher profitability, greater longevity, further job creation and, in summary, to the strengthening of the backbone of the economy.

My final point is therefore that what we are talking about is not simply the balance of payments. It is not simply the need that we have to pay our way in the 21st century. It is about the regeneration of the economy that is core to the growth strategy that this Government have in place alongside the deficit reduction strategy and the strengthening of the macroeconomic environment.

Finally, I thank the noble Lord, Lord Jenkin of Roding, for introducing an extremely important opportunity for us collectively to talk about an issue that is central to all of us who have concerns about this country’s future economic potential.

Lord Haskel: The Minister spoke warmly of reducing corporation tax. Of course, what he forgot to say was that the Government are also reducing capital allowances by an even greater amount. What impact will that have on our competitiveness?

Lord Green of Hurstpierpoint: Corporation tax must be seen in the context of an overall tax package. We have a number of new measures in place. I referred to the patent box, whereby we will tax revenue from intellectual property at 10%. We have very generous R and D tax credits. We have introduced enterprise investment allowances. It would be very difficult to do anything other than recognise that the overall tax framework contributes to a very business-supportive tax environment. It needs to be competitive. The goalposts are moving internationally as other countries seek to create competitive tax regimes. We need constantly to watch what others are doing if we are to go on being an inward destination that foreign investors find attractive.

2.55 pm

Lord Jenkin of Roding: My Lords, according to my calculations we have 14 minutes left before our three and a half hours run out. However, I will relieve noble Lords’ anxieties by reassuring them that I do not intend to speak for anything more than a minute or two. I know that the next debate is ready to start.

I will say three things. First, the Motion was drawn in deliberately wide terms in order to embrace not just the narrow definition of manufacturing or service industries but a whole range of industries. A number

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of noble Lords made maximum use of that. We heard a lot from around the country and across sectors about the importance of competitiveness. I particularly welcomed what was said, for instance, about competitiveness in our cultural exports, which are hugely important.

Secondly, I am most grateful to noble Lords who took part in the debate. I was not sure whether we would secure a long enough list, but we did. I hugely value—and my noble friend said that the Government value—the amount of expert evidence that has come from this House in a way in which we are justified in taking some pride. We have a range of expertise here that was on show in this debate.

Thirdly, I thank my noble friend the Minister, who demonstrated his mastery of the subject as a result of his own long experience, including his experience as a Minister, of dealing with the problems both of encouraging exports and of promoting foreign direct investment. He showed not only that he was master of his subject but that he had taken on board some of the genuine criticisms that were made about where the Government could do more to help industry and companies, particularly SMEs, make their contribution in this field. We look forward to seeing the letters that he has promised to send to all noble Lords. I thank him most warmly. As I said in my opening speech, we do not see enough of him here because he is so busy banging the drum overseas for Britain. I beg to move.

Motion agreed.

Supply and Appropriation(Main Estimates) Bill

First Reading

2.58 pm

The Bill was brought from the Commons and read a first time.

Horses: Transportation

Motion to Take Note

2.59 pm

Moved By Lord Higgins

That this House takes note of the welfare and transportation of horses in the European Union.

Lord Higgins: My Lords, I am very glad and indeed fortunate to have the opportunity to open a debate on issues related to the welfare and transportation of horses in the European Union. In doing so I should declare an interest, as my daughter is an equine veterinary surgeon. It is pleasant to introduce a debate on a European matter that does not involve reference to the eurozone and the various controversies associated with it, on which I have spoken on a number of occasions recently, but it is also true that this debate is unusual and perhaps can be summed up by a quotation in the

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excellent House of Lords Library note that was prepared for this occasion. Under the heading “Overview”, it states:

“There is a special relationship between most British people and horses. We do not see them as farm livestock”.

However, our views are not shared by all other countries. Indeed, EU law regards horses in the same way as farmed animals.

Much of what we have to discuss today is concerned with how the European Union could be useful in ensuring that everything is done to make sure that animal welfare, in particular the welfare of horses, is maintained effectively. For almost a decade, I have been concerned with the suffering caused by the international trade in live horses for slaughter. As noble Lords may know, this mostly takes place between Poland and other countries in eastern Europe, Italy, and to some extent Spain. The charity World Horse Welfare has been at the forefront of campaigning on these issues.

Ideally this trade should cease altogether so that horses are slaughtered in their country of origin and then exported frozen or in some other form as meat. That would eliminate completely the problems that I and many other noble Lords are concerned about. However, for various commercial reasons that is not likely to happen—not least, I should say in passing, so far as the trade with Italy is concerned, where the motivation for carrying on the trade as it is arises from the fact that the horses, which are imported for slaughter, are apparently then presented as fresh Italian meat. One would hope that my noble friend might consider making representations to the Italian Government with a view to stopping what is in effect a fraud being perpetrated on the people of Italy, because they are consuming the product.

This issue has been raised in a number of different ways, in particular on the question of whether there should be an amendment to the European law on this subject. In the forefront of all these is the problem that, as evidence from World Horse Welfare and others shows, the animals are transported in the most appalling conditions that do not conform to what is set out in the regulations. Large and small horses or mares and stallions may be put together with little headroom and inadequate water for the journey that they have to undertake.

Perhaps most important is the question of why there is no limit on journey times. Animals can be transported from Poland to the heel of Italy without any limit being imposed on the length of the journey. In response to an Oral Question tabled by the noble Lord, Lord Dear, a few days ago, my noble friend the Minister said that he would press for a change in the regulations on journey times. When he winds up the debate, perhaps he can tell us to what extent he has managed to make progress in that respect. It is the crucial matter at the moment, quite apart from the other particular issues that I have mentioned.

The second problem is the question of enforcement. When I raised this matter in a debate held in May 2008 in the Moses Room, my understanding was that enforcement was the responsibility of local authorities. This is an international trade, so there is no reason

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why any local authority should be particularly concerned about how horses pass through its area. Perhaps the Minister could say whether that is still the case and, if so, whether something could not be done to put in place a more effective system of enforcement.

All the evidence suggests that the regulations are not being enforced properly. Whatever the terms of the regulations may be, if they are not enforced they will not help the animals who are travelling in these very bad conditions. The proposal on journey times has been endorsed by the European Food Safety Authority. This has been taken into account by the Commission, but we have still not had an assurance that the regulations will be changed to deal with the recommendations put forward by that authority. No doubt negotiations will continue, but perhaps my noble friend could tell us how he sees the next stage in the campaign to try to prevent these abuses developing.

That covers the first point about which I have been concerned for a long time. However, when the previous debate took place, and when I have raised the issue by way of Parliamentary Questions and so on, I was not fully aware of a separate set of problems that are different in nature but of equal severity. They relate to the tripartite agreement that was designed to allow the free transportation of thoroughbred and competition horses between the UK, Ireland and France without the need for health certification. This is entirely admirable because these are extremely valuable animals. I imagine that the transportations are conducted with a degree of luxury, which is in total contrast to the poor animals I referred to a moment ago. It is good that the practice should continue.

However, as I understand it, in 2005 the agreement was extended to allow the free transportation not only of high-value horses but of horses of low value, which can now circulate around these countries unchecked and unmonitored. The market has been growing as a result of the overbreeding of horses both in the UK and on the continent. Animal welfare charities are aware of cases where these horses are being moved from place to place, including into and out of the UK, with no official record of those movements, making them virtually untraceable and rendering any disease control measures difficult. Apparently the European Union law on routine port inspections of horses entering and leaving the UK allows for regular checks only in exceptional circumstances. These horses are now going in and out with no checks being made for diseases.

This is an extremely dangerous situation. We are all aware of the case in 2010 of a horse being imported into this country from Romania, where there was an outbreak of equine infectious anaemia. It is a notifiable disease and the animal was slaughtered in due course. If the tripartite agreement is not amended so that it reverts to its original form, there is a serious risk that infection will enter this country and spread through our livestock, resulting in horses having to be slaughtered—no doubt to the great distress of their owners.

This is something that should be preventable. I would be glad to know whether my noble friend has taken the point fully on board, and I will seek to negotiate

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the tripartite agreement, maintaining its original intention while ensuring that the risk of disease spreading to this country from elsewhere in the European Union is reduced. For example, imports can come in from France although the horses concerned might have originated somewhere in eastern Europe, where there are disease problems. I know that the Minister is sympathetic to all these arguments and I hope that he will be able to take positive action on the issue.

I believe that both the previous and present Governments are sympathetic to these arguments, so I hope that we can encourage the Government to take positive action and to press forward in negotiations in the European Union to protect the position of horses. This relates both to the very bad conditions in which those unfortunate animals are being shipped around the UK—my noble friend referred to it the other day as a disgusting trade—and to taking adequate steps to ensure that there is no spread of disease that would have very serious implications for the UK trade generally, which I gather amounts to some £3 billion. We are fortunate to have this debate and I am glad to see that a number of noble Lords are taking part. I hope this will lead to further progress in dealing with these problems, which are important for the economy of the country as well as of concern to anyone with an interest in animal welfare. I beg to move.

3.11 pm

Baroness Mallalieu: My Lords, I first declare a personal interest as the president of the Horse Trust and the chairman of the All-Party Group for the Horse. I am also a member of the Humane Slaughter Association. Secondly, and most importantly, I thank and congratulate the noble Lord, Lord Higgins, on securing this debate which is particularly timely in relation to the Commission, for reasons I will come to.

At the age of 11, I came across a leaflet written by Ada Cole, the remarkable woman who founded the charity which is now called World Horse Welfare. It was about the export of live horses from Ireland, taken by sea for slaughter on the continent. There was one photograph which I can still remember in every detail. It was of a carthorse with a kind eye and a crooked white blaze, barely able to lift its head from the position in which it had collapsed on the dockside in Antwerp. It looked totally exhausted and a picture of misery. After, no doubt, a lifetime of work, its last days should not have been spent at sea in terrible conditions. The caption beneath that picture, which I have never forgotten to this day read, “A victim of man’s greed”.

That terrible trade in old and unwanted horses from Ireland to France and Belgium by sea has gone. It was killed, in part, by public outcry when, on one occasion, some 12 dead horses, which had collapsed during the journey and been thrown overboard, were washed up on a genteel English seaside beach. The fact remains that, after 50 years of so-called progress, some 65,000 horses still make long, gruelling and almost wholly unnecessary journeys to their death within the European Union each year, with the sanction of the Commission which is frightened of restraining trade. About 15 years ago, we had a debate on this

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subject and I can still remember one speech from that evening. It was made by Lord Slynn of Hadley, no longer with us, who described his own experience of stopping at a continental motorway service station and looking through the vents of a huge lorry standing in the car park. It was crammed with horses, some visibly injured, all utterly exhausted, standing in total silence. They had, he found, been on the lorry like that for two days and had two more to go before arriving at their eventual destination for slaughter in southern Italy.

There has been progress, but it has been painfully slow and inadequate to prevent what is a wholly unnecessary suffering. I have recently visited Transylvania—part of Romania—where tractors are still a rarity and the work is done, as it was 150 years ago, by horse-drawn vehicles. The population of working horses in eastern Europe is still huge yet, despite the fact that no horse there is more than 12 hours from an abattoir in which it could end its days after its working life finishes, many will instead make a journey of two to four days to Italy and Spain in vehicles which are, as the noble Lord, Lord Higgins, said, far removed from the sleek racehorse transporters which we see on our motorways. Those horses are overcrowded, sometimes quite unfit to travel and with wholly inadequate checks made to monitor journey times and rest periods or on whether water is actually provided. Ironically, the comparative cost of slaughter near the point of origin and refrigerated transported is, I am told, very little different from the cost of transporting these animals across a continent in these conditions. The majority of the meat is processed in any event, so arguments about consumers demanding fresh meat are largely irrelevant. In reality, the trade continues in this way because that is how it has been historically and because the Commission lacks the willpower to deal with it.

I cannot help but feel that, if the public in Spain and Italy had the same degree of awareness of what is involved as people in this country, 1 million of whom signed a petition to limit journey times, then demand would drop. This would bring changes more quickly than anything else. There is still no overall limit on the duration of those journeys, despite the recommendation of the European Food Safety Authority, whose research has shown that above all other species—and there are differences between species—horses suffer severe welfare problems in journeys over that time. Our MEPs have shown their support, the European Parliament has supported the change, yet still—and inexplicably—the Commission so far prefers to go down the line of guidance and enforcement of existing regulations, which are currently not adequately enforced.

We are moving into the Cypriot presidency, during which, I suspect, this issue will have very little priority. However, I understand that Ireland takes over immediately after that and I very much hope we will then see adopted the proposal to reduce the journey time for horses to 12 hours, at the very longest. I hope that the Minister can assure us that pressure will be stepped up. I should like to pay tribute to the Minister, Jim Paice, who on 15 June released an intervention calling for the introduction of that limit, as recommended by the EFSA, and it was accepted by the Council of Europe.

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The long journeys from eastern to southern Europe are not, however, the only disturbing feature of what is going in relation to horse transport in Europe. For different reasons, we should all be concerned about the shipments of surplus horses, mostly of very low value, currently taking place between Ireland, France and the United Kingdom. During last year, the provision of abattoirs in Northern Ireland was insufficient to meet the demand for the slaughter of unwanted horses that were, having been bought by UK meat dealers, sometimes waiting for up to six weeks in unsatisfactory conditions before there was the capacity to ship them to England for slaughter. The Horse Trust and other charities did what they could to assist the very limited provision of equine welfare over there, but the volume of abandoned and malnourished welfare cases, which is a combination of the recession and chronic overbreeding, means that humane slaughter on the spot was often the only option.

Low-value horses come every week to the UK from Ireland and France, and go out again. They are not routinely checked at ports of entry and, on occasions, are unfit to travel, or they introduce disease, as the noble Lord, Lord Higgins, pointed out. What on earth was the horse that brought the disease coming here from Romania for? Given that African horse sickness is knocking on our door—with its potentially disastrous consequences for our £3.8 billion equine industry, should it reach us—it is a state of affairs that should worry us all, and every Government.

What this international trade is all about is unclear. There are meat dealers in this country who own literally hundreds of horses of little value, and many of those horses were in a very poor state last winter. It is on a scale that has the equine charities and local authorities that have to deal with the consequences of abandoned horses, fly grazing, welfare cases and escapees, tearing their hair out. These dealers treat the horses as commodities to be sold on, if and when there is a market, but most are poor specimens of little value and no use, save perhaps for meat at some future point. They are the result of indiscriminate breeding, both here and in Ireland. In time of economic difficulty, the numbers are such that all the rescue organisations put together could not begin to take even the worst cases. I have heard reports of local authorities and, indeed, major charities considering that their budgets would not stretch to prosecuting even the worst offenders.

Somehow, people have to be educated, here and in Ireland, not to breed horses unless they have a job for them—and then only to breed from the best—and when they reach the end of the road to do the right thing and put them down at home, not sell them on to the dealer who promises to find a good retirement home. These are the horses that end up on a transporter, being shipped hither and thither to an uncertain end.

What needs to be done right now? The Commission needs to pressed, as it already has been by our Ministers, and pressed and pressed again, until it implements the 12-hour limit. Better guidance and inspections en route, which have been accepted by the Commission, must be implemented. Consumers must be told how the meat has reached their plates in Italy, Spain and parts of France. That is something that I understand

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World Horse Welfare proposes to do. Horses should bee seen and treated as sentient beings, not mere market commodities. If they are to be eaten at the end, so be it; but it is surely our duty to ensure that in life they are treated with respect and consideration, as should be all our food animals. Despite all the advances and all the talk over the course of my lifetime, too many horses remain the victims of man’s greed.

Baroness Verma: My Lords, I remind noble Lords that this is a time-limited debate and when the clock shows “10”, the 10 minutes are up.

3.22 pm

Lord Addington: My Lords, this is one of those debates when you realise that you have jumped into very deep water, so I shall not be paddling far from the banks of my knowledge, which is not extensive. Most of the points that I thought might add to the debate have already been covered by the noble Baroness, Lady Mallalieu. Primarily, the enforcement of good welfare in our nation seems to have been driven by public opinion. If other nations and other bodies, primarily in the EU, wish to drive this on, we must do something to engage public opinion within those nations.

I am assuming that even if we are slightly overly sentimental about horses, other nations do not deliberately go out to hurt them. Most people are not naturally cruel. When animals are transported either for the table or for recreational reasons, they should be treated with dignity. As has been pointed out, there could be bureaucratic reasons behind the economic benefit of transporting a horse for a long period of time. A live animal is probably going to be heavier than the meat of a slaughtered animal and I do not know how that stands with fuel prices, et cetera However, if there is a bureaucratic reason, and the meat can be called a product of Italy because it has been slaughtered and finished there, surely there should be some encouragement for consumers in Italy to have an advantage and not be ripped off like this? Can we make sure that the EU project acts together to defend all the consumers of the EU? That would also benefit animal welfare.

Unless we can bring this to the attention of the public across Europe, progress will be painfully slow. Unless we can enforce regulations and guidance about rest periods, feeding and watering, and make sure that national enforcement agencies regard it as a priority, with people shamed and punished when they break the rules, very little is likely to happen. All nations are full of laws which are a low priority for the authorities. What we have to do is draw this to the attention of the bodies within the countries concerned and encourage them to act. The question for our Government is how do we encourage this? How do we encourage those bodies here and in other nations, such as Ireland, where there is a well-developed respect for the horse, to come together with a Europe-wide message? This will mean that local authorities will have an interest, an advantage and a benefit in taking action. We should never lose sight of the law of self-interest. Unless we can convince our fellow members of the EU that there is something to be gained, very little will be done.

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So we have the consumer argument, the welfare argument and there is a political advantage. Am I the only person here who has felt that occasionally it would be the right thing to do, and politically advantageous to raise that point? I do not think so. If we act, we will have a chance of applying some levers to the process. If we merely stand back and say it is a bureaucratic process that should be left alone, nothing is going to change. We must get out and make sure that people understand the problem. The noble Lord, Lord Higgins, has taken a vital step here. We must engage with those outside, and the Government can help by approving this process. It does not have to be active support in the Council of Ministers, though that may be a good thing; it could mean encouraging our public bodies to spread the message wider. That would probably be more beneficial and will lead to quicker results. I hope that the Minister can tell me that this process of building awareness across the whole of Europe is taking place.

My final point is about the tripartite agreement and the movement of animals for leisure purposes. I live in the village of Lambourn, in the valley of the racehorse in Berkshire. I can assure your Lordships that if there was a big problem with the economic movement of racehorses around the country, I would have heard about it, and at the moment I have not heard anything. For anybody who is not familiar with the village of Lambourn, two people out of three are involved in racing. There are not many places where, if you go for a walk in a morning, you have to avoid strings of racehorses on either side of the road going between gallops. I have not heard much about this being a problem, so presumably the racing position is that people are comfortable with it. As for the use of other horses, again I have not heard of problems, but would the Minister look at the danger of disease spreading in? This very valuable industry employing a lot of people deserves protection. Would he assure me that the Government are looking at whether liberalisation has not gone a step too far and is endangering this golden goose?

3.28 pm

Baroness Trumpington: My Lords, I am very grateful to my noble friend Lord Higgins for introducing this debate. Apart from the grim reality of the subject before us, it makes a change that this matter is totally politics-free and we can say what we darned well like. In pursuit of that, I pay tribute to the noble Baroness, Lady Mallalieu. For many years, she has loved and protected the horse publicly and privately, including through her chairmanship of the All-Party Parliamentary Group for the Horse, which she mentioned. I thank her for all that she has done and all that she will do in the future.

I said recently at Question Time that I had tried to do something about this disgusting trade but without success. I know that it is not much to talk about, but I was a steward at Folkestone racecourse for 10 years, and I know Lambourn, mentioned by the noble Lord, Lord Addington, and Newmarket very well. The economic situation of a country affects the horse trade as well as everything else to do with the countryside

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and nature. I do not believe that Lambourn is as peaceful and happy as perhaps the noble Lord thought it was.

I have two requests to make of the Minister. The first is perhaps unusual. Could he persuade the press to display existing photographs of doomed horses in transit together with as much publicity as possible? I do not believe that the public are aware of this situation, and only the press can help. I believe that photographs exist which would horrify people. Secondly, will the Minister explain—I have written to him—why in Italy and Germany horses are transported live instead of being killed, frozen, cooked and then turned into the sausages so beloved?

I await the answers to my two questions. I realise that the first is somewhat unfair, but I am darned if I cannot try to get all the publicity that I can for this matter. I am sure that noble Lords in this House will agree with me.

3.32 pm

Lord Dear: My Lords, this debate, which I warmly welcome, follows hard on the heels of a Question that I had the privilege of putting before this House on 14 June, when I tried to concentrate on the transportation of horses. The noble Lord, Lord Higgins, to whom I am very grateful for securing this debate, has already addressed that issue in some depth.

Perhaps I might add to what has been said one or two statistics which have been gleaned by the World Horse Welfare charity, of which—I declare an interest— I am a trustee. Examinations by World Horse Welfare of horses leaving Romania en route to Italy showed that 14% were deemed unfit for that journey at the point of departure. By the time they had arrived in Romania, 37% were deemed unfit to have been transported. A separate tranche of investigations by World Horse Welfare, again in Romania, indicated that of horses transported on that terrible route from Romania to Italy, a quarter were showing at the point of arrival in Italy acute injury which had been inflicted or suffered during that journey.

Other evidence on the transportation route might also interest your Lordships. Anyone who knows anything about horses will recognise that an abnormal stance, or weight-shifting, in a horse indicates pain. Behavioural data from one randomly selected shipment two years ago showed that 94% of horses arriving at the point of reception had an abnormal stance and that 83% were weight-shifting. I shall not labour the point because it has already been made, but those statistics might well be of interest to those who read this debate later in Hansard or elsewhere.

The point is that the trade and transportation of horses across Europe is in a mess. I want to concentrate briefly not so much on the transportation issues which have already been very well illuminated by speakers before me but on the tripartite agreement which bears very much on the situation in this country. I will be going over information that has already been given to the House but I will do it in slightly more detail to make sure that the point is not lost. The tripartite agreement was entered into between three countries—the United Kingdom, France and Ireland—to facilitate

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the trade of high-quality horses, usually race horses but sometimes eventers and show-jumpers, between those three countries. Other countries in Europe would have a stake and a claim to say that they, too, are involved in high-quality horses but we all know that the majority of the racing industry is centred in those three countries, hence the agreement called the tripartite. It was originally intended to allow for the free movement of registered horses—racehorses and others—between those three countries without the need for a health certificate.

In 2005, as we have already been told, the agreement was extended to include all horses being shipped backwards and forwards between those three countries, other than those that were being transported for slaughter. What we now have is the completely unchecked and unmonitored movement of often low-value horses into and out of the UK from France and the Republic of Ireland. I venture to suggest that the problem is probably greater emanating from France, but it is also there in those that come from Ireland. Animals can enter France, as we already know, from anywhere in the EU. They can remain in France for a long or a short time—often for a very short time indeed—and they can then enter the UK unchecked under the original tripartite agreement and no one will know where they have come from or the premises from which they have been moved.

We know that welfare is compromised through this trade because many of these animals, as I have said, are low-value—they are vulnerable horses, ponies and sometimes donkeys—and the transportation, as we have explored in depth, is often quite horrendous. But because they pass from dealer to dealer with no check at all, mixing with other frequently low-value animals, they are constantly exposed to the risk of disease. We already know from the agricultural industry how bluetongue and Schmallenbergvirus can affect sheep. We have already heard mentioned in this debate that African horse sickness has reared its head to a tremendous extent in Romania. Romania keeps cropping up in this debate and I really think that the Commission should pay particular attention to that country. In 2010 we had our first outbreak of equine infectious anaemia, EIA. That, too, was traced back to Romania and now, without any pun being intended, the stable doors are being locked there to some extent because restrictions are in place around that country.

The potential spread of disease across borders into this country will affect a UK equine industry which is pushing close to £4 billion a year. It is going to be seriously compromised unless we go back to the original demands and intentions of the tripartite agreement. The information that I have from World Horse Welfare is that there is no reason whatever why we should not revert to the terms of the original agreement. That can be done, I am confidently informed, without undue deference or discussion with the other two countries. As understand it, we simply go back and insist that the terms of the tripartite agreement are adhered to as they were before 2005. Without flogging this particular horse to death—again, no pun intended—I urge the Minister to look closely at the tripartite agreement, what it was intended to deal with in the first place and the tremendous amount of risk that we are now exposed

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to because of the position now being adopted, and to report back to the House as soon as he can on whether he has been able to ameliorate that position.

3.40 pm

The Earl of Caithness: My Lords, I congratulate my noble friend Lord Higgins on finding time for this debate. Although it is focused on horses, your Lordships will know that the EU regulations on horses also cover other vertebrates, and I am sure that the House would not want to give the impression that it is not concerned about other vertebrates.

I have the honour to serve on Sub-Committee D, and we have been keeping an eagle eye on the transportation of livestock which are subject to EU regulations. The picture, as has been described, is pretty depressing. There was no doubt that the Danish presidency tried hard, with its five working parties, to get some agreement in the EU, but the EU is hopelessly riven. It is clear that it is completely split between those who want some reform, those who want no reform, and it is equally split among those who want some reform. As your Lordships will know, trying to get anything done in the EU when there is not cohesive agreement is almost impossible.

Therefore, I have huge sympathy for my noble friend on the Front Bench, because although we know what is right, if we do not have the support of the majority of the other member states—as we clearly do not—we can never achieve the high welfare standards necessary. Here, I have to be a little practical. Is the ambition of the highest possible standards to be the enemy of the good? Should not be UK be taking, not the highest position, which is what we might like to get to, but, to get a majority in the EU for change, ought we to drop the level of what we are trying to achieve? I know that the Government have been very keen to focus on the young stock that have been travelling. That is hugely important, and the committee supported the Government on that but, overall, if we are to make progress—with a future presidency, we might—perhaps we ought not to try to achieve the ultimate but to work to get a majority.

The EU regulations refer to,

“vertebrate animals transported in connection with an economic activity”.

Does my noble friend have any information on what animals are transported in what is not an economic activity? That might be useful to know. The EU prepared a paper in November. In one paragraph, which is a comparison of the quality of animal welfare during transport before and after the application of the regulation, it claims that,

“animal transport on long journeys has improved”,

but qualifies that by saying that,

“no firm conclusions can be established”.

How can the EU Commission possibly say that if there is no firm evidence? It is very good to give yourself a pat on the back, but that if there is no evidence to do so, you had better be a bit careful.

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Turning to the use of navigation systems, again, there has been poor implementation. The use of navigation systems raises a question that runs through the Commission paper: the interpretation of existing regulations varies from member state to member state. Why is there a lack of clarity in the EU regulations? Surely that is a fundamental starting place so that one can get a wording that every country is bound by—they may not agree it, but they are bound by it—because only then can the Commission start to exercise what authority it has.

As has been said, the level of compliance and enforcement is up to each member state, but if there is a variation of interpretation of the regulations and some member states are therefore not complying and enforcing in the way that we do, any statistics are meaningless. You would not be comparing similar things. The basic need is for clarity in the regulations and then we must then ask the EU to make certain that compliance and enforcement are the same throughout every member state.

When it comes to penalties and sanctions, the Commission also says that it is very difficult to get a comparison between the countries, because of the various legal systems and because of the available data. It goes on to say that it considers this to be an unsatisfactory situation,

“and encouraged Member States to provide for more harmonised application of the rules … ‘taking into account the limits of the competence that Member States and the legislators have decided to give to the Commission’”.

I am certainly not one who wishes to give more powers to the Commission—I think it has too many already, as your Lordships will have heard me say on many occasions—but perhaps this is one area where I might back off a little. Can my noble friend tell me whether the Commission is right in putting the blame back on to the member states or does he think that the Commission is not fulfilling the tasks that have already been allotted to it?

This is a very sad subject to have to debate yet again. We should not be doing it but it is clear that there is such diversity of opinion throughout the member states. This Government have done so much, as indeed did the previous Government who also got support from Sub-Committee D. Perhaps my noble friend on the Front Bench can give us some idea of how the Government see this being tackled in the future.

3.47 pm

Lord Knight of Weymouth: My Lords, as my noble friend Lady Mallalieu said in her authoritative speech, this is a timely debate because we finally have the opportunity to make some good progress on this important issue. I am delighted to join not only the consensus in congratulating the noble Lord, Lord Higgins, on his opening of the debate but the consensus that seems to be emerging, even from the noble Earl, Lord Caithness, in favour of stronger EU regulation, if only on this particular issue.

I speak as a former Minister for the horse. When I was leafing back through the 2005 strategy that we produced at that time in Defra, I found that some of the stats were worth repeating to show the importance

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of the horse industry to this country. It had a gross output in 2005 of around £3.4 billion; it employed up to 250,000 people directly and indirectly; 2.5 million people ride in this country; and 11 million people have some interest in the horse industry, 5 million of them having an active interest. The horse population was then certainly at least 600,000 and could total nearly 1 million horses.

Although it is largely left to my wife, I, too, am a horse owner and I would certainly endorse the view that has been put by so many of your Lordships about the remarkable nature of these animals. That nature has of course been celebrated very successfully, first in the novel War Horse by Michael Morpurgo, then in the wonderful stage adaptation and then in the slightly less wonderful but certainly watchable movie of the same name. I am also a patron of a charity called TheHorseCourse, which is doing innovative work with horses in prisons by using one of the remarkable features of these animals: they provide instant feedback to people because of their nature—they are both pack and prey animals. That is proving extremely effective for some of the more difficult offenders, particularly young offenders. I have seen that work at Portland young offender institution.

As the noble Lord, Lord Higgins, said in repeating the excellent Library note from, I think, 2008, we are a nation of horse lovers: hence our concern about transportation and welfare within the EU. This country’s affection for the horse is reflected in the Animal Welfare Act 2006 and especially in the five freedoms that we gave all animals in that Act: a need for a suitable environment; a need for a suitable diet; a need to be able to exhibit normal behaviour patterns; a need to be housed with, or apart from, other animals; and a need to be protected from pain, suffering, injury and disease. We have heard graphically from speakers in this debate how horses are being denied those freedoms in the way in which some of them are being transported around the European Union.

Unfortunately this tradition in our culture is not uniform across EU member states, although I agree with those who say that it is not that citizens of other states want to be cruel; it is just that the culture is different. I am pleased that our tradition is now to some extent reflected in the 1997 revision of the treaty of Rome that happened in the Amsterdam treaty. The wording was changed to:

“Desiring to ensure improved protection and respect for the welfare of animals as sentient beings”—

the first time that animals were recognised as sentient beings in the treaty of Rome. This was then strengthened in the Lisbon treaty, which says:

“In formulating and implementing the Union’s agriculture, fisheries, transport, internal market, research and technological development and space policies, the Union and the Member States shall, since animals are sentient beings, pay full regard to the welfare requirements of animals”.

That is a very important context for legislation and action by the Commission and member states on horse welfare and for concerns about the lack of consistent implementation of current regulations. As a result of those treaty changes, these are now fundamental animal welfare obligations on member states for which the Commission should be held to account. It should

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in turn be held to account on how it is using its powers to pursue member states that allow the unnecessary suffering of horses that are being transported unnecessary and inhumanely long distances. I am pleased that the Commission is currently focusing its efforts on enforcing the existing regulation and on guidance on its implementation. However, I agree with World Horse Welfare when it says that:

“Enforcement of any legislation is essential and there are certainly areas where guidance could have a positive impact. However, enforcement and guidance alone cannot address the key problem of journey times, which do not reflect current scientific knowledge about the impact of long journeys on horses, and other serious issues such as minimum space allowances which should be increased and vehicle standards, which are in need of improvement”.

We need a maximum journey of 12 hours at the very extreme, and ideally lower; and we need an enforceable regime, as transportation crosses borders so easily. Surely in these days of GPS tracking and other recording technology in vehicles, it must be possible to ensure manageable enforcement across the European Union.

I join my noble friend in congratulating the Government on pressing the Commission on this issue through their intervention last month, and am pleased to see the Council now agreeing to encourage the Commission to act. I look forward to the Minister’s update on the Commission’s response and would gently say to the noble Earl, Lord Caithness, that we should push for what we want, even if inevitably negotiation means that we have to give ground in achieving our ambition. However, I accept from his hand gesture that you can argue that one both ways; it is six of one and half a dozen of the other.

I also look forward to the Minister’s response on the tripartite agreement, which all speakers have mentioned and which was examined in particular detail by the noble Lord, Lord Dear. I support his call for the Government to look at this a little more and to come back to us with an update if they need to. I also support what the noble Baroness, Lady Trumpington, said about getting more publicity if the Government’s obviously legendary spin machine can do anything to raise the profile of this, around which there is considerable public interest.

This is an important issue. The UK has a proud international reputation as a world leader on animal welfare and conservation. I hope that the Government can continue to influence progress on this issue. On that they will have our full support.

3.54 pm

Lord De Mauley: My Lords, in view of my own strong feelings in this area, I particularly thank my noble friend Lord Higgins for initiating debate and all noble Lords for participating today. I have a personal relationship with horses that goes back to my childhood. I have ridden under rules and we almost always have horses on the farm at home. My wife and mother are both members of equine welfare organisations and I am president of SPANA, the charity that concerns itself with the welfare of equids in developing countries, so this is a subject I feel strongly about. I applaud the work of World Horse Welfare and the Horse Trust, to which noble Lords have referred today, as well as other laudable organisations working in this field.

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As my noble friend Lord Higgins said, there is a special relationship between the British public and horses, and I share the view of those who want to see the best possible welfare standards applied to all equines, both in this country and abroad. However, we have to acknowledge, as did the noble Lord, Lord Knight, that our views are not necessarily shared by all EU countries, many of which regard equines simply as farmed animals. The Government want to see the highest welfare standards for all animals but, to enable us to make the strongest case to those who do not share our views, these standards, particularly in relation to journey times, must be based on the best scientific evidence available. We would prefer to see a trade in meat and meat products or germ plasm rather than a trade in live animals and that animals are slaughtered as close as is practicable to their point of production. But the export of live animals for slaughter, however repugnant we may find it, is a legal trade.

During the peak of live exports 20 or so years ago, the Government and many local and port authorities were thwarted legally when they sought either to ban or curtail this trade. However, the fact that the trade is legal does not mean that we cannot insist that the highest welfare standards, backed up by the available scientific evidence, are applied to it without exception. That is why we have been pressing, are pressing and will continue to press the EU Commission to adopt the recommendation from the European Food Safety Agency that horses going to slaughter should face journeys of no more than 12 hours duration. That would be a significant improvement on the current rules, which allow journeys of up to 24 hours.

At the EU Council meeting on 18 June my right honourable friend Jim Paice, Minister of State for Agriculture and Farming, expressed the Government’s strong disappointment that the EU Commission was not intending to implement the EFSA recommendation on horses going to slaughter. We will continue to push hard for the adoption of the EFSA recommendation at the earliest possible opportunity. What we cannot, unfortunately, do is act unilaterally in an area already covered by directly applicable EU welfare and trade rules.

The current EU legislation on welfare during transport, EU Council Regulation 1/2005, has been in place for more than five years. The Commission’s recent review of the impact of the legislation noted that, while the welfare of animals during transport has benefited overall, significant problems still persist, particularly in relation to enforcement. We want to see the Food and Veterinary Office of the EU Commission taking a robust line against those member states that, five years on, have failed adequately to implement the welfare during transport legislation. We want to see the journey times for all animals, especially but not only those going to slaughter, reviewed to determine whether the current journey time rules are in line with existing and emerging scientific evidence.

In this debate we have mainly been talking about horses, but my noble friend Lord Caithness mentioned other species. We also want, for example, to see a discussion on better protection for infant livestock such as calves. We do not believe that it is right that

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unweaned calves should face extremely long journeys, sometimes from one end of the Community to the other. Our own research suggests—the noble Lord, Lord Knight, referred to this—that the quality of the transport and the competence of the driver, for example, are as important factors as the overall journey time experienced by livestock.

My noble friend Lord Higgins asked about enforcement and suggested that it was unsatisfactory that this should be entirely in the hands of local authorities. The Animal Health and Veterinary Laboratories Agency and local authorities are responsible for regulation and enforcement action. They inspect livestock transportation on the basis of an assessment of risk and additionally they will investigate claims of illegality or poor transport practices impacting on the welfare of animals. Their inspectors are active at major ports inspecting both imports and exports of horses. They may also inspect horses at the point of loading where they have prior intelligence that there may be welfare concerns. I can tell your Lordships that a successful prosecution involving the export of horses has concluded in Essex in the past few days.

My noble friend pointed to the trade between Poland and Italy and/or Spain. I am grateful to him and to my noble friend Lady Trumpington for calling my attention to a very similar trade between Poland and Germany. These are specific examples of the international trade in horses for slaughter, which is a cause for grave concern. I have looked into it—there was, indeed, a recent TV programme about it—and it looks very much as if my noble friends are tragically right. I have drawn this to the attention of my colleagues at the department and I shall return to the issue in a moment.

My noble friends Lord Higgins and Lord Addington and the noble Lord, Lord Dear, asked whether we will be reviewing the tripartite agreement. Defra has reviewed the risk of importing exotic equine diseases and whether the TPA needs to be amended to mitigate any increased risk. Officials have presented preliminary findings to the Chief Veterinary Officer and to the Animal Health and Welfare Board for England. Following consideration of the AHWBE’s views, proposals will be presented to my right honourable friend the Minister of State, Mr Paice, for consideration.

The noble Baroness, Lady Mallalieu, referred to an increase in the number of unwanted horses as a result of the economic downturn and my noble friend Lady Trumpington also referred to the impact of the economic downturn. I have no doubt that current financial pressure is impacting across all sections of industry. Reported welfare problems include increased dumping of horses and passing horses to rescue centres as they are too expensive to keep. This is directly related to the price of feed. There are also seasonal factors in the reporting of welfare cases: not unnaturally, reports tend to increase during the winter months. Defra remains supportive of the equine industry’s contribution to the economy. The recently created health and welfare strategy group, the equine sector council, will play a valuable role in co-ordinating the views and concerns of the different welfare organisations involved in horse welfare.

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The noble Baroness, Lady Mallalieu, my noble friends Lord Addington and Lady Trumpington and, I think, others referred to the importance of public awareness and publicity generally to our case. The EU’s welfare strategy for 2012-15, published earlier this year, stresses the importance of raising public awareness on animal welfare issues. The EU Council has agreed with the Commission about the relevance of communicating to children, young adults and the public at large awareness of the need for respect for animals and promoting responsible ownership. We will be asking the Commission how it intends to take this work forward in future bilateral meetings with it on implementation of its strategy.

I understand that some international welfare organisations have had some success, specifically in targeting major retail chains in France and Belgium and persuading them to stop selling horsemeat from Mexico and Brazil due to the appalling conditions there. Unfortunately—I have been in communication with my noble friend Lady Trumpington on this—this appears to have resulted in a transfer of the source to Argentina, where welfare conditions are, I am afraid, little better. However, it does demonstrate the value of public opinion in Europe and the value of the work of welfare organisations. Of course, this debate is also helping to give airtime to this important subject.

My noble friend Lord Caithness said rightly that member states are deeply divided on the legislation and whether improvements should be made to it. It is true that a small majority supports the decision by the Commission not to press ahead with changes at the present time. We do not agree and want to see the EFSA recommendations introduced. We are not prepared to give up and I do not believe that we are alone.

My noble friend Lord Caithness and the noble Lord, Lord Knight, referred to the European Commission’s November 2011 report on its review of regulation— I do not know whether they referred specifically to it but they referred to its contents—which highlights severe animal welfare problems during transport persisting. They are right. Reports submitted to the Food and Veterinary Office on its inspections of individual member states demonstrate that the level of enforcement of the legislation indeed varies significantly between them. The European Commission’s proposed solution to these problems involves adopting new implementing rules concerning satellite tracking systems, an increase in the number of inspections to improve existing controls, better reporting on compliance by member states, increased co-operation and communication between the competent authorities and NGOs and the dissemination of Commission guidance on the interpretation of the regulation and development of guides to good practice.

It remains to be seen how far the Commission will go. Like the noble Lord, Lord Knight, I have some doubt about the value of non-binding guides. However, at least it is actively working on a solution, and we will continue to monitor this and bring pressure to bear.

In conclusion, we care a great deal about the welfare of all equines—indeed, all animals. We acknowledge the work that the many equine welfare organisations do in caring for abandoned and badly treated animals, and the campaigns that they run to highlight welfare

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issues and concerns. We owe it to them—as well as, of course, to the animals themselves—to make sure that we do as much as possible at the international level to promote horse welfare. Nearer to home, we look forward to working with the recently formed equine sector council, which we hope will be a fresh and strong voice for the equine sector as a whole.

4.06 pm

Lord Higgins: My Lords, I did not notice what time the debate started, so I am not sure whether I am going to be cut off in full flow. I do not propose to detain the House for more than a few moments. I was very fortunate to be able to obtain time for the debate and I am most grateful to all those who contributed, many of them with more expertise and long-standing involvement in these problems than I.

It has been an extremely helpful debate. We are fortunate in having a Minister who clearly has his heart in the right place on this issue. It is very much a question of our encouraging HMG and, in turn, HMG persisting in their efforts within the European Community. I will read again with interest what my noble friend said about inspection of this trade en route. It is not my impression from the evidence that has been produced that the situation is quite as good as he seemed to suggest, even though it may be as far as this country is concerned. We urge him to do all that he can within the complex negotiations in Europe and particularly to give priority to the question of journey times, which is crucial and could perhaps be facilitated by the use of more technology in monitoring what is actually going on.

On the tripartite agreement, it seems astonishing that the original agreement was extended in the way in which it has been. As the noble Lord, Lord Dear, pointed out, all one has to do is to go back to the original intention of that agreement. There is no great drafting problem with that; we simply revert to the original intention. I very much hope that my noble friend will consult the tripartite group to ensure that the other two will agree to go back to the original proposal. It would be a serious risk to the whole equine industry and, indeed, to many horse lovers—not least youngsters in this country—if we were suddenly to find that there was an outbreak of disease which involved the need to cull a large number of horses. I hope that my noble friend will see what he can do within Europe and with the other two signatories to the tripartite agreement.

I am most grateful to all those who have taken part in the debate and to the Minister for his response. We shall continue to encourage him to do all he can to further the needs of the people involved with this trade and horse lovers generally.

Motion agreed.

Army 2020


4.10 pm

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever): First, I am sure the House will wish to join me in paying tribute to the aircrew from 15 Reserve Squadron, based at RAF

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Lossiemouth, who were involved in the Tornado GR4 aircraft incident on Tuesday—Flight Lieutenant Hywel Poole, who was killed, and Squadron Leader Samuel Bailey and Flight Lieutenant Adam Sanders, who are still missing and must be presumed dead. My thoughts, and I am sure those of the entire House, are with their loved ones at this difficult time and with the fourth member of the squadron involved in the incident, who is currently in a serious but stable condition in hospital.

In addition, I am sure the whole House will also wish to join me in offering sincere condolences to the families and friends of guardsman Apete Tuisovurua and guardsman Craig Roderick of the 1st Battalion Welsh Guards, and Warrant Officer Class 2 of the Royal Corps of Signals, who were killed on operations in Afghanistan recently. My thoughts are also with the wounded, and I pay tribute to the courage and fortitude with which they face their rehabilitation.

The Statement is as follows.

“With permission, Mr Speaker, I wish to make a Statement about the future structure of the British Army.

I know that I speak for the whole House in expressing our gratitude for the superbly professional job our Armed Forces are doing in Afghanistan and around the world and in paying tribute to their courage, commitment and self-sacrifice in doing it. We have seen again this week, in all too stark contrast, the risks they take on our behalf, both in Afghanistan and at home, and the price that all too many of them pay.

The operation in Afghanistan remains the MoD’s top priority, but our combat role in Afghanistan is coming to an end, and with it, the predictability of the Army’s main effort. Looking beyond 2014, we need to restructure to face an increasingly uncertain world, ready to intervene wherever and whenever to protect our national interest and with an ability to project force and prevent conflict through “agile and adaptable” Armed Forces, as set out in the 2010 strategic defence and security review.

We also need to address the reality of the fiscal situation and ensure our Armed Forces are sustainable and affordable. My predecessor, my right honourable friend the Member for North Somerset, announced to the House last July that, as part of the measures to bring the defence budget back into balance and to eliminate the £38 billion black hole we inherited from the last Government, the future strength of the Army would be around 120,000, including an integrated trained reserve of 30,000—a total trained strength not dissimilar to the pre-SDSR level.

So this Statement is not about the size of the Army; that decision has already been announced. It is about how we structure the future Army and how we support it to deliver the greatest possible military effect with the manpower available.

The Chief of the General Staff could have taken the attitude that a given reduction in regular manpower must inevitably lead to a similar reduction in military capability, but he did not. He has grasped the opportunity

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presented by the end of the Afghan campaign to fundamentally review the structure of the Army and its relationships with the reserves and its commercial contractors.

A team led by Lieutenant General Nick Carter has produced Army 2020, a detailed plan for a future Army with two distinct elements: reaction forces and adaptable forces. The reaction forces will generate high-readiness contingent capability, trained and equipped to undertake the full spectrum of intervention tasks, including provision of forces for the first phases of any future brigade-scale enduring operation. The reaction forces will be based around 16 Air Assault Brigade and three armoured infantry brigades, and equipped with new or upgraded armoured fighting vehicles.

Given the high readiness of this force, it will be made up predominantly of regular troops. The reaction forces will form a powerful UK contribution to a coalition effort and act as the initial land component of a joint war-fighting operation, alongside air and maritime components. At best effort, it will deliver a division into the field. The remaining infantry and armoured units will form the adaptable forces, a pool of regular and reserve units, commanded by seven infantry brigade headquarters, capable of generating forces for tasks, including overseas capacity building, homeland resilience, the Army’s standing commitments, such as Cyprus, Brunei, the Falklands and ceremonial duties, and, when required, generating the further brigades to sustain any future enduring operation.

Over a full career, soldiers and officers in infantry and armoured units will expect to serve in both reaction and adaptable forces. Both the reaction forces and the adaptable forces will include force troops, the artillery, engineers, signals, REME, logistics, intelligence, medical and other specialist units upon which the Army in the field depends and without which it could not function. To achieve this design while reducing the size of the Regular Army demands a much higher level of integration of the regular and reserve components. In the past, the reserve may have come to be seen by some as an add-on to the Army; in future, the reserve will be a vital integrated component of the Army.

The requirement for greater integration was a principal conclusion of the independent commission set up to review the UK’s Reserve Forces, led by the Vice Chief of the Defence Staff, General Sir Nicholas Houghton. I am most grateful to the members of the commission, including my honourable friend the Member for Canterbury, for their work in producing this invaluable report.

I can tell the House today that we accept the thrust of the commission’s recommendations. In the interest of keeping this Statement to a reasonable length, I have this morning laid a Written Ministerial Statement setting out how we intend to proceed with our plans for enhanced reserves. But I can tell the House that the process of reshaping the reserves for their future role has already begun, and that I have set up an independent scrutiny team to assess its progress, led by Lieutenant General (Retired) Robin Brims, chairman of the council of the Reserve Forces and Cadets Association, who will make his first report in the summer of 2013.

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Let me now return to the future structure of the Army. In reducing the size of the regular Army in line with the announcement made last July, there must, inevitably, be a reduction in the number of units. In headline terms, there will be 17 fewer major units as a result of this announcement. These reductions will fall across the various arms and services of the Army.

The importance of the regimental system to the British Army and its contribution to the fighting spirit which delivers a battle-winning edge is very clear. I understand the dismay felt particularly by former members at the withdrawal of units that may have illustrious histories and indeed, antecedents. I understand, too, the attachments of the regions and nations of the union to specific units within the British Army, and their pride in those units.

In designing the new structure, the Army has sought to be sensitive to these issues, but I am also very clear that the Army that emerges from this process must be a forward-looking, modern fighting machine, remaining best of its class, respecting the past and honouring its proud history, but looking resolutely to the future, with its principal focus the brave men and women currently serving, and the units in which they serve.

The Army has approached this task methodically, carefully redesigning the way it delivers force support; building up a whole force concept that not only gives effect to the integration of the reserves, but also the greater use of contractors—sometimes using sponsored reserves—to support operations, maximising the combat effect of the regular manpower available.

I should emphasise to the House that the withdrawal or merger of units is completely separate from the redundancy process. An individual in a unit which is withdrawn or merged is no more or less likely than any other individual with similar skills and service record to be selected for redundancy. When units are withdrawn, their personnel are reassigned to other units, where possible within the same regiment. Nor does anything I shall announce today prejudice the basing review which is looking at the optimum future basing pattern for our Armed Forces units around the United Kingdom. I will list the changes to individual units, starting with the Force troops, where 3-9 Regiment Royal Artillery, 2-4 Commando Engineer Regiment, 2-8 Engineer Regiment and 6-7 Works Group will be withdrawn. In the Army Air Corps, 1 Regiment and 9 Regiment will merge in preparation for equipping with Wildcat. In the Royal Logistics Corps, 1 and 2 Logistics Support Regiments will be withdrawn and 23 Pioneer Regiment disbanded, with its functions assumed by other units. 1-0-1 Force Support Battalion REME, and 5 Regiment Royal Military Police will also be withdrawn.

Army 2020 calls for a greater focus on mobility and the ability to mount expeditionary warfare, based around the air-assault and armoured infantry brigades of the reaction forces. This evolution of our posture still further away from the Cold War lay-down inevitably means a reduction in the size of the Armoured Corps, from 11 units to nine.

After careful consideration of all the factors, including regional distribution and the requirement for a balance of capability, the Army has decided that this will be

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achieved by an amalgamation of the Queen’s Royal Lancers with the 9th/12th Royal Lancers and a merger between the 1st and 2nd Royal Tank Regiments.

Turning to the infantry, I can confirm that no current regimental names or cap badges will be lost as a consequence of the changes I am announcing today. Five infantry battalions will be withdrawn from the Army’s Order of Battle, all of them from multi-battalion regiments.

In selecting battalions for withdrawal, the Army has focused on the major recruiting challenges it faces in the infantry. It has looked carefully at recruiting performance, not just at a point in time, but over the last decade; at recruiting catchment areas and at demographic projections for the age cohort from which infantry recruits are drawn. It has also considered regional and national affiliations, the merger and disbandment history of individual battalions and existing commitments of battalions to future operations. The overriding objective has been to arrive at a solution which those currently serving in the Army will see as fair and equitable.

The conclusion of this process has been that 2nd Battalion the Royal Regiment of Fusiliers; 2nd Battalion the Yorkshire Regiment; 3rd Battalion the Mercian Regiment; and 2nd Battalion the Royal Welsh will be withdrawn from the Order of Battle.

In addition, the Royal Regiment of Scotland will see one battalion reduced to a single company. Ministers have agreed with the CGS that, in order to raise the profile of the Royal Regiment of Scotland, and of the Army, in Scotland, a public duties company will be created, returning sentries to Edinburgh Castle and the Palace of Holyroodhouse on a permanent basis for the first time in years. Accordingly, the Argyll and Sutherland Highlanders, 5th Battalion, the Royal Regiment of Scotland, will be re-roled as a public duties company.

These withdrawals and mergers, unwelcome as they will be in the units affected, are fair and balanced and have been carefully structured to minimise the impact of the regular manpower reduction and maximise the military effectiveness of the Army. The reduction in regular forces will be offset by the enhanced role of the reserves and the whole force concept, which optimises the use of contractors both in peacetime and on operations.

The Chief of the General Staff and his team assess that this configuration will mean that Army 2020 can deliver the level of capability agreed in the SDSR. That is an excellent outcome given the appalling state of our inheritance at MoD, and I am extremely grateful to the CGS and the senior leadership of the Army for the constructive and intelligent way in which they managed this process. What I have announced today, while difficult and challenging for those directly affected, represents a vision for the future of a balanced, capable and adaptable British Army that will remain best in class.

The British Army has seen several transformations since the end of World War II: from wartime structure to Cold War; from conscription to professional force;

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and the downsizing at the end of the Cold War in Options for Change and Frontline First. Now it is embarking on another. The values of the Army have endured through previous transformations. They have sustained it through a decade of continuous campaigns. Those same values—courage, discipline, respect, integrity, loyalty and selflessness—will sustain it through this transformation and, no doubt, through many further iterations in the decades and centuries ahead, as this most enduring of British institutions looks confidently to a future in which it continues to adapt to an ever-changing world. I commend this Statement to the House”.

My Lords, that concludes the Statement.

4.27 pm

Lord Rosser: My Lords, I associate this side of the House with the tributes paid by the Minister to the three air crew who were involved in the Tornado GR4 aircraft incident on Tuesday and who were killed or are missing, presumed dead; and with the tributes paid to the three members of our Armed Forces who were killed recently on operations in Afghanistan. We, too, extend our sincere condolences to their families and friends at this difficult time. Our thoughts are also with the fourth member of the Tornado squadron, who remains in hospital.

I thank the Minister for repeating the Statement made in the other place by the Secretary of State. We endorse the comments about the commitment and professionalism of our Armed Forces. The Secretary of State’s Statement—true to form—contained two references to the financial situation, one near the beginning and one near the end. Claims about a £38-billion black hole continue to be made. However, this figure has not been supported by the National Audit Office; it appears to assume no increase in financial resources over a 10-year period, when even the Government’s SDSR stated that the defence budget would rise in cash terms; and, despite requests from the Commons Defence Select Committee, the Government failed to produce a breakdown of their figure to show how it had been calculated. One can only draw the obvious conclusion that the figure has no substance.

I will raise a number of points in view of the fact that the announcement today was primarily financially driven. As the Minister said, the withdrawals and mergers will hardly be welcomed in the units affected. The Statement said that it was about how we should structure the future Army and support it to deliver the greatest possible military effect with the manpower available. Later on the Statement says that,

“no current Regimental names or cap badges will be lost as a consequence of the changes”.

Can the Minister say which came first in determining the Government’s plans for the future structure of the Army? Was it the need to ensure that the future Army looked at as a whole would have the greatest possible military effect with the manpower available, or was it the need to ensure that no regimental names or cap badges would be lost?

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The Statement indicates, as indeed did the strategic defence and security review, that reservists will play a bigger role in future operations, since the number of reservists is rising while the number of regular troops is being reduced to 82,000, which is well below the figure indicated in the 2010 SDSR. Bearing that in mind, the question of how long a future operation could be sustained is highly relevant, not least in the light of the defence planning assumptions referred to in the SDSR. Reservists may be able to be away from their regular employment for a few months, but there may be greater difficulties over their availability if they are required to be away for longer periods or for regular and sustained periods of a few months. It is not just a case of how long an employer might be prepared to accept the absence of an employee, but from the employee’s point of view it is also about the impact that regular and extended absences might have on career development, including progression within the organisation or company where they are employed.

For how long and how frequently do the Government envisage that reservists will be deployed in support of an extended or enduring operation? The Secretary of State’s Written Ministerial Statement today refers to reservists accepting a liability for up to six months’ deployed service plus pre-deployment training in a five-year period. Is that the maximum commitment that will be expected of reservists under the Army 2020 proposals, even if we are involved in the maximum number of operations and interventions at any one time laid down in the 2010 SDSR? If the role of reservists is to be enhanced, what discussions have there been with employers’ organisations on the implications for them? I understand that the answer may well be, effectively, none.

The Statement the Minister has repeated said that it was not about the size of the Army, but it is when compared with what was envisaged at the time of the strategic defence and security review, which announced cuts of 7,000. Since then the Government have announced an additional 13,000 Army redundancies. The SDSR was based on an assumption that we could undertake one major and two lesser operations at any one time. It said that the Armed Forces in the future would be sized and shaped to conduct an “enduring stabilisation operation” at around brigade level involving up to 6,500 personnel with maritime and air support as required, while conducting one non-enduring complex intervention involving up to 2,000 personnel and one non-enduring simple intervention involving up to 1,000 personnel, or, for a limited time and with sufficient warning, committing all our effort to a one-off intervention of up to three brigades with maritime and air support involving around 30,000 personnel. Does this Armed Forces capability set out in the 2010 SDSR still hold in the light of the Statement today about the future shape and structure of the Army and the further reductions in Regular Army personnel announced since the SDSR, and is it still the situation in the light of the higher percentage of our future Army personnel who will be reservists?

What is the maximum length of time for which we could conduct the “enduring stabilisation operation” referred to in the SDSR in the light of the Statement

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today and statements made since the SDSR about the size and structure of the Army, and is it a shorter period of time than that envisaged at the time of the SDSR? How long is “for a limited time” for the one-off intervention referred to in the SDSR in the light of the Statement today and statements made since the SDSR, and is that now a shorter period than that envisaged at the time of the SDSR?

The Statement lays out the future structure for the Army, but just how resilient is that structure? There is nothing in the Statement to suggest there has been any risk analysis undertaken in the light of developments in the last couple of years since the 2010 SDSR, despite those two years hardly being ones of stability in the world around us. Neither does there appear to have been a risk analysis of the consequences of our Army relying to a greater degree than before on reservists as opposed to regular troops. The Statement gives every impression of simply driving on from the 2010 SDSR without any obvious regard to the impact of changes and developments that have taken place since the SDSR.

The Statement is about the future shape and structure of the Army. What happens if the 2015 SDSR indicates a need for operations to be undertaken by the Army which are radically different from those indicated in the 2010 SDSR and this Statement? Is this new structure for the Army capable of embracing radically different operations? For example, will the split between reaction forces and adaptable forces still be relevant? Would the split between regulars and reservists still be appropriate, or is this a shape and structure that might not survive the 2015 SDSR? It may be that this Statement is, in reality, the beginnings of the 2015 SDSR. Will the 2015 SDSR be based on an assessment of the threats we face to our security and to our interests, with the numbers of Armed Forces personnel and the shape and structure of the Army being determined by the requirements and capabilities needed to meet those threats? Or will it be the case that today’s Statement on shape and structure sets out the kind of operations, in size and areas of capability, that the Army is geared to meet and that the rest of the 2015 SDSR will have to fit round it?

I sense a real risk in the smaller, reshaped and reconfigured Army that this Statement reveals. It appears to be based on an assumption that, with our withdrawal from Afghanistan, our commitments will reduce and remain at a lower level despite the current uncertainty and instability in the world. It also seems that, while a much heavier reliance will be placed on reservists in future, little has been done to consider and address the likely practical problems that will arise and whether, in reality, we will be able to meet effectively the capabilities that this Statement requires of the Army, including the commitments on the number and types of operation that could be conducted at any one time, as laid down in the 2010 SDSR. There is a strong sense that key parts of this Statement are expressions of hope rather than conclusions based on hard and robust evidence. I hope the Government’s gamble pays off, because if it does not it is our country and our people who will be exposed to the potentially very serious consequences.

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4.37 pm

Lord Astor of Hever: My Lords, the noble Lord started by talking about the £38-billion black hole. I do not want to score political points at the Dispatch Box but neither will I take any lectures from Labour on the £38-billion black hole. Defence must take its share in helping to reduce the deficit and our debt. Without a strong economy and stable public finances, it is impossible to build and sustain the military required to project power and maintain defence.

We have had to take difficult decisions. I should rephrase that: the Army and the Chief of the General Staff have had to take some very tough decisions. Despite the cuts that have been announced, Army 2020 will deliver approximately 90% of its current combat effect. The Army has produced an excellent paper, Transforming the British Army, which I commend to all noble Lords. In the light of the interest in the changes today, I have asked for copies of it to be put in all Whips’ offices. We are very clear that tradition and history must be respected, but it is also important to look to the future and ensure that the changes are seen as fair by those brave men and women currently serving and risking their lives.

I wrote as fast as I could, but I may not be able to answer all of the noble Lord’s questions. If not, I will certainly write to him. His first question asked what criteria were used to decide which units would be affected. A number of criteria have been taken into account before making final decisions, all of which presuppose the retention of a regimental system largely based on regional connections that continues to serve the British Army so well. These include maintaining balance across the broader armoured corps and infantry regimental structure and the capability roles within it, enabling efficient management of personnel, ensuring parity of opportunity and development for soldiers and officers, balancing regionally based regimental recruiting demand, looking back at the past 10 years’ recruiting performance, looking at the next 10 years’ demographics of regional recruitment pools to retain an effective regimental system, taking account of previous decisions on mergers and deletions, and limiting the number of cap badges affected, thereby ensuring a solution that those serving in the Army will see as fair and sustainable under the circumstances.

The noble Lord asked what underpinned these changes. The 2010 strategic defence and security review set out how the Armed Forces would be restructured to meet current threats, including managing risks before they materialise, and maintain a broad spectrum of defence capabilities. The SDSR also directed that the Army should return from Germany by 2020. Subsequently, further work to balance the books in defence, together with the report of the independent commission on the Reserve Forces, was led by the then Defence Secretary who announced in 2011 a requirement for an Army of 120,000—82,000 regulars, 30,000 trained reserves and 8,000 reserves in training.

The noble Lord asked about the availability of reserves and our discussions with employers. I can assure him that considerable discussions are taking place and have taken place with employers. If this is

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going to work, we have to integrate the reserves. We realise how important that is. Also, the Government must get off the mark and be part of the solution. He asked whether Army 2020 reversed the SDSR decisions. The answer is no. Army 2020 redesigns the Army to be able to undertake the task specified by the SDSR, but with fewer regulars and an increased number of better integrated reserves.

The noble Lord asked whether the Army is able to adapt. The answer to that is yes, of course. I have spoken to a number of officers and soldiers, and they are all very excited at the changes and are up for the challenge. I have also spoken to a number of reserves who are also excited about the changes and very much look forward to the future challenges. He asked about planning assumptions. Army 2020 still delivers the requirements of existing defence planning assumptions, and we cannot of course predict the findings of the 2015 SDSR. He asked what came first when decisions to make these changes were made. The reductions were driven by the requirements in the new Army 2020 structure, then by consideration of which units were the most sustainable, while avoiding the loss of cap badges.

The noble Lord asked about the five-year period, and I can assure him that there will be no change to the existing reserve mobilisation rules. Finally, he asked: how long is a long intervention? Army 2020 is capable of a long-term enduring operation.

I hope that I have answered most of the noble Lord’s questions, but I will certainly write to him on any others.

4.43 pm

Lord Touhig: My Lords, a year ago next Tuesday, the Prime Minister stood up to address the National Assembly for Wales in Cardiff and said he wanted to record his gratitude to the brave Welsh regiments. He went on to say:

“From the trenches of Northern France to the mountains of South Korea they have fought and died in defence of our nation and our values”.

He concluded by saying,

“I will always be an advocate for this country and everything it has to offer”.

Wales can offer no greater sacrifice than the lives of her young men in defence of our country as we have seen in Afghanistan. With the Prime Minister’s words fresh in my mind—and perhaps more in despair than in hope of an answer—what more could we have done in Wales to protect the Welsh regiments from these government cuts, short of threatening a referendum on independence?

Lord Astor of Hever: My Lords, I share the noble Lord’s respect for the Welsh regiments. The CGS, supported by his command team, has made very hard choices in deciding where reductions are made to bring the Army size down to 82,000, and the Army has rigorously applied a set of criteria to make these difficult decisions. They were based on capability, recruiting demography both now and in the future, appropriate national representation and solutions that

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do not undermine regimental principles, established in the last round of changes in 2004. Previous mergers and deletions were also taken into account, to ensure that decisions were seen as fair by as many people as possible.

Lord Lee of Trafford: My Lords, from these Benches I join the earlier tribute to the Tornado crews lost in Scotland and to those soldiers killed in Afghanistan. Perhaps I may say that just having a few minutes to question this important Statement is extremely unsatisfactory and almost an insult to our Armed Forces. I hope that before too long we will have a proper debate on our Armed Forces and that my noble friend will discuss this with the Leader of the House. It is somewhat ironic, I would suggest, that in the Statement reference is made to “an increasingly uncertain world”, yet today we are talking about reducing significantly the size of our Regular Forces.

On the question of the reserves, I have three specific questions. First, how many members of the Regular Forces does he expect will be involved in training 30,000 new reservists? Secondly, does he believe that in future we will probably need a specific covenant to protect our Reserve Forces from things such as totally unhelpful and unprincipled employers? Thirdly, where will all this new training be done, given that we seem to have a significant problem with our bases? If I interpret correctly the article today in The Times about bringing back our forces from Germany, this seems to be on the backburner, with a question mark over it.

Lord Astor of Hever: My Lords, my noble friend mentioned the possibility of a debate and I would certainly welcome that. I will have a word with our Chief Whip and see if it would be possible later in the year. My noble friend mentioned the reserves and employers. The Ministry of Defence is committed to working with employers to understand their views on its use of reservists, the impact of legislation and a better understanding of what an employer can realistically sustain in future. We will publish a consultation paper in autumn setting out our proposals. Following that, we will be able to make informed decisions early next year on the terms and conditions of service, employer engagement, the Government’s commitments as an employer and any legislation necessary.

My noble friend asked how many people would be involved in training. I cannot come up with a specific figure, but this is a good example of where integration of the reserves with the regular Army will be so important and we will use a number of the reserves to help with the training. As for where they would train, we have not yet decided what will happen in Germany, but there are very good training areas there which we might continue to use after 2020. The SDR talks about bringing all our troops back from Germany by 2020. As my noble friend knows, there are some brilliant training areas in this country. He and I have been to Salisbury Plain, Otterburn and lots of different training areas. In Wales, I spent a lot of my time in the Army at Sennybridge with its beautiful countryside. So there are a lot of training areas and I hope that answers all my noble friend’s questions.

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Lord Ramsbotham: I, too, thank the Minister for his reply and declare two lateral interests with regard to the Statement. First, as Adjutant General to the Army, I had to implement the Options for Change instruction to reduce the Army by a third over three years. Let us remember what that meant in terms of all the people who were in the Army. Secondly, Lieutenant General Nick Carter was at one time my ADC and later MA. He, his father and I served together in the same regiment, the Rifle Brigade, whose tie I am proud to be wearing today.

I have two things to say. First, I think like many of us, I deplore the leaking of this Statement during the past few days, because I wonder whether those responsible for it realise the damage that it has done to the morale and well-being of the Armed Forces whom they claim to support. I hope that the Minister will take every possible step to discover who is responsible for this and take appropriate action. It must not be allowed to happen.

The noble Lord, Lord Lee, asked for a debate on defence. I welcome that, because the other thing that I wanted to say was about striking the balance between the Armed Forces. I wonder whether the Army has gone a step further than the other two forces. If there is any restructuring or rebalancing to be done, will the Army be reconsidered in the light of what happens?

My question relates to the last page of the Statement, which says that the vision is that the Army will remain “best in class”. Who else is in that class?

Lord Astor of Hever: My Lords, the noble Lord mentioned General Nick Carter and the Rifles. The Rifles are a very good example of a change that has really worked. All the people I meet who serve in the Rifles are hugely proud of that regiment and of the successful change that it has made.

The noble Lord mentioned the leaks, which did not come from the Ministry of Defence. I was told about these changes only yesterday. A very small group of people in the Ministry of Defence knew of them, so I do not know where the leak has come from. I will certainly go back to the department and see whether we cannot do more to stop such leaks.

We could debate “best in class” all afternoon, but I have met quite a number of officers and reservists in the past 24 hours who are hugely excited about the challenges of the future and really feel that they are up to it.

Lord Crickhowell: My Lords—

Lord Anderson of Swansea: My Lords—

Baroness Verma: My Lords, I think that it is the turn of the Conservative Benches.

Lord Crickhowell: I fully understand why this is being done and I fear that £38 billion is probably an underestimate. The noble Lord, Lord Ramsbotham, referred to leaks. There is one other feature of this Statement which I regret: it disguises the historic names which are disappearing. My noble friend referred to

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“current regimental names” and the Statement named the 2nd

and 3rd Battalions. However, the 1st Battalion The Royal Regiment of Wales, carries the title “1st Battalion Royal Regiment of Wales (Royal Welch Fusiliers)”. I do not know, now that the 2nd Battalion is to disappear, whether that historic name can be retained or what other historic names can be retained. Luckily, we have retained, I believe, in the Royal Regiment of Wales the historic flash, the hackle and other regimental insignia. I hope that in future Statements an explanation is given of exactly which historic regiments are going and how their traditions are to be maintained as far as possible, because they are of great importance when it comes to pride and to recruiting in the areas concerned.

Lord Astor of Hever: My noble friend makes a very good point. This is not a matter for politicians; it is a matter for the Army. It must decide how these regiments will go forward and whether antecedents will be included. I go back to the point I made about The Rifles and how successful the term “The Rifles” has been and how proud soldiers serving in The Rifles are of that.

I can come up with a better answer for the noble Lord, Lord Ramsbotham, about the best in class. Clearly, we are not able to compete with the United States but the British Army is the partner of choice within NATO for its strength and capability.

Lord Dannatt: My Lords, the Statement quite rightly draws favourable attention to the work of the Chief of the General Staff. I certainly echo that. He and his staff have made a very good fist out of the problem that was passed to them. But does the Minister accept that there are elements of risk that are beyond the capability of the Chief of the General Staff to manage himself within current Army resources? We all know that in the past two years of the current Government major decisions have been made on defence—in shorthand terms, prioritising a number of equipment programmes over manpower. That has brought us today to the announcement of a reduction in the size of the Army by 20%—a very sobering day for the Army, whichever way you look at it. Will the Minister assure the House that he will keep these elements of risk under review?

The risks I point to in particular are whether the noble intention to furnish the size of the Army up by a further 30,000 from the reserve will come about successfully. One hopes it will but there is an element of risk in it. Secondly, the Army’s equipment also carries a fair degree of risk. It lacks a protected manoeuvre capability for those armoured infantry brigades. Protected mobility has come out of Afghanistan with the armoured vehicles that have been provided for that operation but battlefield manoeuvre is woefully lacking and unlikely to be fielded until 2022. So will the Minister assure the House that these areas of risk will be kept under review, particularly in the context of the strategic defence review of 2015?

Lord Astor of Hever: My Lords, I cannot commit any future Government to what comes out of the SDSR in 2015 but I can assure him that we, and I think any sensible Government, will keep all these issues under review. On the noble Lord’s point about

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risk, I discussed this at some length with the Chief of the General Staff and he is very confident that he is on top of this issue and that we can handle any risk in future.

Lord Anderson of Swansea: My Lords, following on from the point made by the noble Lords, Lord Ramsbotham and Lord Crickhowell, would it be fair to say that the MoD is the only vessel which leaks from the top? Referring to the reserves and the points made, clearly the success or otherwise of the new proposals depend on the enhanced role envisaged for the Territorial Army, and that in turn depends on the co-operation of employees both in the private and the public sector. Is it not a fact that more and more companies are not headed by people with military experience but are foreign-owned and therefore less likely to understand the national needs here? What is the position in respect of those companies, particularly if there are longer periods abroad? As for the public sector, what estimate has been made of the availability of staff to cover shortage areas, such as anaesthetists, at a time when there are increasing pressures on our hospital services? Also, many reservists and particularly their families do not envisage these longer periods of service.

Lord Astor of Hever: My Lords, the noble Lord makes a very good point. Out in Afghanistan at the moment we rely on a lot of reserve medics. I was out in Camp Bastion in March and I met a number of anaesthetists, surgeons and people playing vital medical roles, many of whom are reserves who help the regulars.

The noble Lord talked about leaks. This leak did not come from the Ministry of Defence. I can assure the noble Lord of that.

The noble Lord talked about the enhanced roles of the reservists. In the Statement there was mention of the independent scrutiny team to assess the progress that we are making with the reserves. This is led by General Robin Brims, who is chairman of the Council of Reserve Forces’ and Cadets’ Associations. He will make his first report in the summer of 2013. This is an issue which we are taking very seriously and it is not going to work unless the reserves are fully integrated into the regular Army.

Lord Burnett: My Lords, I was concerned to hear that 24 Commando Regiment Royal Engineers is to be withdrawn. Can my noble friend tell me which formation will fulfil the engineer functions in support of the 3rd Commando Brigade Royal Marines?

The Statement refers to redundancies which are happening and which will follow. As my noble friend said, the British Army has shown the highest standards of professionalism, courage and devotion to duty, particularly over the past 15 years of continuous and hazardous war-fighting. If it is decided that a member of the Armed Forces is to be made compulsorily redundant after 15 years of service, and is offered a financial package actuarially calculated to be worth, say, £100,000, whereas if he or she had served for 16 years it would have been worth £110,000 or,

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more likely, more, the very least our Government should do is to compensate that person on a pro rata accrual basis.

I know that my noble friend will share my concerns and agree that generosity, fairness and integrity should be the underlying principles in these matters. Will he look into this matter as one of urgency to ensure that the Government’s deeds match their words?

Lord Astor of Hever: I understand that 24 Commando Engineers is an Army regiment that supports the Royal Marines. Although we are withdrawing the regiment, we will leave behind a squadron, which has only 20 fewer people than a regiment, so it will not be a serious change.

On my noble friend’s second question, I will look into the matter, but it is inevitable that some of those selected for redundancy may leave without completing sufficient service to qualify for an immediate pension or equivalent. The Armed Forces pension scheme recognises that, by paying significantly larger tax-free redundancy compensation lump sums to those who narrowly miss out on immediate incomes than to those who qualify.

Any pensions rights that have been earned will also be preserved, meaning that an index-linked pension and further tax-free lump sum become payable at the age of 60 or 65, depending on the pension scheme. Whereas the majority of other ranks normally have to serve 22 years before receiving immediate income, the Armed Forces redundancy scheme has reduced that requirement to 18 years, a concession of four years which will enable many redundantees to receive an immediate income for which they would otherwise not have qualified.

The Earl of Caithness: Will my noble friend tell the House by how much the Royal Regiment of Scotland will be reduced?

Lord Astor of Hever: One battalion, which I think is about 650, will go down to company strength. That will be an integrated company that will perform the ceremonial at Holyrood and Edinburgh Castle and will take soldiers from the rest of the Scottish regiments.

Lord Stirrup: My Lords, if the plans for Army 2020 are to have any chance of success, we shall need a fundamental change in this country of culture, not organisational process, with regard to the status of reservists in society and the workplace. Meanwhile, the Ministry of Defence has just announced a triennial review of the National Employer Advisory Board, a crucial body contributing to the development of reserve policy. Rather than a routine triennial review at this stage, would it not make sense to seize the opportunity to bring together employers, reservists and regulars to work out a plan to achieve the culture change without which Army 2020 simply will not work?

Lord Astor of Hever: My Lords, the noble and gallant Lord makes a very good point about employers. A lot of discussion is taking place with employers.

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As I have said twice, we attach much importance to our relationship with employers. This will not work unless we bring them on side. A lot is happening, but I would be very interested to hear any suggestions from the noble and gallant Lord.

Sexual Offences Act 2003 (Remedial) Order 2012

Copy of the SI19th Report from Human Rights Committee1st Report from Human Rights Committee

Motion to Approve

5.04 pm

Moved By Baroness Stowell of Beeston

That the draft order laid before the House on 5 March be approved.

Relevant documents: 19th Report from the Human Rights Committee, Session 2010–12; 1st Report from the Human Rights Committee.

Baroness Stowell of Beeston: My Lords, the purpose of this debate is to consider the two statutory instruments laid in draft before the House by the Government under, or in relation to, the Sexual Offences Act 2003. The first is the Sexual Offences Act 2003 (Remedial) Order 2012, which sets out the Government’s response to the Supreme Court ruling in F and Thompson. The second is a set of regulations that will strengthen the notification requirements for registered sex offenders. This follows a public consultation carried out last summer by the Government. I shall address each instrument in turn.

Currently, where a sex offender is sentenced to imprisonment for a term of 30 months or more under Part 2 of the Sexual Offences Act 2003, they will be subject to indefinite notification requirements for life, with no possibility of a review. In other words, on completion on his prison sentence a serious sex offender is placed on what is commonly known as the sex offenders register for life. On 21 April 2010 the United Kingdom Supreme Court made a declaration, following an appeal to it made by claimants known as F and Thompson, that the requirement for indefinite notification—also known as life on the sexual offenders register—with no opportunity for review is incompatible with Article 8 of the European Convention on Human Rights, which concerns the right to a private life and family life. To put it another way, the Supreme Court ruled that if a person is included on the sex offenders register for life, they should at some point during their lifetime have the right to request that their inclusion on the sex offenders register be reviewed. I stress the word “reviewed”. They have a right to request a review, not a right to be removed from that register.

Our constitutional arrangements are such that when the highest court of the land identifies an incompatibility with the European Convention on Human Rights, the Government of the day, whoever is in power, take remedial action. This is for various reasons, not the least of which is to ensure that the Government are not left vulnerable to further legal proceedings, potentially involving millions of pounds of taxpayers’ money. All that said, in February last year the Home Secretary

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and the Prime Minister made it clear that the Government would do only what was necessary to remedy the incompatibility declared by the court.

When considering the Supreme Court’s decision, the Government, in deciding what action to take, wanted to ensure that we struck the right balance: putting public protection first and foremost while acknowledging that these offenders also have a right to request a review of the length of time that they spend on the sex offenders register. This approach was reflected in the Government’s initial proposal to make a remedial order to remove the incompatibility, which was laid before this House on 14 June last year. The Joint Committee on Human Rights considered our proposal and published its recommendations in its first report on 13 October last year. Its most significant recommendation was that, in order to ensure a sufficiently independent element to the review process, our proposal should be amended to provide either that the review be conducted by,

“an independent and impartial tribunal”,

by which it meant the courts, or that there be a,

“right of appeal from the decision of the police to an independent and impartial tribunal”,

by which again it meant the courts.

We were grateful to the JCHR for its report, which we considered in detail. As I have said, the Government have been clear throughout that, in removing the incompatibility, public safety remains the first priority. After careful consideration, the Government decided not to accept the JCHR’s recommendation that the review be led by the courts. The Government remain of the view that the police are best placed to carry out the initial assessment of the level of risk posed by the offender, in conjunction with other bodies through the Multi Agency Public Protection Arrangements, otherwise known as MAPPA. We did, however, accept that it was proportionate to amend the remedial order to allow for the provision for a right of appeal from the police decision to the magistrates’ court. After amending the remedial order to include the provision for a right of appeal to the magistrates’ court, the Joint Committee on Human Rights published its second report in May this year. We are pleased that the Joint Committee accepts in this report that our proposal now remedies the incompatibility identified in the Supreme Court’s ruling.

I shall take a moment to explain how the order will work in practice. As I have already said, it applies to individuals who are subject to notification requirements for life, under the 2003 Act. This means, in most cases, those who have committed the most serious offences listed in Schedule 3 to the 2003 Act, which include, for example, rape and sexual activities involving children.

Let me be clear. Offenders will continue to be placed on the sex offenders register for life, just as they are now. They will not come off the register automatically. The remedial order only provides a mechanism by which a sex offender can apply for a police review of whether they should cease to be on the register. The onus is always on the offender to make the application and to demonstrate that they no longer pose a risk. This means that an offender will be required to submit an application to the police seeking a review of their

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indefinite notification requirements. This will be only once a fixed period of time has elapsed following the offender’s release from custody. For adults, we have proposed that this period of time will be 15 years; for a child it will be eight years.

We know that if an offender is to re-offend after completing their prison sentence, it is in the early years of release when it is most likely that that will happen, the majority of these taking place within 10 years of release. That is why our proposal ensures that no adult sex offender will be able to apply for a review until 15 years after they have been released from custody. That will be their first opportunity.

This remedial order ensures that a robust review, led by the police, in conjunction with other agencies, will be carried out so that a full picture of the risks to the public can be considered before any decision is made on whether to remove an offender from the register. Let me be absolutely clear. Our proposals make sure that sex offenders who continue to pose a risk will remain on the register and will do so for life if necessary.

The second instrument that we are considering today follows a consultation carried out last year on options for strengthening the notification requirements applying to registered sex offenders. Currently, when a person is convicted, or cautioned for an offence under Schedule 3 to the Sexual Offences Act 2003, they will automatically be subject to notification requirements, which, as I stated earlier, is more commonly referred to as the sex offenders register. While subject to these requirements, the offender will be required to provide their local police station with personal details annually, or whenever their details change. The most high-risk offenders are subject to additional further conditions and surveillance by local multi-agency public protection panels.

The police identified vulnerable areas in the current arrangements which could lead to some offenders seeking to exploit gaps in the system. To strengthen and extend current checks, this instrument makes four changes to the current notification requirements which apply to all registered sex offenders. First, they must now notify the police of all foreign travel. Offenders who travel abroad for less than three days will be required to notify in the same way as those who travel for longer must do under the existing regime. Secondly, offenders with no fixed abode must notify the police weekly of where they can be found. Thirdly, offenders must from now on notify the police when they are residing with a child under the age of 18. Finally, offenders must notify the police about their bank account and credit card details and notify certain information about their passports or other identity documents at each notification, thus tightening the rules so that sex offenders can no longer seek to avoid being on the register by changing their name.

ACPO and CEOP have both expressed their support for these changes. They believe that these measures will enhance our ability to protect the public and ensure that our management of sex offenders remains effective in an ever-changing world. In the event that an offender fails to comply with the notification

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requirements or with the terms of any order restricting their movement or actions, they will have committed a criminal offence and can be imprisoned for up to five years.

In taking these changes forward, ACPO recognises that there will be resource implications to informing the 53,500 registered sex offenders across England and Wales who are subject to these new requirements, and to ensuring that they are all complying with the new requirements when these come into effect. ACPO has been clear throughout that, in calling for these additional changes, it was prepared to meet the additional workload. My officials have been working with ACPO for some months now to help it in its preparations.

Public protection remains a fundamental priority for this Government. The changes made in these two instruments address the incompatibility identified by the Supreme Court but they do so in a way that ensures public protection against these offenders. We have also closed a number of loopholes identified by the police in respect of all sex offenders. These changes mean that we continue to have one of the most rigorous and robust approaches to sex offender management in the world. I beg to move.

5.15 pm

Baroness Smith of Basildon: My Lords, I am grateful to the Minister for her explanation and the information that she has given to the House on the two sexual offences orders. I shall take them in reverse order. On the notification requirements order, we are broadly supportive but I have a couple of questions, and I was able to have a brief discussion with the Minister earlier to give some indication of what I wanted to ask. My understanding is that the order applies to England and Wales, because policies relating to sex offenders in Scotland and Northern Ireland are devolved to those Administrations. I would have thought, though, that it was important to have some consistency between England and Wales legislation and that in the devolved Administrations. Are there any differences across the UK and, if there are, what are they and how are they being addressed?

I am happy to be corrected if I am wrong, but I think that Northern Ireland currently retains its three-day loophole, as it has become known, whereby an individual does not have to notify the police of foreign travel of less than three days. Have the Government had any discussions with Ministers in the Northern Ireland Assembly and the Scottish Parliament on this issue? What discussions have there been with other European countries? Do they have similar reporting and notification requirements? What co-operation is there between the UK and other European national police forces? That seems to be an area where greater co-operation between us and EU police forces would make great sense.

I was able to talk briefly earlier to the Minister about notification requirements for online identities. I am not clear how these are covered or whether they are covered effectively. I am aware that online social networks are increasingly used to contact and groom young people for sex offences. There are some quite horrific and frightening examples. Jenny Chapman, MP for Darlington, has taken this issue up very robustly.

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In her constituency a young woman called Ashleigh Hall, who was 17 years old, was tricked into meeting a 33 year-old convicted sex offender, who posed on the internet as a 19 year-old man, and she lost her life as a result of meeting up with him.

It is clear that convicted sex offenders register different identities online. Given that registered sex offenders have to notify the police of any identity documents that they have—passports, for example—I am not clear how online identities fit into the proposed and current notification requirements. We are all aware that there are sex offenders who are frighteningly clever and devious in stalking and grooming their prey and that it is perfectly possible to set up different, multiple online identities. I am not so naive as to think that telling a registered convicted sex offender that he will have to tell the police about each and every online identity would work on its own, but clearly this is a problem area. Given the information in the impact assessment on the second order about sex offenders’ propensity to reoffend, this area must be monitored, and I am interested in how the Government plan to do so. Maybe that is in other legislation that I am not aware of, but I thought that it might have been in here as we are talking about notification requirements.

If this is helpful, Surrey Police has pioneered—it has been honoured for the work that it has done in this area—innovative software that monitors online sex offenders. I understand that it has successfully trialled this and now uses it to monitor 25 different criminals. This software installs onto their computer software which monitors use and sends alerts if any risky behaviour is detected. It is looking to use that across the country. So there are ways of starting to deal with this. However, I would be interested to know what the current position is, just in case I have missed something and there is something in this order or other legislation that covers the creation of online identities by those who seek to groom young people for sexual abuse, an activity which led, in that case, to murder. Have the Government sought the views and advice of the Child Exploitation and Online Protection Centre? The noble Baroness mentioned that they have its support, but just in the implementation—it is not mentioned in the consultation documents as a consultee. I am sure that the Government will have had some contact and I think its input would have been helpful.

On the second order, the remedial order about reviews, I am far less comfortable that the Government are taking the right position. I am grateful to the noble Baroness, who knows my concerns, for taking time to explain the Government’s views. I have also read the report by the Joint Committee on Human Rights, which is helpful in explaining why the Government are bringing this order forward, following the case of F and Thompson v Secretary of State for the Home Department in which the Supreme Court declared that the indefinite notification requirements in the Sexual Offences Act 2003 were incompatible with Article 8. That happened because, if I understand it correctly, there was not the opportunity for the individual to be treated as an individual and to apply to come off the register.

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I am concerned about the Government’s inconsistency on legal judgments. Clearly the Government have been keen to accept the judgment of the Supreme Court on this issue and in legislative terms. Many noble Lords who have been in this House longer than I have will recognise that this legislation has been brought forward quite quickly. However, the Government do not always take this view. In fact, when the European Court of Human Rights ruled on the right of prisoners to vote, the Prime Minister—although he may have been in opposition at the time—said that it made him physically sick. I do not go that far, although I think that one of the consequences of losing one’s liberty through crime is a loss of the vote for the period of incarceration. However, I cannot understand why he does not feel equally strongly about this issue, which has a far greater emotional impact for me.