House of Lords
Thursday, 26 March 2009.
Prayers—read by the Lord Bishop of Chester.
The following Act was given Royal Assent:
Corporation Tax Act.
Local Government: Markets
My Lords, the Government recognise the valuable contribution that markets can make to local choice and the vitality of town centres. They complement high street shopping and add to diversity. Our policy remains that local authorities should seek to retain and enhance existing markets or to reintroduce or create new ones and invest in their improvement.
My Lords, I declare my interest as chairman of the Wellington Market Company plc, which operates 25 markets in the sector, with around 2,000 markets nationally and a combined national turnover of probably £4 billion per year. We received our royal charter in 1244; I was not chairman then, but sometimes it does feel like it.
While the British public love markets, too many local authorities, sadly, do not always share that appreciation. Unfortunately, too many local authorities have failed to invest in their markets over the years, both in financial terms and in terms of quality of personnel. Will the Minister encourage local authorities—some very successful markets are operated by local authorities—to joint venture or similar with the private sector to develop more successful markets?
Yes, my Lords, the British people do love markets and they love them for very good reasons. They are part of our heritage and part of the character of what makes our towns really successful and our communities inclusive. We are all in favour of markets. Local authorities also want to cherish and support them. Our planning policy statement 6 makes it absolutely clear that local authorities should seek to retain and enhance markets, as I have said, and to create new ones wherever possible. They should be part of a very clear vision of what the local authority is offering to the community. The idea of joint venture is a very good one.
My Lords, it is a birthday that I share but, sadly, 24 years on.
Recognising the revolution on the high street and in marketing, there is a real need for the Government to have a strategy to ensure that newcomers to the business—very often one-man or small businesses—receive adequate training and guidance. The supermarkets, department stores and large institutions are capable of providing assistance, guidance, training and skills but, all too often, the small, one-man business struggles in the environment of today. Can the Minister assure us that that need is on the radar of the department?
My Lords, I congratulate both the Lord Speaker and my noble friend on their birthdays today. Clearly, it is a big day for birthdays in the House of Lords.
My noble friend is absolutely right. Certainly, markets are under threat from supermarkets and internet shopping, and people are shopping in different ways. I do not think that that is a particularly good thing, because it is so isolated, and markets offer a real social opportunity, particularly for older people. He is also right that markets can do more to train and encourage new stallholders. There is 75 per cent occupancy in the 1,150 retail markets in the UK. I am sure that there is a lot more that we can do. A Select Committee is looking at this, and I am sure it will take up this opportunity.
My Lords, I am doing the City of Westminster Bill, which deals with street trading. I declare that as an interest. It is very important that we retain street markets and street traders and that we differentiate between street markets and vast covered markets, which suit some areas but not all. Does the Minister agree that street trading markets are very much a part of the London scene and should be retained?
My Lords, I could not agree more with the noble Baroness. There is a role for covered markets, which have long histories, as do our street markets. They serve different purposes, different specialist communities and different ethnic communities. There is definitely a place for both.
My Lords, although what my noble friend said about markets may be correct in principle, the Question refers to giving advice to,
“local authorities to promote the development of markets as an alternative to high street shopping”.
Does my noble friend agree that such advice from central government would be daft in principle and that, when we advocate decentralisation of power, we should really let local authorities decide what is best for local people and not give them that sort of daft advice?
My Lords, I did not address that part of the Question because I do not agree that they are alternatives, for the very reason given by the noble Lord. In planning policy statement 6, our policy on town centres is to encourage the vitality of town centres in all their different ways. Through guidance and so on, we help with town-centre management, but of course it is up to local authorities to decide how best to serve their local communities in their town centres.
My Lords, I thank the Minister for the positive statements made and the encouragement given to markets. Clearly, they are very important. In this day and age, they provide staple products, such as fruit and vegetables, at competitive prices. They also provide diversity: ethnic communities are able to sell their products. Notwithstanding what has been said about local areas, there is a concern that some councils, within London and elsewhere, see tidiness as important. Can the Government ensure that they do all they can to give publicity to the real importance of markets in providing diversity, encouraging tourism and so on? They attract people of all sorts.
Yes, my Lords, as I said, it is in our planning policy statement. When we come forward with a revised planning policy statement, which will bring together many of these issues, I shall ensure that the prominence of markets is once again demonstrated. I think the Select Committee report, which will be put forward in the House of Commons, will also draw attention to the many benefits of markets.
My Lords, in any advice that the Government give to local authorities—I appreciate that this should be a local decision—I ask that they do not forget the importance of farmers’ markets and their ability to sell the best of British products, particularly now when we are considering food security as well.
My Lords, rural and urban farmers’ markets are one of the great successes of recent years, particularly in the way in which they address some of the urban food deserts that we have by providing fresh, affordable food and ensuring that it is locally sourced. That is good news. We have 800 farmers’ markets and the number is growing all the time.
My Lords, my noble friend has already acknowledged the very important role played by markets in our towns and cities throughout Britain. In autumn of this year, the All-Party Group on Markets will launch the first ever national markets framework document, incorporating the markets’ knowledge-based databank. That will be invaluable to Government and to local councils in making policy decisions on markets for many years ahead. Will my noble friend agree to meet the group and all the partners who are working to complete this very important document to talk about the document when it is published in the autumn?
Further Education: Capital Investment
To ask Her Majesty’s Government when they expect Sir Andrew Foster’s review of the Building Colleges for the Future programme to be complete; and whether they anticipate any delays during the next two years to projects already in that programme.
My Lords, this Government have invested more than £2 billion in modernising FE facilities since 1997 and will spend a further £2.3 billion in the current spending review period. Nearly 400 colleges in England have been modernised, and the programme has delivered real improvements to learners and communities. Sir Andrew Foster will complete his review shortly and will make his recommendations to the department. Of the 253 colleges that have been given final approval, there will be no delay to these projects.
My Lords, I am grateful to the Minister for that reply, but can he explain how it is that neither his department nor the DCSF, which are jointly responsible for the LSC, was aware that the LSC was encouraging and sanctioning a capital spending programme that was three to four times the amount of funds available? Is he aware of the problems that this potential overspend has caused to the colleges that are at the moment in the queue, some of which have projects half-completed? Is he confident that the LSC, even under its new acting chief executive, is capable of sorting out the mess that it has created?
My Lords, can we give a complete answer at this point in time? No. I suppose that Donald Rumsfeld summed it up when he said that there were “unknown unknowns”. This was certainly the case. We were not aware of the extent of encouragement that undoubtedly was given by the LSC. That is why, in the circumstances, Mark Haysom, the chief executive, acknowledged his accountability and resigned. Do we believe that the new chief executive will be able to do the job? Yes, we do. He comes with a good pedigree, so to speak, and the right sort of experience. The full extent of why officials in my department were not fully advised of what was going on will be revealed when Sir Andrew Foster gives the department his report. We hope to have it in the next few days.
My Lords, does my noble friend agree that further education colleges, such as the wonderful Working Men’s College in Camden, which I once had the honour of chairing, fulfil a vital regeneration role in their neighbourhoods? Can he give an assurance that projects such as that for the Working Men’s College that have received approval in principle, have started and are now half way through a two-stage project, all with the agreement of the Learning and Skills Council, will get priority over projects that have yet to start and have not even had approval yet?
My Lords, I thank my noble friend for her question. I have a strange feeling that I attended that college just a year or two ago. I cannot give her an assurance now that the projects will go ahead because the new chief executive will review the situation on a case-by-case basis. I know that some concern was expressed because this is one of the smaller colleges. I can give her an assurance that each project, regardless of size, will be assessed equally against the same criteria.
My Lords, I had to keep my Answer brief. Of course we recognise that there is a problem; that is why we appointed Sir Andrew Foster. I would just ask for perhaps a little bit of, shall we say, humility. When we inherited the further education college situation in 1997, the National Audit Office told us that FE college buildings were,
“ageing and their quality and fitness for purpose was often unsatisfactory, affecting the reputation of the sector”.
Since then, we have spent £2 billion improving and modernising 400 college facilities. I ask you to recognise that situation. There are 79 colleges that have received their first stage of approval in principle, which would probably amount to about £2.7 billion in funding to proceed, and a further 65 requiring a further £3 billion in government funding. It is evident that not all these projects will be affordable in the short term and priorities will have to be set. That is why we have called for the independent report by Sir Andrew Foster.
My Lords, we have not yet heard from the Liberal Democrats.
My Lords, given that many colleges’ rebuilding programmes have planning permission and are ready to go, thereby creating jobs and apprentice places in the construction industry, how far do the Government propose to use them as a means of combating the recession? Has the department had any discussions on that point with the Treasury?
No, my Lords, I cannot tell you about 1979. I would have thought that you would be more concerned about the state in which you left the colleges in 1997—I say “you” collectively rather than individually. After the NAO report said that they were in a dire state, for you to somehow suggest—
My Lords, I apologise. For the noble Baroness to somehow suggest that what we have done has not been a fantastic improvement surprises me. Yes, we intend to go ahead with the capital programme but, as I said, we need to review each project on a case-by-case basis.
My Lords, English is a statutory subject at all key stages within the national curriculum, and it is a requirement that pupils are introduced to the main features of spoken and written standard English, including punctuation, spelling, language structure and grammar. The Government are committed to improving standards of literacy, and this includes an emphasis on pupils’ understanding and use of the English language.
My Lords, the one measure that the Minister did not mention, which I hoped he would, was trying to prevent the pollution of the English language by Ministers’ increasing reliance on the use of weasel words and euphemisms to obfuscate reality. For example, “extraordinary rendition” might be applied to the talents of Callas and Pavarotti, but when it is used to disguise the torture of alleged suspects in foreign climes with the connivance of the British security services, it is quite another thing. Similarly, “quantitative easing” might be the reason for putting a gusset in a fat man’s trousers, but it should not be used to obscure the fact that money is being printed without the necessary assets to back it up. Does the Minister not think that something should be done about that, and will he urge his colleagues not to use such weasel words and euphemisms? I do not expect an answer now, but I would love one in writing—as long as it is in plain English.
My Lords, the concept of extraordinary rendition was not invented by this Government. The noble Lord will have to accept the fact that English changes over time. Fresh phrases come into use, and quantitative easing is a very clear expression of what is being developed in providing additional resources for the economy.
My Lords, none of us doubts that a Latin background helps with grammar, but that is asking for the return of bygone days, when about 6 to 8 per cent of schoolchildren learnt Latin, to tackle a problem that, we all recognise, affects every one of our citizens. The Government’s responsibility is to ensure that all our citizens are literate as far as possible.
My Lords, of course education needs to be relevant to contemporary circumstances, and it is recognised that young people use new technology and devices. As I emphasised in the original Answer, however, the Government are committed to improving standard English in our schools, and we can establish that there has been considerable improvement in the past decade.
Even so, my Lords, there is surely scope for further improvement. I wonder whether the Minister saw the recent Charlemagne column in the Economist, which points out that school-leavers in Germany and other continental countries have a better command of spoken and written English than many of their counterparts in this country. Is it not time that the Government reflected on the fact that, given that so few of our schoolchildren learn a foreign language, we ought to concentrate on ensuring that they handle better the only language that they know?
My Lords, I agree wholeheartedly with the noble Lord that the important objective is to ensure that our fellow citizens can use the English language easily and effectively. Those who learn a foreign language have an added advantage because they have to master additional concepts in the structure of language. But only a minority of students in our schools have ever learnt foreign languages to any significant level, so our objective must be to ensure that English is taught effectively at all key stages of school development.
My Lords, returning to the supplementary question of the noble Lord, Lord Smith of Clifton, is it not a problem that English is developing with a lot of words from America? Does the noble Lord recall Professor Higgins’s observation that in America they have not spoken English for years?
He did, my Lords, but there are often advantageous acquisitions from the United States. I know that people find it jarring when a noun suddenly becomes a verb. The word “task” is often used as a verb now, which is an Americanism, but it is effective and communicates accurately. Just before we become too strenuous in our criticism of others, I noticed that the debate proposed by the noble Lord, Lord Tanlaw, today on gilt-edged bonds was initially spelt g-u-i-l-t.
My Lords, what efforts have been made to increase spoken English among our ethnic minorities, as the language of school is only part of the problem? An example of something that we do not think was done very well is that, before devolution, the Government promoted at great cost the speaking of Gaelic and Ulster Scots in Northern Ireland to people who already spoke English. They did not put those considerable sums into teaching people who had no knowledge of our language.
My Lords, the noble Viscount has identified an important point. The Government are putting emphasis on the fact that all arrivals in this country intending to settle here should have a command of English. Our fellow citizens cannot play their full role in our society nor enjoy its benefits if they are not familiar with the English language. Therefore, I agree largely with the points the noble Viscount makes.
Croatia: NATO Membership
My Lords, the UK Government are firm supporters of Croatia’s membership of NATO. We were pleased with the offer made to Croatia and Albania at the 2008 summit to begin accession talks. We completed our ratification of the accession protocols in January 2009. We are urging all other NATO allies to do so in time for both Croatia and Albania to join as full members at NATO’s 60th anniversary summit next week.
My Lords, I thank the Minister for his reply. I declare an interest as chairman of the UK parliamentary group on Croatia. Before the summit on 3 April, as the Minister indicated, NATO candidacies have to be ratified by existing members. So far, however, not all existing members have ratified Croatia’s accession protocol. What further steps can the Government now take to assist the timely completion of that process before 3 April?
My Lords, the noble Earl has in mind a little legal problem in Slovenia, where a political party has appealed Slovenia’s ratification to the courts. The Slovenian authorities have assured us that they hope to clear this hurdle in advance and that the ratification documents are ready to go. We hope that all will be done in time and we can celebrate the 60th anniversary with these two new members both joining.
My Lords, on these Benches we believe that Croatia’s NATO membership is good for both Croatia and the region. Does the Minister agree that it would also be a good stabilising factor for Bosnia-Herzegovina, which is currently going through some rather turbulent political times?
My Lords, there are a number of similar accession issues in different countries, but we have always made clear that we would support logical expansions. In general, expansion has slowed for broader geopolitical reasons that we are all familiar with.
My Lords, we understand that at the 60th anniversary summit of NATO there will be agreement on setting up a new NATO strategic review. Given the degree of disputation among members about how far NATO enlargement should go—to the western CIS, the southern Caucasus, et cetera—and about NATO’s future role outside Europe, will Her Majesty’s Government do their best to ensure that Parliament has the opportunity to discuss what that NATO strategic review should include at an early stage?
My Lords, as always, I cannot commit the Leaders of the House to specific items of business, but this strategic review is enormously important and we should, if possible—and I do not see why not—have an opportunity to discuss it here. The two membership expansions that caused such controversy last year—Georgia and Ukraine—are not likely to feature heavily at the summit this year. There is a feeling that a solid process is now in place.
My Lords, Croatia has made significant progress over recent years and we welcome the Commission’s indicative road map, which would allow the reaching of the final stages for negotiation with Croatia in 2009. It is an ambitious document. The view is that Croatia will need to step up its efforts to meet it. Certainly, the road map does not represent any weakening of our conditions-based approach. Those conditions absolutely must be met in order to secure membership. Full compliance with the ICTY remains a key condition of progress towards the EU.
My Lords, does my noble friend agree that, provided the countries qualify, moving towards NATO membership and EU membership for the western Balkans is a desirable aim? However, some of us would be very concerned if we moved too rapidly in accepting Georgia and Ukraine into NATO. Some of us might not like that at all. I hope that the Government will be cautious about moving in that direction, albeit that he said it was for next year and not this year.
My Lords, let me be clear. We said that we see Croatia’s progress towards the EU and NATO as demonstrating the positive effects of enlargement in securing, as my noble friend said, stability and prosperity in the western Balkans. Perhaps I may correct him: I did not suggest that the issues of Georgia and Ukraine were for next year. I said that we have now, I think, put them on a less controversial path which has removed the immediacy and reflects the need that progress in that area has to be very considered.
Business of the House
Timing of Debates
My Lords, before I move the Motion in my name, perhaps I may remind all noble Lords that the Companion states that Oral Questions,
“are asked for information only, and not with a view to stating an opinion, making a speech or raising a debate”.
I am sure that noble Lords would agree that short Questions and Answers will enable more noble Lords to ask supplementary questions.
I beg to move the Motion standing in my name on the Order Paper.
Procedure Committee: First Report
Motion to Agree
My Lords, this report is self-explanatory and, I trust, uncontroversial. If noble Lords have any questions, I will of course do my best to answer them.
Taxation: Offshore Financial Centres
My Lords, this debate is taking place in a very different framework from what it would have been six to 12 months ago. When I first raised the issue of tax avoidance and tax evasion in the Crown dependencies and British Overseas Territories more than 10 years ago, I was struck by the hostile response to discussing an almost taboo subject. Senior officials from Jersey came to see me the next week to explain that Jersey has always been a low-tax jurisdiction, since 1204, as if whatever promises the King of England in his capacity as the Duke of Normandy may have made in 1204—I checked and there is no reliable contemporary record of what he is claimed to have promised—still contained its relevance to the world of global finance 800 years later.
The London representative of the Cayman Islands once sent me a sharp message demanding to know why I had put down a Question on the relationship between Enron’s fraudulent practices and the special purpose vehicles that it had established on the islands, without consulting her first. One noble Lord attacked me for not distinguishing more clearly between tax avoidance, and honourable and legal activity, and tax evasion, a practice on the other side of the law. A small number in both Houses have nevertheless continued to pursue this issue. I welcome the contribution that the noble Baroness, Lady Hooper, will make to this debate as one of those who has done so for many years.
Now we are in a different world and the massive scale of revenue due to national Treasuries lost through the manipulation of financial transactions through offshore financial centres has become a matter of concern to heads of Governments across the world and a major item on the agenda of the forthcoming G20 summit. There is now a far wider awareness of the thin line between avoidance and evasion, policed by highly paid bankers, accountants and lawyers, who earn their money by devising evermore complex schemes to hide profits and generate artificial losses through setting up trusts and companies in tax havens and moving money between the onshore and offshore worlds until its origins, ownership and tax liabilities are effectively obscured. We now have a term to cover this hazy area: aggressive tax avoidance, which describes deliberate efforts to get around whatever tax regulations there are, operating as close to the edge of what is legal as is possible.
The revelation that Barclays Bank had an entire department devoted to aggressive tax avoidance, setting up huge transactions for the sole purpose of generating artificial tax losses, and that its head was the highest paid executive in the entire bank, managing transactions that were just—but only just—within the law, sums up how far British clearing banks have moved from their respectable origins. I declare an interest here. My father worked for Barclays for 40 years. The bank paid for my secondary education and I grew up with a strong sense of a bank that had not lost touch with its Quaker origins. The current chief executive is married to a descendant of one of the founding Quaker families, but I fear that he has no sense of the principles that they embodied.
In recent months, the British Government have been leading calls for tighter international regulation of offshore financial centres. The Prime Minister has singled out Liechtenstein. The Chancellor, according to the Observer on 22 February, has launched a “blistering attack” on Switzerland. I sympathise with the Swiss response, as reported in Tuesday’s Financial Times, accusing Gordon Brown and Alistair Darling of double standards about the lack of transparency in their own back yard. A dozen of the OFCs listed in the US tax evasion Bill are under the British Crown: the Crown dependencies of Jersey, Guernsey, Sark, the Isle of Man and several of Britain’s remaining overseas territories, which have boomed as global financial markets have mushroomed over the last 20 to 30 years—Bermuda, the British Virgin Islands and the Turks and Caicos Islands have been the most successful. Gibraltar hangs between the two categories with funds flowing between Europe and Africa, and beyond.
Offshore finance has made these British territories rich. Bermuda is the fourth richest country in the world, according to CIA figures, after Liechtenstein, Qatar and Luxembourg. Jersey is the seventh and Guernsey, the Cayman Islands and the BVI are close behind, well ahead of the United Kingdom itself. The scale of the funds that they manage is enormous. According to the Tax Justice Network, an immensely valuable source of information, in 2007 Jersey had £466 billion in cash deposits and investment funds. That is to say, it had £5.2 million per head of population. Guernsey had a further £207 billion and the Isle of Man a modest £155 billion. Getting on for a tenth of assets held in the Isle of Man come from developing countries, which lack the clout or administrative capacity to chase tax fraud or laundered money, let alone to negotiate and enforce tax information exchange arrangements.
The Cayman Islands are home to a high proportion of the world’s major hedge funds. Of course, they are not really home to them; they are managed, effectively, from New York and London, but for tax reasons are domiciled in the Cayman Islands, along with a massive number of shell companies, special purpose vehicles and trusts. Many of them are registered in the offices of Maples and Calder, the largest offshore legal firm in the world. One of the founders of Maples and Calder is now a vice-chairman of the Conservative Party, although he tells me that—sadly for him—he no longer has a stake in the firm.
For all of these territories and dependencies, New Labour, like its Conservative predecessor, has preferred a system of light-touch regulation. The FCO and DfID encouraged the overseas territories to develop financial services as a way of lessening their dependence on British subsidies. On coming into office, the Labour Government set up an inquiry into the financial regulation of the Crown dependencies, which led to the Edwards report, which recommended an increase in regulatory staff to counter fraudulent activities and money laundering. I recall that two experienced officials were sent from London to the Channel Islands to raise standards; one was Mr Crook and the other was Mr Pratt. The small regulating staff—in contrast to the vast scale of funds moving in and out of the islands—has not been able to distinguish between clean money and dirty, or between the legitimate tax planning of multinational companies and the evasion of national taxation through offshore accounts.
On the British mainland, our Government scarcely trust any local authority smaller than 500,000 people to administer its own affairs, and then only under careful oversight from central government. For the Crown dependencies and overseas territories, the opposite is true. They are entities with fewer than 100,000 inhabitants, most with fewer than 50,000, and they are largely left to govern their own affairs. I defy anyone to define precisely the constitutional relationship between the Crown dependencies and the UK. Indeed, the Ministry of Justice acknowledged in a memorandum to a Commons committee last December that,
“the constitutional relationship between the UK and the Crown Dependencies is complex and … contains areas of uncertainty”.
The noble Lord, Lord Bach, gave oral evidence to this inquiry in the light of the collapse of the subsidiaries of Icelandic banks in the Isle of Man and the Channel Islands, which gave rise to the delicate issue of whether British citizens who had deposited money there, in most cases to avoid tax on the mainland, would be entitled to claim compensation from the British Exchequer. He said:
“It is not our job to nanny the Isle of Man in any sense”,
and an official with him helpfully added:
“I think that it is to put it too strongly to say that we have abdicated all responsibility for them”.
That is wonderful obfuscation.
The quality of governance in some of the overseas territories has been sufficiently questionable to force greater attention from Britain. I welcome the inquiries by Commons committees last year and the year before, and I hope that they will press further. Concern about the impact of far too much money on far too few people in the Turks and Caicos Islands has now led to an inquiry under Sir Robin Auld. His interim report, which was presented on 28 February 2009, refers to,
“possible systemic corruption ... Coupled also with clear signs of political amorality and immaturity and of general administrative incompetence”.
It also notes,
“the declared ignorance of some Ministers and other Members of the House of Assembly of what is required of them as public servants”.
I look forward immensely to what he says in his final report.
Our prime concern as British politicians, and as Liberal Democrats, is with the massive loss of tax revenue to this country which the displacement of corporate and personal income to tax havens involves. A fair tax system requires loopholes to be closed: and tax havens provide massive loopholes. However, not only British taxpayers lose from this offshore network. Christian Aid estimated last year that the loss of corporate taxes to developing countries through tax havens, many of which are British-dependent tax havens, is around $l60 billion a year: 50 per cent more than the entire flow of official aid from OECD countries.
Part of the attraction of tax havens under the British Crown is their British system of law, with its underpinning of inquiry and redress if things go badly wrong. The banks, law firms and accountancy firms with offices in these havens are mostly British, not locally owned, using the islands as warehouses for the transactions that they nod through them and paying useful fees for the convenience of doing so. KPMG, Freshfields, Barclays and the Royal Bank of Scotland all work with, and usually have subsidiaries in, these offshore centres. They are also linked to others; Union Bank of Switzerland, which is now under heavy attack from the US authorities for encouraging tax evasion, manages offshore accounts for some 28,000 British citizens through its Jersey subsidiary.
The classic excuse for not tightening up procedures has been that we would lose out because others would be less tight. Now that we are in a multilateral situation in which all Governments are attempting to tighten up procedures, we need to know what Her Majesty’s Government are doing in response. In mid-December, the Government announced an independent review into British offshore financial centres, to be chaired by Michael Foot, formerly of the Bank of England and the Central Bank of the Bahamas. I hope that the Minister will update us on the progress of this inquiry in his reply, and tell us how the Government intend to engage Parliament when the report is published. Its establishment has been welcomed by the Crown dependencies that it will investigate, so I hope the Minister will assure us that it will not, like the Edwards report, be a friendly review that is intended to disturb established practices as little as possible, as some have suggested to me it might be.
On 11 March, the noble Lord, Lord Myners, told us in a Written Statement that Jersey has now signed a tax information exchange agreement, following the patterns of a number of foreign offshore financial centres. He called it,
“a crucial step in the right direction”,—[Official Report, 11/3/09; col. WS 91.]
but it is only a step. Jersey now promises to provide information in response to requests from HMRC, and in the seven years since Jersey signed a tax information exchange agreement with the United States its authorities, I am told, have provided information to Washington in six cases. This all comes down to the level of the British citizen when they contemplate the origins of the current financial crisis. Northern Rock’s charitable trusts were in the Channel Islands. When my wife and I discussed tax planning with advisers from Barclays Bank—I have not yet got around to moving my account—their first suggestion was to set up a family trust in the Isle of Man so that we could avoid inheritance tax.
One small example of defrauding the tax authorities through offshore manoeuvres is provided by the mysterious case of Leeds United Football Club, the beneficial ownership of which is being contested in a court case in Jersey. The club, largely owned by Ken Bates, who is resident in Monaco, went bankrupt owing the revenue nearly £8 million, among other creditors. It was bought out of insolvency by Forward Sports Fund, a company registered in the Cayman Islands and administered in Switzerland; that, in turn, was owned by Astor Investments, a trust fund based in Guernsey and administered from the British Virgin Islands—a merry-go-round of tax havens created to disguise who owns what. It is being argued in court that the ultimate owner of these shell companies is Mr Bates himself, who has thus avoided a large tax bill and retained effective ownership. The noble Baroness, Lady Noakes, may care to note that the role of KPMG, as administrator in this case, has been sharply criticised.
The Government have repeatedly refused to give Parliament any estimate of the scale of lost revenue, but it recovered from one amnesty two years ago £400 million from 45,000 disclosures, which suggests that the overall figure is in the tens of billions and that a large number of individuals as well as companies are involved.
Fair taxation is a basic principle of a liberal democracy—I refer to progressive taxation, in which the rich contribute proportionately to the costs of national security services and welfare. We therefore want some reassurance from the Government that they will be as vigorous in dispelling the secrecy of British offshore financial centres as of foreign ones; that they will now clarify the constitutional and oversight relationship we have with these semi-autonomous entities; and that they will ensure appropriate contributions to the UK Exchequer in return for the services received. I note, for example, that Tax Research estimates that the UK gives an effective subsidy to the Isle of Man of £270 million a year. The party should now be over for aggressive taxation avoidance and tax evasion under British sovereignty.
My Lords, as one who follows as closely as possible events concerning the overseas territories—I declare an interest as vice-chairman of the Overseas Territories All-Party Parliamentary Group—I was intrigued by the wording of the Motion before us today, although I was perhaps to some extent informed by comments made by the noble Lord, Lord Wallace of Saltaire, in the money laundering debate concerning the overseas territories last year. I therefore thank the noble Lord for giving us the opportunity to review the activities of offshore financial centres in the light of the current financial crisis.
I shall concentrate on the overseas territories rather than the Crown dependencies, about which I am less informed and on which I understand others will focus. As a starting point, and as the noble Lord, Lord Wallace, has already said, I agree that there must be clear international standards based on openness and transparency and with appropriate supervision. I add to that by saying that any such regulatory approach should be based on objective criteria, that there should be a level playing field, and that each case should be looked at on its own merits.
There is no doubt that successive governments have encouraged the overseas territories to be self-sufficient. A number of them have developed highly efficient and successful financial services, based on international best practice, and, as small jurisdictions, they can be simpler, cheaper and highly specialised. There is also no doubt that in this global commercial world, professional advisers and clients alike look to find the most favourable structure for their investments and projects. We all know that Ireland attracted a lot of writers and artists because of its intellectual property rules and the abolition of inheritance tax. We know that Bermuda specialises in shipping and insurance and that in the state of Delaware in the United States a company can be incorporated rapidly with the minimum of fuss and cost. Therefore, if choice is to be available I believe that this diversity is to be encouraged.
My final general point is to emphasise, as did the noble Lord, Lord Wallace, the distinction between tax avoidance and tax evasion. The former is legal, the latter a crime. Since this has already been mentioned and the issue was raised on Tuesday at Question Time, it is not necessary to dwell on it. In his reply at Question Time, the Minister referred to the Chancellor’s code of practice that has just been issued. I should like to hear more about that, including whether it covers banking operations in overseas territories and Crown dependencies.
The Turner review of global banking regulation, which has just emerged, says that,
“it is important to recognise that the role of offshore financial centres was not central in the origins of the current crisis … And many of the problems arose from the inadequate regulation of the trading activities of banks operating through onshore legal entities in major financial centres such as London or New York”.
Professor Avinash Persaud, a member of the United Nations high-level task force on international financial reform, was quoted recently in the Financial Times as saying:
“The attack on offshore centres is a politically seductive distraction from the thorny task of making regulation better in large developed countries and will end up being a discriminatory attack on small developing countries with little voice”.
Today I am trying to redress the balance. I will refer to the British Virgin Islands as a case study, to make my point that each case should be looked at on its merits. I could equally well talk about Bermuda, with its well developed services, or Gibraltar, the only overseas territory in Europe.
The financial services sector of the British Virgin Islands is founded on five pillars: robust regulation, intergovernmental collaboration, effective enforcement, transparency and high levels of expertise. I emphasise in addition that there are no secrecy laws. The industry has developed and diversified, particularly over the past 20 years, to include specialist sectors such as mutual funds, insurance—both risk and captive—professional services provided by fiduciary and insolvency practitioners, and legal and accountancy services provided by globally recognised firms established in the jurisdiction. These services have been further enhanced by the award of category one status to the BVI shipping registry, and by the creation of an aircraft registry. As a result, financial services now account for more than half the GDP of the BVI, immeasurably raising the standard of living for all inhabitants and, together with the development of a successful tourism industry, enabling the territory to establish financial independence. Reputation is everything in financial services. The BVI has long recognised this and I maintain that the same goes for most of the overseas territories. There is the sad exception of the Turks and Caicos, which has already been referred to.
The noble Lord, Lord Wallace, also referred to the Foot review. I will quote a statement made the day before yesterday by Michael Foot from the BVI. I believe that his report covers the Cayman Islands, Bermuda and the BVI, and has been very positive. He said:
“The United Kingdom needs to remember that it gets a great deal of value and advantage out of jurisdictions such as the BVI. Funds and business flow from the UK here, they flow from here back to the UK. The value of having a clear English legal status, a creditor-friendly certain legal system, having political stability, of being able to bring together in a suitable context international investors around the world to form companies and operate elsewhere in the world, actually plays a critical role in benefiting the global economy, and I am hoping that in that the United Kingdom and the United States … make increasing efforts to remedy the problems in their own economies …and will be reminded again of the valuable role that offshore centres like this play in facilitating the operation of the global capital markets, flows of banking finance and other things”.
He also talked about the level playing field and stated that the jurisdictions he has been examining have met international standards effectively and on average score considerably higher than many much larger ones. He goes on to say that he is,
“confident that the findings of my review will reflect the fact that jurisdictions like the BVI are well regulated, the regulator is well resourced and is resourceful and that that is a very sound basis on which to build your international standing”.
While the concerns voiced by the noble Lord, Lord Wallace, must be considered, I believe that there is a real danger in targeting a specific group of countries, especially as financial centres no longer operate on a geographic basis; nor do such territories operate in isolation. Apart from anything else, it would drive the business to other, possibly less well regulated and open centres. The financial system must be viewed as a whole, and the focus must be on encouraging greater international co-operation and ensuring that all countries and jurisdictions build a capacity for adequate regulation and supervision, whatever the size and scale of their financial services industry.
The overseas territories used to be known as the dependent territories. In my opinion it would be very wrong if, in a knee-jerk reaction to the current financial crisis, those overseas territories that operate financial services were to be deprived of the independence that they have now earned.
My Lords, I declare my interest as a pension fund manager since I first joined Warburg’s in 1976; these days I manage British commercial property for pension funds, charities and investment trusts. When I buy a warehouse from Sainsbury’s, neither of us pretends that Tamworth is in the Cayman Islands to dodge stamp duty land tax. Tax havens are sunny places for shady people. No one sends their money to Monaco or the Cayman Islands because they are centres of excellence for fund management. I was going to add the British Virgin Islands, but in deference to the noble Baroness, Lady Hooper, I shall leave them out. From Antigua to Belize, you use a tax haven because you have something to hide, be it from the taxman, the authorities where you live or even your family. “Low tax and low disclosure” is the polite way in which the apologists for tax havens put it, but if you are Mobutu or Mugabe, Imelda Marcos or a Colombian with a big briefcase, a brass-plate company in an anonymous office block means that your millions leave no trace and tell no tales.
Gordon Brown is strutting the world’s stage as Mr Clean-up, the man to make tax havens and tax dodgers quake in their boots. Oh yeah? Why then did the Treasury say only yesterday that the asset protection scheme for banks to dump their bad debts on the taxpayer and the code of practice covering tax avoidance for the banking sector due next month are “separate issues”? That is the most unjoined-up government imaginable. Why has the budget of HMRC’s hard-pressed tax avoidance team, led by Mr Tailby, been cut by 5 per cent from 6 April? Barclays will be laughing all the way to the Cayman Islands. Our taxmen are like fat policemen running after a speeding Ferrari; they need all the help that they can get.
We all rejoice at the sinner who repenteth, but this is the same Gordon Brown who as Chancellor cuddled up to the bankers so hard that it hurt and who showed no interest in taxing or regulating hedge funds registered in the Cayman Islands and run by non-doms in Mayfair, or the private equity millionaires with their absurdly generous special tax breaks.
My Lords, I have only 10 minutes and I want to make my speech in my own way.
Why will the Prime Minister and the Treasury not use their power over the banks to stamp out tax abuse right under their nose in London? You do not have to take a Caribbean cruise; all you have to do is get on a boat down the Thames to Canary Wharf. The superb tax gap series in the Guardian shows how big British businesses, both publicly quoted and private, twist and turn to dodge tax in this country. Their glossy corporate governance reports say nothing about paying your fair share of tax to meet your obligations to the society where you operate. Being a good corporate citizen must mean more than putting on green lipstick and ticking the boxes on diversity.
Nearly nationalised RBS claims to have closed down its tax avoidance operations at head office but still actively promotes its operations in offshore tax havens and its private bank in Switzerland. Barclays has developed tax avoidance into a massive profit centre in its own right, with vast sums of the bank’s money touring tax havens on what in one case amounts almost to a three-day super saver return ticket from Canary Wharf, saving Barclays, not the taxpayer, mountains of tax.
Documents leaked to the Liberal Democrats, which appear to detail systematic tax avoidance on a grand scale by Barclays, were injuncted last week. The Sunday Times and the Guardian had already made them front-page news and these documents are widely available on the internet from sites such as Twitter, wikileaks.org, docstoc.com and gabbr.com. Yet the Guardian had to remove them from its website and cannot tell its readers where to find them. These documents describe deals worth billions of pounds set up by the bank in order to make money out of depriving the UK and foreign exchequers of revenue. Barclays would not last for one minute without the British taxpayer standing behind it, yet it is holding out one hand for taxpayers’ money while it picks taxpayers’ pockets with tax avoidance activities on the other.
Unlike Barclays, HMRC cannot match the best tax and legal brains that money can buy and unpick these deals. It is a sad day for democracy if a judge sitting in secret can stifle this essential public debate. Louis Blom-Cooper and three distinguished colleagues wrote to the Guardian:
“Barclays may properly be regarded as an operator in the private sector, but its corporate status, carrying with it all the advantages that incorporation confers on the bank, and performing a function so vital to the country’s economy, was such that Mr Justice Blake should have concluded that Barclays Bank was akin to that of a public authority and susceptible to the precepts of public sector activity. Perhaps the Court of Appeal will exhibit rather more boldness in supporting the Guardian’s valuable crusade against tax avoidance”.
Vince Cable has done his duty and sent all these documents to HMRC and the Financial Services Authority. I believe that it is mine today to tell—as I just have—Parliament about Barclays’ tax avoidance machine with its aggressive exploitation of tax havens and to tell the public, in their interest, where they can get chapter and verse and judge for themselves.
Barclays has a whole department, the structured capital markets division, inside Barclays Capital, dedicated to dodging the taxman, and has been reported as paying Mr Roger Jenkins, who runs it, £40 million a year. Vince Cable and I are now being told of more, even murkier, deals. About a third of a billion pounds has been added to Barclays Bank’s bottom line by the following six “projects”, from what we can see. Barclays’ Project Knight, set up in 2007, with capital of more than $16 billion, involved making loans to American banks which now need federal funding: Wachovia, WaMu, Bank of America and BB&T. This allowed Barclays to benefit from “double-dip” tax credits, as they are called, and made the bank £100 million or more.
Project Faber, also in 2007, involved capital of £1.5 billion and made Barclays £29 million in tax profits. That involved using tax havens in the Isle of Man and the Caymans for subsidiaries to channel loans to Luxembourg banks. Project Brontos in 2007 was a scheme between Barclays and Italian banks to save Italian tax; it made Barclays £15 million in profits at a conservative estimate. Project Valiha, with capital of nearly £400 million, involved an elaborate trade with interest rate swaps that could be transferred to an American counterparty, alleged to be AIG, which gained Barclays £69 million in tax-free profits. Project Brazil, set up in 2005-06, made Barclays £30 million in tax profits from currency trades and, in Project Berry, a Barclays subsidiary buys index-linked gilts and lends them back to Barclays so that it can collect tax reliefs worth £134 million. How many more of those morbid mutants are on the books of Barclays’ structured capital markets group? Before the Treasury takes on any of the toxic assets of Barclays, we must know how much tax it has avoided, how and with whom, and what has passed through or is still hidden in tax havens.
The international jet-setters at the top of Barclays, grasping their multimillion pound bonuses, will not know what I am on about at all in what I shall talk about now. My noble friend Lord Wallace, however, rightly pointed to Barclays’ international roots. It is high time that the bank remembered its Quaker founders in East Anglia. They did not gamble or dodge tax; they saw themselves as stewards of people’s savings, which they lent prudently for productive purposes so that their fellow citizens could work and prosper. The Quaker motto is “Live simply”. Tax havens are a moral as well as an economic affront to Britain and to the whole civilised world—the unacceptable underside of capitalism. Our Prime Minister is a moral man, but he must now turn his words into deeds.
My Lords, on the subject of morality and moral behaviour, could the noble Lord, Lord Oakeshott, tell us why the Liberal Party has not paid back the £2.4 million that it got from Michael Brown, a fugitive from justice? His money was paid, although apparently through a London company, from a Swiss subsidiary.
If that is not clear, my Lords, this debate is about tax havens and our country, not about any particular political party. I do not propose to get into that. Those who live in glass houses should not throw stones. That was a cheap and unnecessary intervention by the noble Lord, who has had plenty of time to make that sort of intervention when we have been discussing my Bill or other matters. It is quite inappropriate here today.
My Lords, I shall turn back a little from the exchanges involving my noble friend, with whom I agree. I was involved in setting up the Saïd Business School in Oxford and in developing its curriculum. At the outset, we included in the curriculum short but important areas about the environment and ethics. After a couple of years, they were conveniently dropped from the syllabus, because the students were not interested in the environment or ethics; they just wanted to know how they could make the most money.
It occurred to me that company directors feel that they have a responsibility to their shareholders rather than the public at large; that accountants are concerned about the profits of those who employ them, not the general good; and that it appears that bankers—certainly, from the examples given by my noble friend—are mainly concerned with financial manipulation in the interests of the bank. They are the people who benefit from the very large sums of money that were referred to just now. I am also afraid that lawyers often act, not in the interests of truth, but in the interests of whoever employs them.
There was an interesting article in the Times yesterday, by Daniel Finkelstein—not someone whom I read often—which accused the Conservative Party of existing mainly on the interests of those who are “rich and secure”.
A huge number of people in this country, the overseas territories, the third world and developing countries are completely left out of the strata of society that we have had so graphically described to us. We all know that large amounts of aid that pass to developing countries find their way into the pockets of the people who lead those countries. We have had many debates about Zimbabwe, for example, which we hear about almost every month when the noble Lord, Lord Blaker, asks a Question. The money that has gone there has gone to tax havens, outside the country.
It ill behoves us to moralise about Robert Mugabe when this country and people here do business with the tax havens concerned. I am not trying to preach a Sunday sermon, but I am saying that moral behaviour starts at home. We cannot even excuse ourselves, as I thought the noble Baroness, Lady Hooper, did, by saying that a lot of other people do it; that is not really an excuse, if people who operate here operate under the mottos quoted just now. Of course the financial situation must be viewed as a whole, but we want to see this country taking a prominent position in campaigning and planning against these sorts of abuses which, in the end, are paid for out of the pockets of the people who pay honest tax. Many of them find that honest tax to be quite a burden on them, because they are the poorer people, both in this country and around the world, on whom this whole shaking edifice is built.
My Lords, I congratulate my noble friend Lord Wallace of Saltaire on securing this debate at such an opportune time. I declare an interest, in that I am a lawyer and I do quite a lot of tax work.
On 22 April last year, I was fortunate enough to secure a debate on inheritance tax and capital gains tax. Before that debate, I advised the participants that I would say a few words about international tax evasion and avoidance. I stated in that debate:
“There is reason to be reasonably confident that major economies in the world are becoming more enthusiastic about dealing with international, corporate and individual tax avoidance”.
I pointed out that some of the tax avoidance schemes that were being used were on the cusp of evasion, if not outright evasion. I said then and state again now:
“I believe in international tax competition as long as international conglomerates and individuals pay their fair proportion of tax in the countries in which they operate”.—[Official Report, 22/4/08; col. 1457.]
In this country, we have made some sensible attempts to tackle these problems, with control of foreign companies legislation, other anti-avoidance legislation and legislation to deal with abuses such as transfer pricing. Nevertheless, with growing financial deficits in the major world economies, especially the USA and Britain, and with a major financial crisis bearing down on the world, it is imperative that far more compelling efforts are brought to bear to eliminate tax fraud and tax avoidance.
I wholeheartedly agree with the Minister’s comment the day before yesterday in reply to a question asked by the noble Lord, Lord Barnett. The Minister stated:
“There needs to be international co-ordination”.—[Official Report, 24/3/09; col. 555.]
I would add to that: we also need international co-operation. Too frequently, the fraudsters and money launderers can conceal their ill-gotten gains and proceeds of crime by the use of complex nomineeships, trusts and companies with special tax status, all in obscure and opaque jurisdictions, often using a number of these jurisdictions further to conceal their activities.
In a debate last year, I reminded the House that in the United States in, I believe, 2007, three senators introduced the Stop Tax Haven Abuse Bill. I do not believe that the Bill became law. Of the three senators who sponsored the Bill, one was a Republican and two were Democrats. One of the Democrats is now the President of the United States. One of the thrusts of the Bill was to impose restrictions on foreign jurisdictions, financial institutions and international transactions which raised money-laundering concerns or—this is a very important addition—impeded United States tax enforcement.
Other countries, such as India and Germany, are deeply concerned about leakage of tax from their jurisdictions. The German Chancellor, Angela Merkel, visited both Monaco and Liechtenstein in early 2008 and made it abundantly clear that Germany expected co-operation from both jurisdictions. The British Government started to act some time ago and, in 2005, produced information exchange agreements with Guernsey, Jersey and the Isle of Man.
Before I discuss those efforts, which I strongly support, I should add that I would like to hear from the Minister exactly what the Government aim to achieve. Is the Government's aim to have full information-sharing arrangements with every jurisdiction in the world and, if so, to what extent? That appears to me to be one of the ideals. Presumably it would mean that all jurisdictions worldwide which are involved in this co-operation should refuse to take any deposits or securities in any of the banks, law firms or other organisations in their jurisdictions unless and until they have full and proven beneficial ownership details with money tracing. That jurisdiction would then have to report back to the country or countries of origin, domicile, residence and ordinary residence of that beneficial owner, or beneficial owners, be they individuals, companies, partnerships, limited liability partnerships or whatever. As the Minister knows from his previous experience, that is a very tall order indeed. I am anxious to know the level of international co-ordination and co-operation that the Government and leading economies seek to achieve. Will the Minister also spell out—this is an important point—what sanctions will apply to jurisdictions and states which fail to co-operate?
Adverting to the 2005 orders, I have the following questions. What has been the outcome of those orders? Would the Minister let us know how frequently the orders have been invoked and used? What level of co-operation has there been from Guernsey, Jersey and the Isle of Man? Is there any estimate of any tax saving as a result of those orders? Have the Government measured the success of the orders and what is their measure? The orders were approved under powers introduced in 2000 to enable the United Kingdom to enter into agreements that concerned the exchange of tax information. They are bilateral agreements relating to the European Union savings directive. Will the Minister spell out what agreements have been signed with other dependent and overseas territories? The genesis of the agreements was the 1999 Helsinki European Council, which agreed that,
“all citizens resident in a Member State of the European Union should pay the tax due on all their savings income”.
To their credit, the United Kingdom Government have done some admirable work in this sphere, although they found it difficult to reach agreement that exchange of information is the right way to counter tax evasion.
The day before yesterday, as reported at col. 556 of Hansard, my noble friend Lord Maclennan of Rogart asked the Minister the relevant question whether he believed that the European Union would speak with one voice on this subject. My more specific question to the Minister is this: exceptionally, the European Union accepted that three member states, Austria, Belgium and Luxembourg, may levy a withholding tax for a transitional period before moving to the automatic exchange of information. Has that transitional period now expired? Is there now full co-operation with all European Union countries in relation to these matters? Obviously, the weakness in this system is that this agreement deals primarily with savings. The object of the exercise is to have a far wider exchange of information between revenue authorities. It would be interesting to hear from the Minister what progress on information sharing and other matters is being made with Switzerland, Liechtenstein, Andorra, Monaco and San Marino.
It would be wrong to have a debate of this nature without saying a few words about tax avoidance and the possible introduction of a purposive rule in our tax affairs. In an excellent article in the Times on 21 March this year, Matthew Parris described the appallingly complex nature of our tax system and the convoluted and extremely expensive efforts that taxpayers and HMRC expend to deal with these matters. He referred to “loophole-seekers”. I do not entirely agree with his solution; nevertheless, it is surely time that HMRC introduced a consultative document on these matters and a full public discussion, including debates in both Houses of Parliament, on the effectiveness or otherwise of taking these steps and pursuing a purposive rule in taxation.
There is much more to be said on these matters, but there is insufficient time to deal with further details. Nevertheless, I conclude my speech by making one further point. It was hinted at by the noble Lord, Lord Baker of Dorking, in his question to the Minister the day before yesterday, reported at col. 555 of Hansard. It was also hinted at by my noble friend Lord Oakeshott. The Minister said that he had been assured by Her Majesty's Revenue and Customs that it was confident that it had resources in terms of number of staff and skills to deal with these matters. I am not sure that that is the case, especially in terms of tax fraud. Now would be a good time to recruit some very able specialists into HMRC, the Security Service and other agencies, including the Serious Organised Crime Agency, to get to the bottom of what are very complex and convoluted steps taken by fraudsters on an international scale and to bring them to justice.
I hope noble Lords will forgive me for quoting from a leading article taken from yesterday’s Financial Times:
“Either government makes use of the expertise that former bankers and other financiers can bring to bear, or it draws only on professional politicians and paragons”.
“Hiring poachers to become gamekeepers means picking candidates with rabbits and pheasants in their past—otherwise there is no point in employing them. But they must then be defended if and when their previous careers cause controversy”.
I believe that the Minister comes from Cornwall, so he has quite a bit going for him.
My Lords, let no one say that debates in your Lordships' House have no impact outside it. Since my noble friend Lord Wallace put this debate down on the Order Paper, the whole edifice of global tax havens has started to crumble. It now looks likely that the G20 will take action that was inconceivable until relatively recently. Indeed, the G20 Finance Ministers meeting a couple of weeks ago urged the G20 as a whole to develop a toolbox of effective countermeasures against such havens.
It is ironic, however, to hear the Prime Minister talk about UK leadership on the issue when his role has been one of studied followership. Two key developments have spurred him into action. The first was when the German Chancellor and Government discovered the degree of tax avoidance and evasion happening via Liechtenstein and took action there and followed it up by action, or certainly pressure, on Monaco and Switzerland. The second was, as my noble friend Lord Burnett mentioned, the fact that the new American President, while still a senator, introduced the wonderfully entitled Stop Tax Haven Abuse Act to the Senate, and has made it clear that he intends the principles embodied in it to be implemented by his Administration. I commend it to the Minister; it is a splendid document. The US estimate that if it were implemented fully, they might save as much as £50 billion of tax revenue, which gives some idea of the scale of the problem. I commend it to the Treasury and to the Minister as essential reading.
It was those examples of leadership that resulted in the Prime Minister springing into action. Despite a record of almost total inactivity as Chancellor, he is now setting himself up as the global scourge of tax havens. He has done that because he can now see an opportunity to have an impact. We hope that his fellow G20 leaders take a collective leap forward on tax havens when they meet next week.
Today's debate is concentrating on those tax havens that, in one way or another, fall under the British Crown. Although many features of tax havens are common across the world, we bear especial responsibility because so many of them are, to a greater or lesser extent, under UK jurisdiction. In the case of some of the most notorious tax havens, especially in the Caribbean, the UK has allowed or even encouraged territories to develop their offshore financial services sector to reduce the likelihood of the UK having to give them financial assistance.
At one level, that has been extremely successful. Mention has already been made of the Cayman Islands, where per capita income is now higher than that in the UK. The Cayman Islands are the largest offshore banking centre in the world. That is not absolutely surprising when you look at their tax policies. There are no corporate, capital gains, VAT, profits or other taxes on Cayman companies, and there are no withholding taxes on dividends or payments of principal or interest. It is hardly surprising that that is an attractive place to set up a company.
In other territories, such as those in home waters, we have let things drift, either because of lack of interest or because there were always enough powerful individuals and companies that benefited from using those tax havens to make it politically too controversial for Governments to act. Fortunately, that now seems to be changing. Of course, not all tax havens are the same, as the noble Baroness, Lady Hooper, pointed out, and not all the financial activity that takes place there is equally reprehensible.
Of course, there is a distinction to be made between avoidance and evasion. On evasion, either by companies or individuals, the key is transparency and the UK’s ability to get the information it needs about UK residents or companies to track them down. Progress has obviously been made in recent weeks on that. My noble friend Lord Wallace mentioned the case of Jersey, where a new agreement on exchange of information was signed earlier this month. That is pathetic. This month? As my noble friend Lord Wallace pointed out, Jersey has had an association with the British Crown way back into the mists of history, but it has taken until this month to get a tax exchange agreement sorted out. Dear, dear, surely we can do better than that.
The Government have at least taken, or may be about to take, decisive action in the case of the Turks and Caicos Islands, where the Auld report pointed out that there were systematic corruption and serious dishonesty by the Government there. I hope that in taking action there, the Government will not be put off by some of the bleats by some of the offenders in the Turks and Caicos, who claim that any action we take is a colonialist venture. Robert Mugabe tries that, and we know how much logic there is in that.
Even if we conclude acceptable tax information exchange agreements with all our tax havens and they do the same with all other countries whose nationals use their financial services, we will have gone only part of the way, because tax avoidance using tax havens is almost as pernicious, if not more so, as tax evasion. There was nothing illegal about Tesco using a Cayman Islands subsidiary to avoid paying tens of millions of pounds of stamp duty on some of its property transfers. There was nothing illegal about at least some of the schemes referred to by my noble friend Lord Oakeshott which Barclays Capital dreamt up and made such a lot of money on, just as there is nothing illegal about individuals who have made their wealth in the UK retiring to the Channel Islands to reduce their tax liability.
However, we feel a sense of moral outrage and a justifiable sense that something should be done to stop such behaviour, because its purpose is to allow the wealthy and the powerful—companies and individuals alike—to avoid their responsibilities as citizens and to take the benefits of living and operating in a well ordered society without paying their share of the costs that the state needs to incur to enable society to function. My noble friend Lord Burnett referred eloquently to that.
If the conclusion one draws is that more needs to be done, what might that programme consist of? One thing that is clearly not possible, even if we wanted to do it, is to require those countries to set tax rates at levels which are more nearly those in the UK, but there is a raft of things that we can do either on our own or in co-operation with our international partners. I strongly agree with my noble friend Lord Burnett’s proposal of a purposive rule for tax avoidance schemes. Over the past decade, we have seen a huge volume of legislation introduced in Finance Bills to try to deal with schemes on a case-by-case basis. One is always one step, if not more, behind the avoiders, so a purposive rule has a lot to recommend it. I am curious why the Government do not take a tougher line with the banks that they now effectively own or that are seeking or may seek government support, requiring them to stop running tax avoidance schemes.
One would like to see shareholders asking more questions of the companies in which they invest. I was interested to see the initiative taken by Aviva Investors earlier this year, which said that it will be a much more active shareholder across a whole raft of corporate governance issues. I hope that that is followed.
There should be a requirement that all non-doms who choose to remain in the UK for more than a set period should pay UK tax on all their global earnings, thus not just generating more tax income but closing another gigantic loophole. Noble Lords have referred to the Foot review on tax havens. Like others, I would welcome an update from the Minister on where that is going and when we may expect something back from it.
Finally, I return to the broad principle that my noble friend Lord Burnett discussed. We want to push for full information exchange agreements not just with our tax havens, as it were, but with those elsewhere in the world. We hope that that will be one of the outcomes of the G20 discussions.
There was a very effective summary of the situation in tax havens in this weekend’s Financial Times in an article by John Kay, who wrote:
“If you operate in the penumbra of legality, as havens do, it is easy to slip outside the bonds of legality altogether. Where there is legal avoidance of tax and regulation, illegal avoidance of tax and regulation is rarely far behind, and often hard to distinguish: where there is secrecy the motive is frequently impropriety; where there is impropriety, criminality is rarely far behind”.
We agree. We now want the Government to take action.
My Lords, I congratulate the noble Lord, Lord Wallace of Saltaire, on securing this debate. Despite the additional focus that tax havens have attracted from the G20 and, indeed, from President Obama, this is not the most important issue facing our country. Indeed, I have not even put it in the top 10. As my noble friend Lady Hooper pointed out, the report last week of the Lord, Lord Turner, found that offshore financial centres were not a cause of this financial crisis.
The Prime Minister has jumped on to the tax haven bandwagon precisely because it is a good way of diverting attention from the real problems that our economy faces and from his own role in creating them. To use the words of Mr Martin Broughton, the President of the CBI, this is a “red herring”. The Motion refers to tax avoidance and tax evasion, but as has already been pointed out, only tax evasion is illegal. As Lord Clyde said in the 1929 Ayrshire Pullman Motor Services case:
“No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores”.
I look forward to hearing whether the Minister regards that as continuing to be good law.
We condemn tax evasion, and we have absolutely no desire to encourage tax avoidance. It reduces tax revenues and penalises other taxpayers. But we equally respect the right of taxpayers to arrange their affairs within the law so as to minimise the taxes that they pay. On the other hand, the Government of the day have a clear obligation to create a tax system which results in tax being paid fairly across the population and which deals severely with those who evade tax. It is beyond the scope of today’s debate to say how our tax system should develop to reduce the scope for tax avoidance, but I commend to the House the report of the tax commission chaired by my noble friend Lord Forsyth, which sets out the principles that should guide Governments in this area. It includes massive simplification and lower rates of tax. That is what will contribute to an environment in which tax avoidance will be reduced. We do not expect the current Government to deliver on that agenda.
Offshore financial centres are only one aspect of the problem of tax avoidance and tax evasion. The Motion refers only to those under the British Crown, but the issues that the noble Lord has raised are relevant to financial centres, whether offshore or onshore and whatever their constitutional arrangements and allegiances. We see nothing wrong with a territory having low or zero tax rates. The OECD recognises that it is for each individual country—not the global community—to determine how it raises the revenues that it needs. We do not condemn tax competition between nations. We support the autonomy of the nation state in tax matters, which includes defending our own tax system against constant attempts by the EU to interfere in direct tax matters for which it has no competence.
We are also aware of good reasons for the use of offshore financial centres. I have received some briefing from CDC group, formerly the Commonwealth Development Corporation. Noble Lords will be aware that CDC channels development money into businesses in emerging markets, particularly in Africa and the Indian sub-continent.
CDC often uses offshore financial centres for the vehicles that it sets up to create this worthwhile investment. It has a number of reasons for that, including the availability of a legal infrastructure, which does not exist in all developing countries, and access to financial markets that are not open to developing countries. In addition, offshore financial centres offer tax neutrality so that no additional taxes are borne by the vehicle set up to pool investment funds. My noble friend Lady Hooper also set out how centres such as the BVI are beneficial not dens of iniquity.
We certainly do not support the secrecy that is often associated with offshore financial centres, though not, as my noble friend pointed out, the BVI. We do not believe that secrecy should be allowed to be a competitive advantage. Secrecy has much wider implications than tax. Transparency makes ill gotten gains from corruption more difficult to conceal and hampers those who gain from organised crime or who wish to finance terrorist activities. These are the most important reasons for putting pressure on all countries to abandon secrecy.
Today’s debate is particularly important as it allows us to ask the Minister some questions about the Government’s position on offshore financial centres. We have learnt over the last week that the Minister has been intimately involved in business in tax havens. I am quite sure that he knew—and operated within—the distinction between tax avoidance and tax evasion. Does he agree with what the Prime Minister said to Congress earlier this month? He asked:
“But how much safer would everybody’s savings be if the whole world finally came together to outlaw shadow banking systems and offshore tax havens?”.
Does the Minister join in the Prime Minister’s condemnation of the use of offshore tax havens? Should people who use them now be regarded as outlaws? During Oral Questions earlier this week, the Minister seemed rather proud of his involvement with a business based in the tax haven of Bermuda. He told the House that,
“since inception it has paid $360 million in tax, the majority of which has been paid in the UK at an effective tax rate of 24 per cent compared with UK tax rates of 28 per cent”.—[Official Report, 24/3/09; col. 556.]
That of course leaves open the question of how the group shaved 4 per cent off its tax rate—or indeed 6 per cent—before our corporation tax rate came down from 30 per cent last year. On the Minister’s figures, that is between $60 million and $90 million less tax paid to the UK than we would have expected.
I have also had a quick look at the financial statements for the company concerned, Aspen Insurance Holdings Limited. They show an overall current tax rate—that is the cash tax rate—of less than 20 per cent, so another 4 per cent or so is not actually being paid in taxes. There must have been some impressive tax planning going on somewhere, presumably using the tax holiday from which the group benefits by being based in Bermuda. Can the Minister say whether the UK Government think that it is justifiable to use tax havens like Bermuda to avoid UK tax?
When the Prime Minister addressed Congress, was he referring to arrangements like those in which the Minister has been involved? I repeat, does the Minister endorse the Prime Minister’s condemnation of the use of tax havens? He did not appear to do so on Tuesday. Put simply, will the Minister in his response to this debate give a simple answer—yes or no—to one very basic question? Is it justifiable to avoid UK tax by using tax havens such as Bermuda? These questions must be answered when the Minister responds, in view of the Prime Minister’s clear declaration to Congress that offshore tax havens must be outlawed.
My Lords, this is a timely debate. I thank the noble Lord, Lord Wallace, for bringing this issue to the attention of the House and, if the noble Lord, Lord Newby, is to be believed, the world.
I want to set out the Government’s actions in addressing the issues that have been raised. My right honourable friend the Prime Minster said to the European Parliament earlier this week that,
“we can for the first time agree the big changes necessary for co-ordinated action that will signal the beginning of the end for offshore tax havens and offshore centres”.
The UK has been leading the development for this international consensus. As the noble Lord, Lord Newby, noted, there has been a marked change of attitude globally towards this issue, no doubt in significant part related to the very strong position that President Obama has taken on it.
Tax evasion is illegal, and those who engage in it risk prosecution. It is also distortionary, meaning that investment decisions are made in order to evade taxes rather than for reasons of economic efficiency. Secrecy contributes to tax evasion. Improving transparency and the exchange of information by tax authorities is the key to tackling secrecy. It is a global problem, and the UK’s response to it needs to reflect that. We have been using our presidency of the G20 this year to focus on tax havens and to ensure that they do not have a harmful effect on tax revenues and the financial system. The UK wants to see all jurisdictions signing up to international standards on transparency and the exchange of information in tax matters. I agree with the noble Lord, Lord Burnett, that this will require co-ordination and co-operation. It is a tall order but it is achievable. The noble Lord, Lord Burnett, asked a number of questions about the outcome of existing agreements for the exchange of information and I will investigate whether that is a matter on which I might be able to provide him with some further assistance in writing.
In the days leading up to the G20 Finance Ministers’ meeting, there was a flurry of announcements from countries such as Switzerland, Liechtenstein and others who have upheld banking secrecy in the past. They have made commitments to meet the international standards. The key now is to ensure the swift implementation of these commitments. Leaders will review progress at the London summit on 2 April. One of the issues they will no doubt review at that time will be the sanctions that may be required should this voluntary process not deliver the expected results.
In addition to promoting exchange of information through the G20, for a number of years we have been taking similar action in the European Union through the savings directive, which has improved the flow of information between member states. This framework also extends to third countries such as Switzerland. We have also taken action closer to home. As the noble Lord, Lord Wallace, noted, HMRC’s offshore disclosure facility shows that HMRC is tackling evasion through the use of offshore accounts. Set up in 2007 to encourage UK residents with unpaid tax connected to offshore accounts to make full disclosures, it has so far recovered £400 million. HMRC has also been successful in reducing losses in VAT and excise fraud in recent years by about £4 billion. The Government also recognise the wider effects of tax evasion on developing countries. That is why, with the Department for International Development, we are looking at ways to improve developing countries’ tax systems, and why DfID and HMRC provide capacity-building assistance to those countries.
In response to a Question from the noble Lord, Lord Higgins, earlier this week, I spoke about the distinction between tax evasion and tax avoidance. Tax avoidance is not illegal but, like evasion, it can undermine tax revenues and investment in public services.
Last week, my right honourable friend the Chancellor of the Exchequer announced that HMRC will be publishing a draft code of practice on taxation for the banking sector to ensure that banks comply with not just the letter but also the spirit of the law. Our intention is to produce a draft code, probably at the time of the Budget, and then to consult publicly with a view to getting it right so that the code of practice works and is introduced as soon as possible thereafter. The noble Baroness, Lady Hooper, asked whether this would apply to offshore banks. I will certainly draw this to the attention of Mr Michael Foot. In addition to UK banks, it will cover the UK branches of overseas banks, and I hope it might prove to be a model which others will see as having merit. We can no longer hide behind the excuse that there is no acceptable definition of avoidance. In the end this becomes a moral issue and to some extent answers the point raised by the noble Baroness, Lady Noakes, about whether the legal judgment to which she refers continues to be applicable. There is a new sense that complying with the spirit of the law and the intention of Parliament is important and we have ample evidence of codes of practice, particularly in the financial sector, providing guidance as to behaviours. I am optimistic that the steps we are taking here around a code of practice to include an independent audited element will help take us forward.
The UK has taken the EU lead in tackling some of the most aggressive tax avoidance schemes through the EU’s Code of Conduct for Business Taxation. The former Paymaster-General and the Financial Secretary chaired this code group for more than 10 years. During this period, the group identified 66 measures that were considered harmful in the UK’s Crown dependencies and overseas territories. All have now been repealed or are in the process of being abolished. We have also recently seen progress made by the UK’s Crown dependencies and overseas territories—particularly Jersey, Guernsey, the Isle of Man, Bermuda and the British Virgin Islands—in signing tax information exchange agreements. We welcome this, and it is important that this momentum continues. We expect offshore financial centres to go further and to commit to meeting international standards as they arise in the future. Recent financial events have highlighted the need to look at the role the UK’s Crown dependencies and overseas territories have played in encouraging non-transparency in the financial system, which has led to tax evasion and avoidance.
At the Pre-Budget Report last November, the Chancellor asked Michael Foot, a former director of the Bank of England and the FSA, to lead an independent inquiry into the long-term opportunities and challenges facing Crown dependencies and overseas territories as financial centres. The review will release interim findings at the Budget. The noble Lord, Lord Wallace, inquired whether this would be a friendly or an aggressive review. I would like to believe it will be an independent and objective review, which reflects the wisdom and experience of the reviewer, Mr Michael Foot. Tax is only one factor in the review but it is right that we should have an independent assessment of the sustainability of an economic model where one sector—financial services—dominates but which has been attracted there not by intrinsic skills or resources but by other factors, particularly low taxation. A financial services industry based solely or primarily on tax evasion or avoidance is no longer internationally acceptable.
The noble Baronesses, Lady Noakes and Lady Hooper, referred to the many skills and qualities offshore centres provide which go beyond tax issues. The noble Baroness, Lady Noakes, referred, in particular, to representations made to her by CDC, and I recognise the merits of those arguments. What I am establishing here is that an offshore financial centre which is solely or primarily dependent on tax evasion or tax avoidance is not acceptable. In the same way as we are having to wean the farmers of Afghanistan off the poppy and the farmers of Colombia off coca, we have to wean offshore financial centres off tax if that is the only source of competitive advantage that they offer.
The noble Lord, Lord Bradshaw, referred to the moral role for the UK Government. Proper governance is not incompatible with adopting a code of practice for tax aimed at complying with the spirit of the law. The Government have a role in setting standards. We can provide a policy, an institutional framework, which can stimulate companies to raise performance on tax compliance beyond the statutory minimum in order to benefit the wider community and the longer-term interests of shareholders.
The noble Lord, Lord Burnett, referred to whether we should have tax and information exchange agreements with all countries which involved the automatic exchange of information. Tax information and exchange agreements are effective at providing targeted and relevant information on request and are now widely used. Automatic exchange of information between all countries would probably be highly complex and costly to administer. The key is to ensure we have the relevant information required to achieve the purpose.
My Lords, I agree with the noble Lord’s representation. I may well add further comment in a letter, which I will of course copy to others who have participated in the debate.
The noble Lord also asked why we did not just stop avoidance. Avoidance is legal behaviour that goes beyond the spirit of the law; that is why it is so important that we recognise that the letter will not be sufficient here and that the spirit is critical. I have already answered his question about sanctions. The G20 summit on 2 April will no doubt take stock of latest progress. He also asked about withholding tax agreements with EU countries. Three EU countries—Austria, Luxembourg and Belgium—apply a withholding tax rather than exchanging information under a transitional framework, although Belgium recently committed to automatic exchange from next year. We are keen for all countries covered by the EU savings directive framework to move to exchange of information as soon as possible.
The noble Lords, Lord Newby and Lord Burnett, asked about the Stop Tax Haven Abuse Bill in the US. We are closely monitoring that Bill, which was introduced by Senator Levin, and have co-operated with the US Government on the issue through the G20. The noble Lord, Lord Newby, said that he was curious why the banks in which the British Government had a shareholding were not moving more rapidly on the issue. I and others in government welcome the steps taken already by the Royal Bank of Scotland to close down the unit primarily responsible. It is important to recognise that individual banks taking action will not stamp out behaviours that we find unacceptable, because there will simply be somewhere else to go. That is why this needs to be co-ordinated and to involve international co-operation. However, as one walks around places such as Jersey and Guernsey, it is striking how on every street and on every corner you see the logos of major international accounting firms such as KPMG and major international banks. It is important to recognise that, in this area, those centres rely for their effectiveness on the operations there of non-domestic banking and advisory institutions.
I will not be tactless and refer to Mr Michael Brown and the difficulties that the Liberal party might have in that respect. Nor will I express anything other than mild disappointment that the noble Lords, Lord Laidlaw and Lord Ashcroft, are not in the Chamber; no doubt they would have been able to give us some valuable insights into offshore centres and tax matters—as indeed, in the other House, would the shadow Business Secretary, who would have been able to tell us about his involvement with businesses based in offshore centres. In response to the noble Baroness, Lady Noakes, I say that we must accept that there are legitimate reasons for operating from other centres. No doubt the treasurer of the Conservative Party has good reasons for being involved in businesses that have activities in other financial centres. Frankly, it is a pointless route to go down to try to damage people’s reputations and integrity by implying in whatever cautious language one uses, as has been the case with the press at times, that there is something improper about being involved in other jurisdictions. I for one have no shame about my involvement with Aspen, a highly successful international reinsurance company based in Bermuda, one of the world’s important reinsurance centres—advised throughout on tax matters by the reputable firm of KPMG, with which I believe that the noble Baroness is familiar.
At times, I found the noble Baroness’s speech veering towards her being an apologist on matters that are clearly a great concern to the noble Lord, Lord Wallace, and others who spoke in support. I read in the Financial Times earlier this week that she said that this issue was just a distraction. I do not believe that; there is clear evidence that very large amounts of tax are not being paid, and it is important that we address that. I recommend that she read the recent speech by Mr David Cameron on capitalism with a conscience, which shows that there is a moral dimension to business—it is not all about making money or lining your pockets with as much money as possible, but is about being a responsible member of society.
The Government and other Governments are gripping the issue in a way that has not been done in the past. We are improving transparency. There is an international consensus around spirit in addition to letter, which will pay significant dividends in due course. I hope that I have answered most of the questions raised. If I have failed to answer any that were material, I will of course cover them in writing to the noble Lord.
My Lords, I thank the Minister for that useful and constructive reply, and thank all those who took part in the debate. Let me briefly make a few remarks. The sustainability of the offshore financial centre model is a large question. I was in Jersey some months ago talking precisely about how it survives if its offshore financial services go down; that is a real problem.
I am sorry that, in her short and uninformative speech, the noble Baroness, Lady Noakes, did not address many of the issues at stake. I was surprised that there were no speeches from the Labour Back Benches. The Labour Party used to be concerned with social justice and fairness. A number of Labour Members of this House are active members of the All-Party Cayman Islands Group, and I know that they go to the Cayman Islands with their partners on occasions.
This has been a useful debate. We need to continue to follow the issue. We wish the Government good luck in pursuing it further. They need to act now because, if we did have a change of government, clearly a new Government would not wish to take any action in this respect.
My Lords, 64 years ago on 16 July 1945, the first test of a nuclear weapon occurred in Alamogordo, New Mexico. As he saw the now familiar and sinister mushroom cloud arise, Robert Oppenheimer, the head of the Manhattan Project to develop a nuclear bomb, said, “I am come, Kali, destroyer of worlds, brighter than a thousand suns”, a quotation from the holy scriptures of Hinduism, the Upanishad, which to this day resonates with those of us who look at the issue of nuclear power.
The world pulled itself together and established a nuclear proliferation treaty, originally signed in 1968 and coming into effect in 1970, which established a system of regulation and control over nuclear power that has lasted extraordinarily well among the disarmament treaties that the world has signed at one time or another. In the 40 years since, the number of nuclear powers has risen from five to nine. That is troubling, but it is in many ways remarkable that the world has managed to restrain the development of nuclear military power to that extent.
Also in those 40 years, there has been a strong awareness of the dangers and threats constituted by nuclear power. However, the nuclear proliferation treaty was based on a crucial bargain, which is expressed in Articles 4 and 6. Under Article 4, nations have the right to develop civil nuclear power to enable themselves to produce energy from nuclear fuel under strict safeguards. However, each nation state is absolutely free to take the advantages offered by Article 4. Under Article 6, the other part of the bargain, the existing nuclear powers, which by this time were the United States, Russia, China, the United Kingdom and France, committed themselves to energetically and persistently pursuing nuclear disarmament. That is the fundamental bargain on which the NPT rests.
That bargain has unquestionably eroded. In 2005, the preparatory commission for the nuclear proliferation treaty, which has to be renewed in the spring of 2010, was unable to reach agreement because the non-nuclear weapons powers felt that they had been effectively deceived. They regarded the nuclear powers as having failed to carry out their commitments under the treaty.
If we go back to the years between, we can say quickly that in the 1980s there was a remarkable movement forward in disarmament treaties that affected military nuclear power. The long, and in many ways extraordinarily benevolent, American presidencies of Ronald Reagan and George Bush the elder, if one can properly so describe him, produced in START, SALT and the Moscow treaty remarkable disarmament agreements. Under them the world’s supply of nuclear weapons was, very broadly, halved. They deserve credit, as do President Brezhnev and, even more, President Gorbachev of Russia, for the active part that they played in those disarmament treaties.
By the end of the 1980s, it began to look as if the world would be able to control nuclear weapons. Sadly, there succeeded a whole decade of, effectively, lost time. Between 1998 and 2008, the world saw its movement towards control of nuclear weapons moving backwards and not forwards. A large part of the responsibility rested on the Administration of the United States, who pulled out of the Anti-Ballistic Missile Treaty without consulting their allies, let alone their potential enemies, and who essentially weakened the conventions that dominated the control of chemical weapons and biological weapons.
By 2008, Russia still had 14,000 nuclear warheads and does so to this day. The United States had 9,400 nuclear warheads, although it is fair to say that 4,200 of them are due to be dismantled. However, they have not yet been dismantled, or made operative. Finally, the little nuclear powers, which, paradoxically, include China as well as France and the United Kingdom, had between them just over 1,000 nuclear weapons, which constituted only 4 per cent of the world’s supply.
There are now, I think, two major threats. The first is to the existing system under which we live—the new risks. The second is to the nuclear proliferation treaty structure itself. The first of those new risks is familiar: the probable massive expansion of civil nuclear power. At present in the world, there are 439 power stations or, more often, small research centres, mostly based on low-enriched uranium, which are matters of concern to those who wish to control nuclear materials. Most of them are small, well organised and well controlled, but all these centres exist. On top of that, we now have another 37 proposals for new nuclear power stations and some 300 in the planning process. In other words, the potential for new nuclear power centres or stations would double the existing provision of nuclear centres in the world.
Perhaps even more important is that a great many of those planned and those under construction are in countries with virtually no experience or knowledge of managing nuclear power. The lack of knowledge and awareness is terribly important. Already, we have in the world a couple of generations of men and women who have no idea of the threat that nuclear power can present and are therefore in some ways rather apathetic about it or even complacent.
Therefore, the first issue is the huge expansion of nuclear power. Does it matter? Yes, it does. The process of producing nuclear power for civilian purposes and for producing nuclear weapons is similar in the early steps. In the first stages of the enrichment of low-enriched uranium or other nuclear materials to the point where they can be used either to produce energy or to produce nuclear weapons, it is difficult to know the intention of a country.
The second major threat to existing structures has been little discussed and debated: the emergence of cyber power in a major way. Cyber power, the capacity to effectively disrupt, alter or diverge information in the computer world and in the world of space, can effectively disrupt and even destroy the command and control systems on which the present controls over nuclear power and nuclear weapons are conducted. This is much more dangerous than people believe. You only have to read a little bit about cyber hackers and others, many of whom are individuals with rather curious intentions, to see how dangerous cyber power can be. It is one of the reasons why China is particularly concerned about the move towards space weapons and the shooting down of cyber satellites. With cyber satellites goes a fully sophisticated inspection system on which we all now depend for our safety.
For reasons of time, I will mention the third danger only in passing, as I have spoken about it already. Put simply, there is a population in both nuclear weapons powers and non-nuclear weapons powers that is fundamentally unaware of the dangers of what it is dealing with.
On the threats to the system, the discussions about the extension of the nuclear proliferation treaty—I repeat that it will expire in the spring of 2010 unless it is extended or renewed—are already in considerable danger because we have seen that the non-nuclear weapons powers are increasingly not prepared to co-operate. What can be done about that? The coming of the Obama regime in the United States, which coincides with what at least seems to be a more questioning regime in Russia, is the best chance, and perhaps the only chance, that we have of controlling this extraordinary multiplication of nuclear power in the world.
What steps should be taken in order to bring that about? The first is passing the Comprehensive Test Ban Treaty. The parallels with the banking crisis are close. In both instances, trust is the factor that has disappeared, which has made producing a new architecture extraordinarily difficult. In the case of a nuclear architecture, the CTBT is vital to restoring trust, a first step, which means that it has to be ratified by the American Senate. In my view, the second crucial step is to move from that to reducing the arsenals. I have said how large they are. Privately, the United States and Russia agree that 500 nuclear weapons would suffice, and would be far more than is necessary, as a minimum deterrent. Therefore, to get from 14,000 to 500 or from 9,400 to 500 is a perfectly possible second step towards building trust.
The third step is a fissile material cut-off treaty, which means that we do not keep pouring more and more nuclear weapons into the system. The fourth step was interestingly debated only a few weeks ago at the fuel cycle conference in London, which, to his great credit, Gordon Brown initiated. It is to recognise the need to internationalise the fuel cycle from its beginning in fuel materials to its ending in waste materials from nuclear power and other nuclear installations. That is a huge step, as it involves confronting the immense pressures of national sovereignty. National sovereignty is the great enemy of building a new nuclear architecture. If we are honest with ourselves, we have to confront that.
The United Kingdom has already proposed bringing down the existing deterrent of Trident to the absolute bare minimum that would leave it as a deterrent, from 160 warheads to 120. There may come a time when we have to look again at Trident. That will be the point at which we move away from the idea of a minimum deterrent to the glittering idea of a nuclear-free world. It is an idea that the Prime Minister has adopted, as has President Obama in the United States, although, understandably, neither offers us a timetable at present.
How do we get to the first base? Most of us agree that the abolition of nuclear weapons cannot be done in one great leap. I think that it was the French historian Braudel who said that you cannot cross a chasm in two leaps. To cross this chasm, we must move from island to island. I have already mentioned the first island of CTBT, fissile material cut-off, reduction in arsenals and the gradual multilateralisation of the fuel cycle, which would mean that fuel banks were available to any country that obeyed the terms of the nuclear proliferation treaty. The United Kingdom has put forward a proposal for what is called nuclear assurance. In turn, this must be linked to a fuel bank. The first fuel bank already exists. I declare an interest as a member of the board of the Nuclear Threat Initiative, an American-led, non-governmental organisation that has so far raised $116 million, some of it from Sunni Arab powers, to create an international fuel bank, which would be available to any country that keeps to the rules.
The final step, as I have mentioned, is the abolition of nuclear weapons. That means taking one further step and introducing a treaty of fuel material stocks and international globalised inspection. The IAEA is central to this and we must build up its resources and inspectors to enable them to carry out this huge task. I conclude with a quotation from a speech that our Prime Minister made at the nuclear fuel cycle discussion on 17 March, when he said that,
“the nuclear question … is about the values of the global society we are trying to build”.
Let me put it more succinctly, in the words of a great poet, Wystan Hugh Auden:
“We must love one another or die”.
My Lords, I congratulate the noble Baroness on her initiative on this debate and on her speech, which showed a magisterial command of this vital subject. She has an expertise in this field that is second to none in the House. I am glad, as she is, that the United Kingdom has taken a lead in the build-up to the NPT review next year. I cite both the FCO document of 4 February and the Prime Minister’s speech to the IISS, to which the noble Baroness referred. I cannot claim nearly to match the expertise of the noble Baroness in this field, but I will make a number of rather random reflections on the broad subject.
First, non-proliferation is now increasingly recognised as a key problem of our age. Henry Kissinger said in his famous International Herald Tribune article:
“Proliferation of nuclear weapons has become an overarching strategic problem for the contemporary period”.
Until recently, the whole issue appeared to have slipped further down the agenda of concern from the alarming predictions of President Kennedy in the early 1960s that by this time perhaps 40 or 50 countries would have the know-how to produce the bomb. That prophecy has not yet been fulfilled. Of course, other threats have tended to take centre stage. One thinks of the strong lobbies for climate change and the environment generally; for action on world poverty; and, of course, the war on terrorism, as defined by the Bush Administration. Yet the threats of nuclear proliferation are more imminent and more fundamental to our survival.
It is also a problem where we have, perhaps, a greater chance of success than in certain of the other fields, as the noble Baroness has said. I recall reading an article recently by one US academic who argued that the problem in respect of Iran’s wish to obtain military nuclear capacity is so fundamental that one should strike a bargain with Russia on Iran, bringing Russia on board as a first priority, which could mean ditching the enlargement of NATO and the proposed missile sites in central Europe. It is so vital to have Russia on side in seeking to persuade Iran. Similarly, the message of the Prime Minister’s speech on St Patrick’s Day was for a global nuclear bargain that would encourage countries to go along the civil nuclear path, helping them in every possible way so as to avoid the military path. Much needs to be done to reduce the explosive power of the existing arsenals. In the same speech, the Prime Minister showed that Britain is prepared to contribute to further reductions.
In relation to nuclear weapons generally, the recipe is well-known. We cannot disinvent them. The FCO pamphlet quotes Einstein:
“If only I had known, I should have become a watchmaker”.
The world, as the noble Baroness has said, needs a greater reliance on civilian nuclear energy to reduce carbon emissions. Essentially, the problem is how to harness nuclear potential for the good of mankind, while minimising the dangers. Some look back nostalgically to the Cold War period of mutually assured destruction, when both superpowers knew the rules of the game and there was a degree of stability in the nuclear stalemate. Now, of course, that stability is no longer there as nuclear capacity appears to move to less stable and less responsible states, and even, possibly later, to non-state actors. Yesterday’s government document, Pursue Prevent Protect Prepare, mentioned the danger of dirty bombs.
There were cracks in the old certainties immediately after the fall of the Berlin Wall. I recall the concern in the 1990s about Russian nuclear scientists, following the collapse of the Soviet Union, being lured to Iran and less stable regions; and the lack of security in Russian military installations, photographs of which I saw at the Rand Corporation in California. The United States in particular, and the European Union to a lesser extent, are to be commended on what they have done to assist Russia in this field.
On Pakistan, when we learnt of the activities of AQ Khan, we gained some indication of the difficulty of enforcing global controls. It is difficult to accept that his activities were unknown to high officials in the Pakistan Administration. That is why, realistically, the situation in Pakistan is probably a greater threat to world peace than the Middle East, given the instability of the Government. One thinks of the recent deal with the Taliban in the Swat valley and also of the nuclear device that was exploded in 2002. How do we remedy this? Obviously, we need to assist Pakistan with the security of its installations and seek generally to reduce tensions in the area, particularly in their bilateral relations with India. The US new strategy in relation to the Taliban is particularly important.
Realistically, Iran is in many ways less of a risk; there is a Government in control of the country. Israel views the nuclear pretensions and aspirations of Iran as an existential threat and, given the precedent of the Osirak strike against Iraq in 1981, would probably consider a surgical strike at some stage. However, that would need the agreement of the United States which, given the current mood of the US in its talks with Iran, is highly unlikely and would be counterproductive for Israel.
A group in Israel accepts that Iran, perhaps for reasons of self-respect and deterrence, would need to have only an initial nuclear capacity. It is obviously worth dissuading Iran from going further along that road by using big sticks and big carrots to avoid the danger of instability and the temptation of other states in the region to go along that same path. Yet much of the evidence is that Iran is now buying time and is unlikely to accept the sticks and carrots that are and are likely to be on offer. Historians may well say that little can be done if Iran obtains that capacity. President Obama’s Iran initiative is encouraging; the response of the Supreme Leader is particularly discouraging.
North Korea is an unknown quantity, even to the South Koreans. The six-power talks trundle on, but North Korea is highly unreliable and has shown itself in the past to be an arch proliferator. As we saw yesterday, the United States Secretary of State expressed concern about the proposed North Korean rocket launch into space. To produce a bomb, one needs highly technical know-how and the financial resources, which would rule out many states. There is, however, always the danger of leakage and another AQ Khan, who might still sell the capacity for a nuclear bomb to terrorist groups.
I have one final reflection. Some talk about a world without nuclear weapons. Perhaps I am being too cynical when I recall the aspirational visionary initiatives of the period between the wars, such as the Kellogg-Briand accord of 1928 to outlaw war, and later debates on no first use and nuclear-free zones.
Theologians are about to take part in this debate. I always enjoy Reinhold Niebuhr’s phrase about the relevance of an impossible ethical ideal. He used it in a theological sense, but I apply it here. It is clearly highly relevant to proceeding along the path of seeking maximum reductions. It may be impossible to have absolute certainty, but it is still worth striving energetically in the direction of the best attainable controls, as can be seen in the letter of the noble Lord, Lord Owen, which was published in the Times last June. The noble Lord is here today and I look forward to hearing his contribution later in the debate.
As a start, we know that 95 per cent of nuclear arms in the world lie with the US and Russia, so when START expires later this year and needs to be renegotiated, we wish them well with that. However, the danger is in the 5 per cent and those who aspire to having a nuclear capacity. We should work for the success of the NPT and should seek confidence-building measures step by step to deal with volatile and vulnerable countries. I welcome the Prime Minister’s initiative in offering to reduce our own stockpile. As the noble Baroness, Lady Williams, has said, the whole debate on the UK’s nuclear capacity needs to be revisited as the facts on the ground evolve. With all the dangers, it is imperative that we seek agreement to prevent the proliferation and reduce the dangers of leakage. All should recognise the mutuality of our interest in this area, and I am heartened by the changed attitude of the US Administration and by the initiatives taken by our own Government.
My Lords, I join the noble Lord, Lord Anderson, in expressing my warmest congratulations to the noble Baroness, Lady Williams, on the absolutely outstanding speech that she made when she introduced this debate. This is quite a complicated subject, but as her initiative today has shown—many others have already been taken—it is of increasing interest and concern. To the people who ask what it is all about, I shall simply say, “Get a copy of Lady Williams’ introductory speech in Hansard. That is your best beginning to understanding the background to these issues”.
I am delighted by the timeliness of this debate. I associate it with my late great friend and colleague Sir Michael Quinlan, who spent a lifetime being interested in these subjects. I had the privilege of working with him for five years. He was my Permanent Under-Secretary in two different departments, and we greatly mourn his recent loss. This is a timely debate because, as the noble Lord, Lord Anderson, has just said, we are catching the tide. This is the moment, with President Obama and the new American Administration coming in and on the back of a move that was promoted, ironically I thought, by two quartets that included gentlemen whom some of us have had the pleasure of working with over the years: George Shultz, Henry Kissinger, Sam Nunn and Bill Perry—two Republicans and two Democrats; and, from our own country, my noble friend Lord Hurd, Sir Malcolm Rifkind, the noble Lord, Lord Owen, who is in his place, and the noble Lord, Lord Robertson, who similarly echoed concerns about this issue, and absolutely rightly so.
Still on the question of the timeliness of the debate, I was pleased to see the interview in today’s Financial Times with Sergei Lavrov, the Russian Foreign Minister, who welcomed the American initiative and said he thought that the improved climate creates hope of progress on nuclear arms controls. This is a moment when we need to catch the tide and move forward. I am participating in this debate to add my own modest voice to those that have already supported this cause.
My first point is not about the major issue of nuclear weapons, about which I will say a word in a minute, but about my enormous concerns about the very dangerous world in which we now live and the risks presented particularly by the permanence of fissile material. The noble Baroness referred to the importance of that.
When we first experienced the problems of 9/11 and Afghanistan, a failed state, it seemed a rather isolated item on the world stage. When one looks at the situation now, one sees Somalia and the extremely daunting situation in Pakistan—a nuclear weapon state—and, amazingly for the Americans, the present challenges in Mexico. We thought that the world order was reasonably stable, but it now looks much more uncertain. Into this dangerous mix have come non-state actors and terrorist groups, whose ambition is to cause as many casualties and as much destruction as they possibly can. The existence of nuclear or radioactive material is a major challenge, and we go into this situation against a background of the considerable failure to control nuclear and other materials of this nature. I was interested to see the reference to the evidence of smuggling in the Caucasus in eastern Europe; Mohamed El Baradei has talked of 1,500 incidents of trafficking of nuclear and radioactive materials.
It is also assessed that there is enough uranium and plutonium in the ex-Soviet Union for another 40,000 weapons. When I was thinking about what I might say today, I recalled a meeting in Downing Street, at which John Major, President Yeltsin, Marshal Shaposhnikov, who was then the commander-in-chief of the CIS, the successor to the Soviet Union, and I were present. We were discussing then what we in Britain could do to help recover some of the nuclear weapons, and providing transport and other containers to help. At that time, some may remember, Boris Yeltsin was going around with great satchels stuffed with roubles to try to ensure that the security guards on the nuclear sites were still being paid at the time of that complete collapse of the Soviet Union. It had to withdraw nuclear weapons from some of the countries for which Russia no longer had responsibility and wanted to recover its nuclear weapons. That brought home to me very clearly how dangerous the situation could be.
In that situation, of course it will not be made any easier by what is clearly going to be a long-lived and very serious economic recession, which is going to have, I think, an extremely damaging impact in a number of countries least able to resist it. The other element, which I have not included, but which the noble Baroness rightly mentioned, is the terrifying new element that has crept into this of cyber power. She is right to emphasise the dangers that that poses.
At this time, it is vital to keep control of nuclear material. That coincides with the fairly general agreement around the world that we need a lot more nuclear power. Therefore, the challenges we now have in this particularly dangerous new situation could not be a more appropriate time to try to tackle these problems. I briefly support the statement made by Mohamed El Baradei of the urgent steps he sees as now essential—multinational control of the production of fissile material; significantly improved physical security of nuclear materials throughout the world; and to strengthen the IAEA, its authority, its capability and its resources. That is an essential step.
Then, of course, as the noble Baroness said, we move on to the other side of the bargain. That has to be active measures by the nuclear weapons state to reduce their own stockpiles. Ninety-five per cent of the nuclear warheads are now held between Russia and the United States; 25,000 is a number that I have never been able to comprehend. It cannot possibly be justified. It is capable of massive reduction while in no way endangering the security of the United States or Russia or seriously risking their national sovereignty and situation.
The noble Baroness also referred to the UK position. We have made significant reductions. We made some reductions in my time as Secretary of State and some have been made since. There is no perfect answer and I am perfectly prepared to accept that there would be scope in a multilateral context for further reduction to be made without endangering our security and without actually undermining the ultimate credibility of our retaining a nuclear deterrent.
The noble Baroness took us on to the next stage, which is to achieve the ultimate objective of total disarmament and a nuclear-free world. I find it difficult to believe that that is achievable at the present time. The problem about this is that it is the elimination of fear. It is a noble objective but in the present uncertain world and against the background of our failure in so many areas to solve the grievances, the problems and the hatreds of the world, I do not see an early outcome to that. I turn in my approach to, I thought, a rather apt analogy by Sam Nunn, which is that it is like climbing a mountain when the top is covered in clouds. You do not know what the obstacles may be, you do not know what the crevices may be on the way up the mountain, but if that is your objective, you have to start and as you climb and maybe climb above the cloud level then you may see the peak and see how it may be achieved. So I lend my fullest possible support to the initiative of the noble Baroness in introducing the debate—the way she has done it and what she has had to say—and I strongly support the need for this now to be the opportunity for the world to take this matter again seriously and make real progress on these issues.
My Lords, I apologise to the House for having a rather bad throat. I may have to abandon my attempt to speak, but I want to speak because of the way in which the noble Baroness, Lady Williams, has set out the debate and its immense importance.
The decision of the new American Administration under President Obama to “press the reset button” on relations with the Russian Federation is of immense importance. There is a very real possibility now that we will see, even before the non-proliferation treaty starts next year, two important agreements made between the United States and the Russian Federation. The first relates to the agreement which George W Bush and Vladimir Putin made in Moscow in 2002 to reduce their deployed nuclear warheads by 2012 to 1,700 to 2,200 each.
In my view, when one Administration make a positive move on nuclear disarmament, it is extremely important for the next Administration to consolidate them. In 1977, when President Carter came in with very good intentions, he asked for a dramatic reduction in nuclear missiles and warheads from the then Soviet Union, going beyond the Vladivostok agreement which had been negotiated by Henry Kissinger. Unfortunately, the then Soviet leaders, Gromyko and Brezhnev, mistook this genuine effort, which I believe it was, from President Carter and blocked all future discussion, even when the Americans went back to the Vladivostok agreement. I see tremendous advantages in President Obama doing what President George W Bush was not prepared to do—to put this agreement in treaty form very quickly, and he should be able to easily get ratification. That would be a very significant gesture and an important decision, and it could be done before the NPT starts.
I think that there are quite good prospects now of getting the American Congress to ratify a comprehensive test ban. A treaty has been signed up to, but Congress has not ratified it. If one reads carefully Senator McCain’s speeches, particularly during the presidential election campaign, he is ready to look again at this issue, and there are enough Republicans to be able to get ratification of a comprehensive test ban treaty. Of course, if China would do the same it would be doubly significant. That would make it much easier to hold the non-proliferation conference in a genuine spirit. Agreement on non-fissile material is an interesting measure. I do not think we should exaggerate its importance, but that might be possible too.
We all know that haunting a non-proliferation treaty will be the outcome of discussions and negotiations—call it what one will—between the United States and Iran. Here I think we have to recognise a few basic things. There is little doubt—experience of our failure to stop Pakistan getting nuclear weapons shows this—that we always underestimate the extent to which a country has gone in its objective of achieving sufficient nuclear-enriched material to make a bomb. There is little doubt that Iran has passed that threshold. One cannot realistically discuss this without recognising that reality.
There is an air of unreality about the current negotiating position. I will not go into it in depth while negotiations are at a delicate stage; that would not help. However, the idea that countries have to stop enrichment before serious talks start is not realistic. The nature of enrichment is an important question. There cannot be any escape from far more stringent on-ground IAEA inspections, without warning. That is essential; but putting all your weight behind stopping enrichment prior to getting into detailed dialogue is a mistake.
The other questions relate to the business of ultimately giving up nuclear weapons. The idea is not new. The non-proliferation treaty countries would say, with justification, that it is already in the Nuclear Non-Proliferation Treaty. The difference is that people in nuclear weapon states who have a long record of believing that they had to have nuclear weapons are now ready to talk about “disinventing” the nuclear weapon—giving it up. They are realistic people—certainly those in the United States—and they have given credence to this initiative.
I come to the Government’s position. We all know that nothing will be done about nuclear weapons this side of a general election. However, this country has been spending far beyond its means. If you look at the decision in the White Paper of 2006 on Trident replacement, and the subsequent papers that have come out of Select Committees and the National Audit Office, it is abundantly clear, taking into account a 25 per cent trade-weighting reduction in the value of sterling, that the bill will be far higher than first thought. Also, we see day by day our defence budget so obviously squeezed that it is causing actual deaths among our servicemen. No Government who come in after the next election will be able to avoid looking again at the question of Trident replacement; that is not credible.
I pray in aid, first, that the decision announced to Parliament in 2007 in another place is more tentative than many people have understood. It says that there must be a review by 2014, and explains the decision-making framework of 2009—the first phase of submarine replacement—then 2011 and 2013. I was struck by a recent book by Michael Quinlan, the high priest of nuclear theory and a remarkably able man. Even he was not dismissive of the need to reconsider the 2007 choice by Parliament. He wrote that it should take place,
“not later than about 2013”.
He went on to write:
“The central decision of principle might at that stage be significantly influenced by whether the cost estimates remained of the same order as those assessed in 2006-07”.
He argued that this revisiting should be approached “seriously”.
We should try to get from the Government a decision that was made by James Callaghan in 1978. He set up a study by the Civil Service, not influenced by Ministers, to decide what would replace the existing Polaris deterrent, and have it ready for any Government who took office after the general election of 1979. That study was the Duff Mason report. Sir Anthony Duff was a distinguished diplomat and former submariner. Ronald Mason was a chief scientist at the Ministry of Defence. The document was on the desk when Margaret Thatcher came to office, with an explanation written that day by James Callaghan of the discussions about a successor system that he had had in Guadeloupe with President Carter.
These issues are too serious to be left hanging from 2007 until a new Government come in, with all the tremendous pressures that they will be put under. We should undertake that study now. One option that should be considered was excluded, for ridiculous reasons, from the 2007 decision. That is for the UK to put nuclear weapons on cruise missiles in our SSN fleet. This is what has happened in the United States, which only deploys its nuclear missiles periodically in its SSN fleet. Of course, it has a very different, hyper-sophisticated ballistic missile deterrent. If you can afford it, that is the best system; but I believe increasingly that this country cannot afford it.
If we are serious about ultimately moving to abolition of nuclear weapons, some countries will have to move faster than others. It seems logical that those of us who have chosen a minimum deterrent must be ready at some appropriate moment to take the first step. I agree that this will not be in the immediate future of the next 10 years. However, I find it very hard to consider spending billions of pounds on a deterrent that will last into the 2050s when it is possible to retain our nuclear option over the next 15 to 20 years at a much cheaper rate, and hold open the option of giving up nuclear weapons.
People tell me that it would mean no longer having a veto power in the Security Council. This is a complete misreading of history, and how the veto power came out of the 1946 negotiations over the United Nations. There was never any doubt that a veto power would have to be there, because the United States Congress would never have agreed to anything else. It must also be recognised that the veto power cannot be taken away from Britain. We can veto any measure to take it away, and France and Britain have made it clear that they would do this.
I do not believe that France will be first to make a move on nuclear weapons. We might persuade France to move with us. However, some time down the track—it might be in 2020, or a little before or after that—I can see all logic backing a UK decision to give up its nuclear weapons, and to claim it as a virtue to justify our continued presence as a permanent member of the Security Council with veto power. I also wish to extend the number of permanent members, though without veto power, and I hope that this will be done in the next year.
I will not go on any longer. These are troubling times. What worries me about the commitment ultimately to give up nuclear weapons is that it has been made by a lot of people who do not really believe what they are saying. The commitment risks going the same way as the pledge in the non-proliferation treaty, and that would be a tragedy. We have to give substance to that commitment. There is no country better placed than the UK to give that substance, and no Government will face the realities of the defence budget more than the Government that takes office in this country in 2010.
My Lords, as a new Member of this House, may I have the temerity to thank the noble Baroness, Lady Williams, for her speech? To presume to take part in this debate after the many excellent contributions thus far may seem presumptuous.
Some 30 years ago, I was asked to act as a positive vet for a young serviceman seeking promotion. The interviewer who came to see me was a former high-ranking military police officer. At the time, I lived in a Christian community in the north of England—rather a remote place. On my study wall was a poster. It read simply, “It is a sin to build a nuclear weapon”. During a sandwich lunch, the investigating officer asked whether I believed the statement. I assured him that I did and, as you may imagine, it led to an interesting philosophical, but quite convivial, conversation, which concluded with him saying that in his former life he was responsible for protecting such weapons from people like me.
What was, I hope, not evident to this man at the time was the internal and divisive dispute in the particular Christian community of which I was a member. Regrettably, I was not an insignificant contributor the arguments, and there were times when the anger among us would have been sufficient to start the third world war all by itself. Paradoxically, I was at the time participating in the occasional “Ban the Bomb” demonstrations, declaring that Britain must unilaterally disarm.
The internal disputes of our community caused me to seek the help of a wise counsellor who I though might offer me consolation and justification, perhaps even siding with me. Instead he asked me, “When are you going to unilaterally disarm in this conflict?”. My response was somewhat incredulous. “You must be joking”, I said. “If I do, they will win.” “So”, retorted my friend, “if you can’t make a unilateral declaration, what makes you think that nations can?”. The question bothered me and, after a time, led me to two conclusions. First, reconciliation is the essence of Christianity. When its adherents, like me, fail to recognise and seek to live that out, something at the very core is missing. Secondly, however, I was reminded that human beings, whether people of faith or not, often fail to live up to the highest ideals to which they might aspire. When we do so, two possibilities face us: either we give up, or we begin again.
In my situation at the time, those options faced me. In reality, the only option was to begin again: to commit myself to the task of reconciliation, however difficult and painful. Beginning again calls for a certain letting go, a leaving behind—an opening up to new possibilities. The Motion of the noble Baroness, Lady Williams, is timely and I welcome it. She has judged a certain mood towards nuclear disarmament, not just within this House but within the wider nation as a whole. We must try to see the possibility of a new “grand bargain” in the light of the forthcoming nuclear proliferation treaty review in 2010 as a new beginning. The noble Lords, Lord Hurd, Lord Robertson and Lord Owen, together with Sir Malcolm Rifkind, spoke last June of a powerful case for a dramatic reduction in the stockpile of nuclear weapons.
In his St Patrick’s Day speech, the Prime Minister spoke of the nuclear question being at the heart of what he called the four great and interconnected challenges of our global society: the financial instability, climate change and energy needs, global poverty and global security. This is not an item on its own. In that same speech, he spoke of a need for a new internationalism that is both hard-headed and progressive; that has been borne witness to in speeches this afternoon. However, somewhat more controversially, he suggested that we will not meet the challenges of climate change without the far wider use of civil nuclear power. He spoke of the right of all nations to acquire nuclear power safely, and said that Iran should be a test case for this new philosophy.
While few can doubt that that will be anything but a difficult path, which the Prime Minister observed will be crossed in steps and not in one leap—I agree—what causes nations to arm themselves to the point of mutually assured destruction is a complex mix of fear, anger, xenophobia and much else besides. When the Prime Minister speaks of the need to act together to take the next steps in building confidence in a new and dangerous nuclear era, one can do little but say, “Amen to that”. However, I believe not in simply wishing for it, or being unrealistic about what we might determine as the future of disarmament programmes. We need a new ethic for our times: an ethic that enables us to leave for future generations a time marked by hope and not by fear and despair.
In your Lordships’ House last week, the noble Baroness, Lady Hooper, introduced what was to become a remarkable debate to mark the celebration of the 200th anniversary of the birth of Charles Darwin. Predictably, perhaps, religionists, non-religionists and self-declared rationalists participated. There was a surprising unity within diversity. For my own part, I sought to observe that open-minded, honest, scientific research leads to wonder, mystery, respect and humility. I believe that these elements—wonder, mystery, respect and humility—are the building blocks of a new ethic of shared responsibility. Like the noble Baroness, I agree with WH Auden that love is the ultimate, but sometimes we have to build our way towards love. That comes about through understanding and learning to respect through mystery and wonder, and being humble enough to accept that we do not know all the answers. These elements are integral to both religion and rationalism at their best. The mystery and majesty of splitting the atom, or the cells that divide to begin the journey to human birth, ought to lead us, in the words of Amnesty International's slogan, “to protect the human”.
While there is much to debate over the issue of civil nuclear power, and at the risk of being too controversial this late into my speech, if it is “even handed”, as the Prime Minister has put it, to,
“enshrine the right for all nations to acquire civil nuclear power safely”,
with due verification, rules and sanctions, by what criteria do we decide that it is even handed not to allow the possession of nuclear weapons? Who decides the moral case for some to have and others to have not?
Surely the future must lie in a universal commitment to disarmament: “to protect the human” in its totality. We must regain respect for the human through a new ethic based not on xenophobic fear, but on wonder, mystery, respect and humility—not least because the nuclear issue is inextricably tied in to the issues of poverty, climate change, energy, financial instability and global security. A friend of mine during the Northern Ireland peace process many years ago said that we must learn to be “1 per cent peacemakers”. Well, 1 per cent or 99 per cent, let us work towards the nuclear proliferation treaty review discussion in 2010 not by giving up but by beginning again; offering a “Yes we can” to the task of reconciliation and protecting the human; and knowing that if we cannot live together, then we shall certainly die together.
My Lords, I pay tribute to my noble friend for introducing this debate. That it is far from being a debate on the theoretical matter of foreign or defence policy was underlined on Tuesday by the Government launching their new counterterrorism strategy.
By and large, the provisions in that strategy were welcomed. However, in part 2, it talks of the need to improve the security of fissile material around the world and of the global threat reduction programme. It says that that is the UK’s largest co-operative counter-proliferation assistance programme. That strategy brings right home the urgency of what my noble friend has been talking about this afternoon. She gave us a clear picture of the urgency, which has been underlined by other speakers, with the volatility in the price of oil and the uncertainty of gas supplies encouraging so many new countries to look at developing their civilian nuclear capability. Countries are looking more and more to nuclear power, so any increase in the use of fissile material must be matched by a substantially increased effort to ensure its safe storage through robust stocktaking exercises. If the counterterrorism strategy had one fault when talking about these issues, it was that it did not stress enough the urgency of matching any development of nuclear power with the necessity for that work.
This spread also means that no country should fail to address what is happening not only within its own borders, but also those of its neighbours and the region. As a member of Parliamentarians for Nuclear Non-Proliferation and Disarmament, a global network of over 500 parliamentarians from more than 70 countries, I can confirm that we share a common interest in working to prevent nuclear proliferation and, eventually, to achieve nuclear disarmament. The group’s strength lies in its non-partisan, international collection of parliamentarians who can play some part in leading public opinion in their own communities and in doing what George Schultz said when he visited the UK Parliament and spoke to the All-Party Group on Global Proliferation. He talked about how when Governments, leaders and presidents make the right moves, we need to get behind them and applaud, and that in itself is a very important role. I see that disarmament will be a long and difficult process and that leaders will need encouragement to keep going with it.
Every political party needs to sign up at least to a vision that a world without nuclear weapons is possible and desirable, but even signing up to that vision is a difficult move, as we know in this country where such a view has historically been held to be a sign of weakness. We cannot leave the debate only to those with an in-depth knowledge of foreign affairs and defence. As parliamentarians, we need to become involved not only in applauding actions taken, but also in questioning inaction and welcoming each step that our own or another Government take.
A fear shared by many of the parliamentarians I have met through PNND is that even as we take the small steps we are talking about today, or we take bigger steps, there is the distinct possibility of an accident due to the high alert status maintained by the US and Russia. I imagine that all who contribute to the debate today will be aware of the near misses. Some of them have been widely reported, but others may never have hit the headlines. Perhaps the US is more open about these issues than others, and some of the incidents are quite bizarre. My noble friend described to me how a flock of geese flying in formation could be mistaken for missiles and thus set off a nuclear holocaust. Last year, a Channel 4 documentary examined an incident in 1983 in the film, “The Brink of the Apocalypse”. De-alerting to a more acceptable level that does not lay us open to such random rolls of the dice must be the highest priority.
My Lords, I listened with enormous admiration to the opening speech of the noble Baroness, Lady Williams. With others who are speaking in the debate, she and I attended the conference held last week at Lancaster House and listened to what I regarded as a very remarkable speech by the Prime Minister. I am not normally given to admiration, but I do not hesitate to say that I was impressed on that occasion. Most of the media reports of the conference concentrated, quite rightly and understandably, on what the right honourable gentleman said about the need for major nuclear weapons countries to reduce, as he put it, “step by step” their arsenals of nuclear warheads as part of a process to prevent proliferation under the Nuclear Non-Proliferation Treaty.
Other contributors to the debate have clearly demonstrated that they know a great deal more about nuclear disarmament than I can possibly profess to, but as the noble Baroness, Lady Williams, said, one has to remember that one of the main purposes of the conference was to take forward the proposals for a multinational approach to the nuclear fuel cycle for civil nuclear reactors, and I hope that it will not be regarded as a distraction from what has so far been the main thrust of the debate if I devote a little attention to that topic.
There are two underlying drivers of the need to take the multinational approach forward. First, modern reactors require a guaranteed—that word is very important—supply of low enriched nuclear fuel if they are to attract investment into new power plants, but few countries in the world are planning to spend the huge sums necessary to build enrichment capacity. However, they need low enriched fuel. Secondly, while the uranium enrichment process can be used to provide that fuel, it can also be misused to provide fissile material for a bomb. With an increasing number of countries across the world now planning investment in nuclear power plants primarily to provide a secure, low carbon source of energy, it is becoming, if I may put it this way, increasingly urgent for the international community to find a mechanism for ensuring supplies of enriched fuel to these countries, while ensuring that guarantees are in place that they have complied with the nuclear non-proliferation treaty.
It is now four years since the IAEA launched the search for such a mechanism. The director-general, Dr Mohamed El Baradei, has spelt out what he sees as the four essential criteria for success. The first criterion is that the system must unambiguously be under some form of multinational control because that is essential in order to reassure the rest of the world that it will not be misused. Secondly—this point has already been made—the system must be available to all states, as is their right under the NPT. It is a legal right and it must be honoured. Thirdly, the sale of nuclear materials should be,
“determined by non-political criteria established in advance and applied in an objective and consistent manner”.
That is more difficult, but it has to be done if one is to operate the guarantee effectively. Fourthly, he said that the system must be part of an overarching multilateral nuclear framework.
These principles have attracted very wide support, and in response to the appeal for proposals, no fewer than 12 separate proposals were submitted by states or groups of states. The issue now is for the international community to reach decisions on the best way forward. Of course, this is far from being a simple question. The issues are extremely complex, and if anyone doubts that, I refer them to the papers that have been produced about the UK’s proposal for a nuclear fuel assurance programme. It is extremely complex.
These 12 proposals are different in many respects, and I have to say that I do not think I was alone in finding that the ways in which the different speakers at last week’s conference addressed the proposals became immensely confusing. Many conferences have been held and much study undertaken, but we do not seem to be any closer to arriving at a solution acceptable to all than we were two years ago. The Minister will recall that I was asking about this at the beginning of 2007. I say this having studied the Prime Minister’s speech again and having read the chairman’s winding-up remarks—while not a full communiqué, he indicated what might be the substance of the final communiqué. In between those, the conference was presented with a bewildering array of proposals, classified in several different ways.
We had a table by the UN Institute for Disarmament, which grouped the proposals into short-term, mid-term and long-term. There was an address by an extremely able Dutchman, Mr Henk Swarttouw, whose task was to give the conference what he called a forward look. He grouped the proposals under four different heads. The first was to leave it to the market, but I do not think that anybody is advocating that. The second concerned the various nuclear fuel bank proposals. These could function, but there would be no guarantee of security. The third consisted of several proposals that embodied arrangements to guarantee supplies of nuclear fuel to the users. This included the UK’s proposed nuclear fuel assurance scheme. However, it is described as a “virtual” arrangement, which I find difficult to grasp as the fuel cannot exist in cyber space. The fourth envisaged the establishment of multinational enrichment facilities—the speaker instanced the URENCO plant in this country, a joint UK/German/Dutch facility—and a Russian proposal for a plant at Angarsk. He also referred to a proposal for a new enrichment plant in neutral territory. After suggesting that all of them could be pursued side by side, he urged his audience to be creative. That was it. There was no guidance, no preference, just another rehearsal of the options.
This debate gives the Government a chance to tell the House what they now expect will happen. When do they expect a preferred solution to emerge, and how will this be achieved? Are they satisfied that there is a sufficient sense of urgency on this issue? It is clear that the IAEA has a crucial role to play. It launched the process and it sees itself as the guardian of its international nature. But we know that Dr El Baradei is due to retire in November this year and that the process of selecting his successor is going on as we speak. I am told that the vote took place a few hours ago. Can the Minister give us an up-to-date picture on that? I warned his office that I was going to raise this question. What has happened? One of the two candidates must attract at least a third of the votes of members of the IAEA council—not a third of those voting but a third of the whole council. If he does not, the whole process must start again, which would set it back enormously.
I return to last week’s conference, at which Iran was the elephant in the room. It is to the Prime Minister’s credit that he at least did not dodge the issue but insisted—I emphasise that—that the problem of Iran’s nuclear ambitions should be addressed, if Iran responds positively, not by isolating and abusing it but by applying the very processes which the Lancaster House conference had been convened to progress; namely, the MNA process. In this he was clearly drawing attention to President Obama’s dramatic offer to Iran in his inauguration speech. But if finding an MNA solution as regards the supply of nuclear fuel to countries that do not possess enrichment takes very much longer, I find it hard to see how, in the short term, it will make any contribution to solving the Iranian problem.
As has been said by all other speakers, the overriding issue has to be to pursue a process of nuclear disarmament. I firmly agree with those who argue that this must—I stress, must—go hand in hand with the establishment of an international mechanism for guaranteeing the supply of low enriched fuel for peaceful use by countries exercising their right to deploy civil nuclear generation. I wish I could see a more hopeful prospect of this being achieved but I hope that the Minister will be able to give us some comfort when he winds up.
My Lords, like other speakers, I thank the noble Baroness, Lady Williams, for initiating this debate and express my admiration for the way in which she introduced this extremely complex subject.
I declare an interest: I am on the advisory board of Thorium Power, which owns the technology for replacing uranium with a blend of thorium and uranium in large nuclear reactors, which could make it impossible to produce the amount of material needed to make nuclear weapons. A thorium/uranium blend is designed to make proliferation impossible. Of course, we desire to see a world where all nuclear weapons are abolished but we have to be realistic and face the fact that this is unlikely to happen soon. Indeed, we will be fortunate if a nuclear weapon-free world comes about during the lives of any of us in your Lordships' House today or, indeed, before the 100th anniversary of Hiroshima and Nagasaki. This does not mean that we should give up and do nothing as there are significant risks, and nuclear proliferation is one of the greatest challenges we must face up to and do all we can to prevent.
A number of measures have been introduced since the 1960s designed to prevent further proliferation, the most important one being the nuclear non-proliferation treaty of 1968. In many ways the treaty has been very successful. In the 1960s many forecast that by the turn of this century about 40 nations would possess nuclear weapons. This has not happened. Today, as we have heard, both the United States of America and the Russians still have vast nuclear armouries. As other noble Lords have said, many would judge these arsenals to be too large. They are unnecessarily large and could be reduced with little or no risk. But what should we in this country be doing now? The British Government have acted wisely in deciding that, with so much uncertainty and potential danger, now is not the time to abandon entirely a capability which we have had for more than 50 years. I believe that Trident is affordable and needs to remain so even today. However, I agree very strongly with the views of the noble Lord, Lord Owen, on Trident’s replacement. Although I do not think the time is right to abandon nuclear weapons, we should seriously examine the number of submarines that we have and whether we always need to have one boat at sea. I also wonder whether we need to have 16 missile tubes in each boat.
Remaining a nuclear weapon state for the present enables us to carry more weight and leverage in discussions about non-proliferation. Giving up nuclear weapons today would be something of a gesture which I doubt would influence many who continue to move towards becoming nuclear weapons states. I am afraid that I am extremely sceptical that the money saved by abandoning our nuclear weapons would be immediately ploughed back into the defence budget. Trident is coming to the end of its life and we certainly need to be prepared for that. Nuclear weapons are a good bargaining chip which we do not want to cash in at the moment. The day has not come yet and I think that the Government are on the right course.
My Lords, I, too, begin by congratulating the noble Baroness, Lady Williams, on introducing the debate in such masterly fashion. This debate is, as other noble Lords have said, very timely, and I was particularly glad and interested to hear her mention the cyber-dimension, which is all too often ignored, because if command and control is missing then the danger is magnified greatly.
I must declare two past interests. First, I was once on the council of the International Institute for Strategic Studies which, last September, produced the admirable document Abolishing Nuclear Weapons, calling for a broad and deep international debate based on serious analysis of what it would take to achieve the immensely important and equally difficult goal of nuclear disarmament. That debate must include all states, whether nuclear or non-nuclear. Secondly, for a time I worked for a company that had the extraordinary multinational role of providing British ex-servicemen to guard Russians protecting Americans who were breaking up intercontinental ballistic missiles in Kazakhstan in the 1990s.
The call for the debate was also reflected in a letter that my noble and gallant friend Lord Bramall and I wrote to the Times. I have colluded with my noble and gallant friend, who unfortunately cannot be here today to apply the passion and intellectual vigour that he has so often deployed on the issue on the Floor of this House. As other noble Lords have mentioned, this debate is timely because of the quinquennial review of the non-proliferation treaty that takes place next year. I was particularly glad, therefore, to see the government paper Lifting the Nuclear Shadow, which was published last month, and to hear the admirable speech by the Prime Minister, to which the noble Lord, Lord Jenkin, referred. Both of those are covered in the admirable briefing provided by the Library, for which, I am sure, all Members of the House are, once again, hugely grateful.
As other noble Lords have done, I start my comments on the Government’s plans to counter possible nuclear proliferation with a brief look at how the world has come to the situation in which it finds itself, and thus the platform on which plans must be based. In view, particularly, of the human casualties resulting from the bombs dropped on Hiroshima and Nagasaki, it was inevitable that the moral dimension of what nuclear weapons could do became the immediate focus of attention. During the Cold War, however, the political dimension came into play more.
It always seemed something of a paradox that the comparative stability in the world depended more on uncertainty than certainty. Neither side knew precisely what the other might do, although it always seemed likely that the side that appeared to be losing would be more tempted to use nuclear weapons first. To some extent, the moral dimension was mothballed by those nations who deemed it in their national self-interest to maintain a seat at the top table thanks to possessing nuclear weapons, as well as the intellectual conviction that the impact of such holdings would have more influence over a potential aggressor than more affordable conventional weapons would.
However, in the years since the end of the Cold War, when we have seen and been involved in an exponential growth in asymmetrical warfare—or, as General Sir Rupert Smith has so accurately described it, “War amongst the people”—the practicality and utility of nuclear weapons have also edged out the moral dimension from the top of our concerns. Of course, the political dimension has not gone away—far from it, because possessing nuclear weapons puts us on the opposite side to those who do not. Possession, therefore, carries certain rights and responsibilities in the debate for which the noble Baroness, Lady Williams, and many others are now calling.
The recent government statements to which I referred very clearly announce a commitment to an eventual nuclear-free world. No one pretends that the road to that goal will be covered quickly or easily, nor do I pretend for one moment that, by unilaterally giving up our weapons, we will encourage other weapons possessors to do the same. The sheer number of weapons possessed by America and Russia makes that a practical impossibility and justifies the separate START process, which involves them alone. Yet the two statements made by the Prime Minister on 17 March give me hope that he is determined that we do not merely follow others in paying lip service to the opportunity presented by the review for measures to prevent proliferation. First, the Prime Minister said:
“We cannot expect to successfully exercise moral and political leadership in preventing the proliferation of nuclear weapons if we ourselves do not demonstrate leadership on the question of the disarmament of our own weapons”.
Secondly, he said:
“As soon as it becomes useful for our arsenal to be included in a broader negotiation, Britain stands ready to participate and act on our current holding of 12 tubes per submarine and fewer than 160 warheads”.
However, those commitments require, and should only follow, deep analysis and serious debate about national defence self-interest. I entirely agree with the suggestion from the noble Lord, Lord Owen, about the study that should be started now; the more you look at the practicality and utility of using weapons with the capability of the Trident system, the more useless they appear to be as deterrents of the types of violence against which we are currently, and for the foreseeable future appear likely to be, faced. One can, of course, never be certain about that, as recent reports of nuclear refurbishment by President Medvedev confirm.
There is also always the great danger either of a disastrous nuclear accident, or of technical know-how—as well as weapons and nuclear material—getting into the wrong hands. In that connection there will always be fears, for example, of Pakistan’s weapon falling into fundamentalist Islamist hands. Yet nuclear weapons of the size and capability of Trident are unusable because of their effects against both the guilty and the innocent, which could be catastrophic in both the short and long term for us as well as for any target.
However, before we even think of using them, we have to remember that we do not own the D-11 missiles on which the warheads are mounted, and it would be incredible to think of our using them without consulting America, of whose overall capability our Trident fleet forms a very small part. On the national defence self-interest, we also have to ask ourselves whether we can continue to afford so much of our defence budget being devoted to what is essentially a political weapon when, day after day, we are reminded of the inadequacy of our conventional forces, who are currently being called upon to carry out commitments for which they require increasingly expensive and technically advanced equipment, including precision guided munitions.
If we are to exercise moral and political leadership in line with the Government’s announced intentions, then what plans should we make? Of course, the six steps announced by the Foreign Secretary are critical. They include as their first five: stopping further proliferation, action on the Comprehensive Test Ban Treaty and the Fissile Material Cut-Off Treaty, as well as encouraging US-Russian negotiations and working with the IAEA to help those nations who wish to develop civil nuclear energy systems. However, great attention must also be paid to what David Miliband described as,
“the exploration of the technical, political, military and institutional challenges that need to be resolved if states such as ourselves, that possess nuclear weapons, are to reduce and ultimately eliminate their arsenals securely”.
In relation to the national defence self-interest, I have called before in this House for consideration of whether nuclear should be removed from the defence budget, because of the political nature of its possession. If we are to be properly equipped to meet the requirements of our conventional forces, their size and shape should not be determined by budgetary competition with the nuclear force. A seat at the top table, except at the NPT table, is not now linked to the possession of nuclear weapons, but more to economic power.
Recently, therefore, the Government showed considerable courage and leadership on the issue of cluster munitions. Any pretension to moral leadership in the proliferation debate is likely to be undermined if we press ahead with the expensive replacement of our current capability. Indeed, in view of the parlous state of our conventional forces, I would go so far as to say that it is irresponsible to spend vast sums on new and irrelevant weapons, purely to satisfy domestic political amour-propre. If the Government exercised similar courage over the possession of nuclear weapons, declaring that they will carry on with what they have for as long as possible, while considering further reductions or change in the context of the NPT, we are much more likely to earn the respect of those nations who do not possess them and who are understandably questioning the whole NPT process, because they do not see much sign of those who possess such weapons, including us, moving towards the goal to which we say we ultimately aspire.
My Lords, I warmly thank the noble Lord, Lord Ramsbotham, for some very wise words, which I am sure other noble Lords also support. I thank him particularly for highlighting once again the fallacious irrationality of the submarine-based deterrent arguments and their continuation in the future. In fact, in referring to that, he reminded me of a recent incident that was hilarious and amusing in one sense but disturbing and sinister in another. We await the results of the inquiry, but unfortunately and inevitably some of the answers will be covered by the Official Secrets Act in this country and, I imagine, by similar provisions in France.
It was either early in February, or maybe before Christmas, when it was reported in the press—maybe from a leak, or else it was announced by the French and British ministries of defence—that a collision took place recently in the Bay of Biscay between HMS “Vanguard” and “Le Triomphant”, the equivalent French nuclear submarine. As others have mentioned, each had 16 missile warheads on board, of something like 15,000 tonnes each, with over 100 crew members each. They are very similar vessels, coated in a strange kind of black material—the name of which I cannot remember, it is so complicated—which means that they are undetectable and totally silent. They avoid active sonar and use only passive sonar so that they cannot be detected. They are supposed to be able to immediately ascertain everything that is going on around them.
These vessels, which cost £2 billion each and thousands of millions of pounds to repair and maintain under the normal programmes, let alone if there are accidents, both had to limp back to suitable ports in the UK and France. I think that our vessel was towed, and perhaps the French one made it under its own steam. They collided; and they are not supposed to collide. The destructive nuclear power of these vessels, if there had been a worse accident, would have been truly appalling, not only for the crews involved but for everyone else because of the radiation and fall-out results.
That hugely expensive so-called deterrent system has been our mainstay for a long time, since nuclear bombers were replaced. The idea of its continuing on this irrational basis, which is so expensive for countries of our size of a population of 60 million, with hugely stretched resources because of the worldwide financial and economic crisis, is to my mind utterly absurd. That is the case even if the surrounding arguments for the maintenance of nuclear capability of one machinery or another are continued, as they will inevitably be for some time, particularly by the five principal nuclear powers that started off before other countries, such as India, Pakistan and Israel, joined in.
The considerable reduction of the nuclear arsenals has been referred to by my noble friend Lady Williams—I pay tribute to her for her outstanding speech—and by the noble Lord, Lord Owen, in his compelling and riveting speech. He suggested future prescriptions for continuing the process of reduction. Yes, the Russians and the Americans have shown impressive leadership in recent times, despite the awful nature of the Cold War. That surely must continue, I hope, on an accelerated basis.
In fact, more and more people now think that you do not have to be a unilateralist any more, but you can be a multilateralist and get on with it, and you can make sure that the countries under the new treaty frameworks that are going to be created from next year onwards covering all the fields—I thank my noble friend Lady Williams for mentioning the specific mechanics, modalities and machinery for doing those various bits and pieces—of the total nuclear disarmament, nuclear reduction and non-proliferation exercise. It is hugely complex task, which is now more and more urgent and is often put aside in people’s thinking because of other pressing economic and financial problems. However, it is one of the most important examples of the dangers facing us.
The nuclear weapons and warheads reduction by France and Britain, starting at a much more modest and higher level, has been reasonable. France has done less than Britain in numerical terms, but that is understandable because France became an independent nuclear power in its own right later on. I happen to live in France as well, and often when one discusses these matters in Paris the old cynicism comes out. There were many different arguments about what happened, but the French like to think that they were prevented by the Americans from having atomic secrets because they had a large Communist party that was inherently unstable, and there were lots of people who rather liked the Soviet Union, Stalin and so on in the post-war period in France. Therefore, they could give the secrets to the British, and the British had the sharing of nuclear secrets eventually, even though they did not at the beginning. The French muse on that in an amused way that all the nuclear secrets given to Britain by the Americans were given away by rather posh undergraduates at Oxford and Cambridge, some of whom ended up living in the Soviet Union.
All this madness now has to be looked back on with an idea of changing the world, creating a new situation and saving a huge amount of money. Even if some part of that saving goes back into defence spending, that is a separate argument. It is very important for countries that now wish to contribute to the modern form of warfare, which is the peace process, trying to maintain peace and create peace where war exists. That is the new kind of warfare, which we find more acceptable, though tragically inevitable. We would prefer not to have any wars at all, but that is the real world in which we live. It is that kind of thing, rather than imperial struggles and the nuclear arms race which went up to a total of 70,000 warheads and now is down to 20,000 plus because of the disarmament process, which we now look back on.
It would have been impossible a few years before that people such as Henry Kissinger, George Schultz, Senator Sam Nunn and others would have said what they said recently, about the need for us to see a new world and to respond, in a solemn international compact, which the advanced countries should now accept more and more, with this fresh treaty-building on which we are about to embark. It has been said that we have sorely and savagely let down other countries that expected us to do this business much more rapidly and much more creatively.
I do not think that anywhere near 20,000-plus warheads are necessary in this unstable world. The way in which you stop the spread of nuclear fissile material and dirty bombs, and all the sinister terrorist threats that may be conjoined with those, is to put an end to those weapons as soon as possible, even if, as the noble Lord, Lord Owen, said, it could take 10 years, which is not a long time in these processes, and it may be longer. Whatever the time taken, the whole world and the United Nations must be supported in these matters. We do not seem to be able to get modernisation and reform of the Security Council or an acceleration of the process of nuclear disarmament to create a proper non-proliferation nexus for the global society, where we are more and more interdependent.
Apparently the Israelis have 200 nuclear bombs. What is the use of those nuclear weapons? As a friend of Israel, I agree entirely that Israel has to be militarily unbeatable otherwise it would be too vulnerable in the Middle East to attacks from surrounding countries which might believe that they could win in warfare. Israel, once armed with that superior unbeatability in conventional terms and with the latest aircraft which any air force in the world can possess, does not need nuclear weapons. What if they were unleashed in some tragic circumstance against Arab countries which surround Israel and the pollution and the nuclear fallout came back on to Israel because of the way the wind was blowing or something equally absurd? It would be absolutely crazy for them and they know it. They were acquired in a strange, illicit fashion.
In more recent years we have seen the spread into Pakistan and India. Perhaps my noble friend Lady Falkner will refer to Pakistan, which she knows so well. This is a time for huge change and a time to get away from nuclear weapons. I thank my noble friend Lady Williams who has not only been helping the Government officially on disarmament matters but she has the unusual distinction of teaching with great commendation in both Harvard and Yale. I remember an old story of a graduate from Yale—a young man, not a distinguished lady—who said, “I graduated from Yale which stands for youth, ability, leadership and energy”. Although my noble friend and the rest of us in this Chamber are of a more mature age in physical terms, in no way does that remove from her the youthful approach which she has to new ideas on this matter. Long may she prevail, like all of us, in this battle to achieve common sense and the end of madness. I believe that nuclear weapons were effective only between 1945 and 1949, and not in a very nice way, in view of what happened in Japan. The sooner we get rid of that madness—mutually assured destruction is MAD and is madness —the better for all of us.
My Lords, it is no exaggeration to say that at no point since the non-proliferation treaty came into force, some 40 years ago, has the risk of a substantial degree of further nuclear proliferation been greater than it is today. That risk is not limited to the two countries whose nuclear programmes provide the greatest cause for concern, North Korea and Iran. If either of those countries were to become a fully fledged nuclear weapons state or were to acquire the capability to do that in short order, few believe that the matter would rest there. Each of those countries is in a region full of tension with other neighbouring states which would not lightly sit idly by in such circumstances. I believe we are faced with the risk of a major breakout from, if not a complete breakdown of, a rules-based regime, which has made a major contribution to international peace and security. Therefore, we should not lull ourselves into a false sense of security with talk of a soft landing, even if attempts to prevent those two countries acquiring such a capability were to fail.
That sombre prospect is a reason to welcome the timeliness of the debate and to congratulate the noble Baroness, Lady Williams, on initiating it. In recent years, she has worked tirelessly as a member of the Nuclear Threat Initiative, as the Government’s adviser on non-proliferation and now as a member of the Australian and Japanese Governments’ Commission on Nuclear Non-proliferation and Disarmament. She has also worked tirelessly to strengthen the regime which others are working so assiduously to undermine.
What needs to be done? Put simply, I suggest that we need to ensure that the 2010 nuclear non-proliferation review conference does not turn into the sort of fiasco which the last quinquennial review turned into in 2005, unable even to adopt its own agenda let alone achieve anything positive. To do that we need to ensure not only some positive results next year but also to set a clear direction of travel for both nuclear weapons states and non-nuclear weapons states for the years ahead, a direction of travel which demonstrates that they all mean to make a reality of their commitments under the treaty, on the one hand, to move towards nuclear disarmament and, on the other hand, to strengthen the safeguards against any blurring of the line between civil and weapons programmes.
Of course, those broad objectives will require deeds and not just warm words. First, efforts need to be resumed to bring into force the Comprehensive Test Ban Treaty. In that context, the new US Administration’s willingness to return to the charge with Congress is extremely welcome. Others too, like China and India, will need to match those efforts. Secondly, we surely need to find a way to initiate rapid negotiations on a fissile material cut-off treaty. If the procedural deadlock created by the consensus rules of the conference on disarmament in Geneva remain an insuperable obstacle to initiating those negotiations, I ask the Minister whether the Government have given any thought, and whether they are prepared to consult their fellow recognised nuclear weapons states, all of whom have said that they favour such a treaty, to the possibility of proceeding on a narrower basis. After all, such an approach worked quite well for landmines and for cluster munitions. Thirdly, there is an urgent need to reduce the seven or eight different schemes. Here I agree entirely with the noble Lord, Lord Jenkin, about making available internationally guaranteed supplies of enriched uranium and reprocessing services to bone fide civil and nuclear users, thus removing the damaging temptation of a spread in enrichment and reprocessing plants and having one scheme which everyone can back. Last week, the Government’s conference on the nuclear fuel cycle was a genuinely welcome initiative but, I suggest, that we now need to move to decisions at the IAEA, if possible by the time of the June board of governors’ meeting. What are the Government’s plans in that respect?
I suggest that we should look at other ways of narrowing the gap and the discrimination between nuclear-weapon and non-nuclear-weapon states. In 1995, when it was decided to prolong the non-proliferation treaty sine die—it is now prolonged sine die, so there is no question of it coming to an end next year—the nuclear weapons states gave certain negative security assurances which were endorsed in a Security Council resolution. First, could we not now strengthen those assurances, perhaps stating flatly that the Security Council would act if any non-nuclear state were attacked or were threatened with nuclear weapons? Secondly, could we not also revisit the vexed issue of no first use? Throughout the Cold War, the West refused to contemplate any such undertaking, given the massive superiority in conventional weapons in northern Europe of the Warsaw Pact, but that consideration no longer exists. Thirdly, surely all nuclear weapons states could do more to de-alert their weapons systems so that our nuclear arsenals are not only much reduced—there is still plenty of scope for that to go further, particularly in the case of the US and Russia—but also so that they became weapons of last resort, not weapons deployed as part of our normal defence posture.
There is nothing particularly original about many of the points that I have raised—other noble Lords and other participants in this debate have covered much the same ground—and they are not matters which will necessarily be negotiated at next year's review conference. However, they will critically affect the outcome of that conference and the outcome of the efforts to handle successfully the problems which have arisen in relation to North Korea’s and Iran’s nuclear programmes. Of course, both of those latter problems of Iran and North Korea will need to be handled separately on their own merits within the existing negotiating frameworks which have been established for them: the six nation group for North Korea and the 3+3 group for Iran. In both cases, it is late but not, I would argue, too late to hope to achieve outcomes consistent with what the Security Council has called for. The chances are better now that the US is prepared to talk directly to Iran, as it has already been doing for some time to North Korea, and now that there is a willingness to address both countries’ wider security concerns, not just the narrow nuclear issue. I would also argue that a fundamental shift towards multilateral nuclear disarmament will influence positively the prospects for the future handling of the three nuclear weapons states that stand outside the Nuclear Non-Proliferation Treaty regime: India, Pakistan and Israel. The prospects for progress on these must be slight in the short term and probably for so long as the disputes over Palestine and Kashmir remain unresolved. In particular, I urge that we must not lose sight of the objective of a nuclear weapons-free zone in the Middle East as part of an end-state in that region.
I began on a sombre and rather pessimistic note, but I conclude on a note of hope. The first moves by the Obama Administration in the nuclear field seem to me to have been well judged and to have signalled a fundamental shift in US nuclear policy away from the unilateralist nostrums of their predecessor back towards a comprehensive revival of multilateral nuclear arms control and disarmament. The response in Moscow so far as bilateral nuclear negotiations with the US are concerned has been positive, so there is something to work with there. The Prime Minister’s speech last week was a welcome and serious contribution to the debate over future policy, as was President Sarkozy’s letter last December to the UN Secretary-General when he wrote on behalf of the European Union. Above all, I hope to hear from the Minister at the conclusion of this debate that we in this country intend to give these nuclear issues a much higher priority in our foreign policy than has been the case in recent years and that the Government will sustain the kind of comprehensive approach that the noble Baroness, Lady Williams, many other noble Lords and I have been calling for for some considerable time.
My Lords, I, too, thank my noble friend Lady Williams for initiating this debate and for setting out so clearly the challenge confronting us in advance of the review conference on the NPT next year. I want to concentrate on the potential for nuclear proliferation in the Muslim world, primarily on the threat of proliferation in Iran and the reality of proliferation in Pakistan and India.
Several noble Lords have spoken about Iran and, at this stage, it is difficult to bring a unique perspective to this issue, but I want to make a few simple points. First, despite the pressing issue of proliferation and the NPT review conference, we in the UK and the US might wish to desist from commenting on or indeed making approaches to Iran in the lead-up to the presidential election there on 12 June. Anything that we or the US might say in this period will at best be ignored or at worst be politically manipulated or hastily dealt with against a stressed political campaign. A hasty or unconsidered response could further be seen as limiting the possibility for movement on a future Government in Iran. A veil of silence for 100 days now may well shed more light in the 100 to follow after 12 June.
Secondly, the United States has to negotiate with Iran directly, and is doing so. That is a fact now well established in Washington but, in doing so, it has to improve co-ordination between its attempts to prevent Iranian nuclear proliferation and its recognition of Iran’s strategic interests in Iraq and Afghanistan. This is not to say that the US and UK should ignore the views of other regional actors, including Israel, who arguably feel more threatened by Iran than we might, but we should consult them while being clear about our preparedness to have a more constructive dialogue with Iran.
A further issue to do with Iran is for the P5+1 states to come to a realistic assessment of what can be achieved in terms of non-proliferation. We know that sanctions have not worked to dissuade Iran’s nuclear ambitions—the noble Lord, Lord Owen, made that clear in his elegant speech—nor will they work in the longer term. Iran’s people are too resilient to be brought down by the limited sanctions that we might apply.
A further issue with Iran is history. To its east, Iran knows that India, which first tested in 1972 claiming that its pursuit of nuclear technology was for civilian purposes only, was able to continue down the path of proliferation until 1998, when it finally came out as a nuclear weapons state. It has now been rewarded by the US with a treaty that brings it firmly into the declared NWS club with all the attendant benefits that membership brings. To its west, Iran sees that Israel has also benefited from a covert nuclear programme, not only to go unpunished, but then to use pre-emptive strikes against others that might wish to go down the same road. The lessons of history weigh heavily in Iran and the threat of Israeli strikes against its nuclear facilities à la Syria in 2007 have served only to reinforce its determination to move as fast as possible to attain highly enriched uranium. It is clear that any overt attack on Iran would probably prove ineffective, almost certainly lead to the end of what co-operation exists between Iran and the inspection regime of the IAEA and drive Iran’s covert nuclear programme further underground. It is not something that one hopes the Obama Administration will support.
So what is to be done with Iran? I am influenced by thinking in the US that points to support for the idea that the Europeans form a multinational consortium with Iran to produce enriched uranium inside the country, thus transferring a purely national programme to international ownership, management and supervision. This way, all nuclear-related developments in Iran would be monitored by an enhanced verification system with the full participation of the IAEA to ensure that military nuclear activity is not taking place. It appears that the Iranian Government have raised the possibility of a multinationally owned enrichment facility on Iranian soil that would provide them with a guaranteed supply of fuel for a civilian nuclear energy programme, which they say that they have the right to pursue, and that must be acknowledged.
Several noble Lords have spoken of the dangers inherent in Pakistan’s possession of nuclear weapons. In the case of Pakistan, with its history of conflict with India, it was inevitable that, once India had tested, Pakistan would strive for a similar capability. Had it not, India would have had sufficient asymmetry of power to become an existential threat to Pakistan. That both countries went down the road to possession of nuclear weapons is the failure of our—the West’s—overall lack of imagination to have come up with an even-handed, ongoing commitment to that region. It is a failure that continues to preoccupy us and will do so for several more years, I fear.
There is also growing fear that Pakistan’s nuclear arsenal may fall into the wrong hands. Several noble Lords have touched on this. We know that Pakistan is currently dysfunctional; some say that it is even on the verge of becoming a failed state. To worry about that is the rational thing for us to do. However, it may help us in thinking about Pakistan’s nuclear weapons —to paraphrase Michael Quinlan’s title for his excellent book—to recognise that Pakistan’s military continues to exercise considerable power within that country. Indeed, while we despair at the military’s inability to remain in barracks, we can take some comfort from the fact that Pakistan’s nuclear arsenal is in the hands of the national command authority, a body dominated by the military. While we might have concerns about the radicalisation of the Inter-Services Intelligence Agency, the military is far more cognisant of the deterrence value of its nuclear arsenal. In other words, it is much more likely to behave responsibly, even in a conflict situation, because the cost of not doing so would almost certainly result in its devastation.
In closing, I shall make a few general points about the scale of the task of disarmament. I agree with almost everything laid out in my noble friend Lady Williams’s road map for the review conference next year. What I would add is that there is a real and heartfelt belief in the Muslim world—by which I really mean the Middle East and south Asia—that in this new talk of disarmament in the West there is an agenda. Public opinion in those regions sees Israel given a free hand while the Israel/Palestine issue remains unresolved. It sees India rewarded for proliferation with a new co-operation treaty while Kashmir remains unresolved. It sees UN resolutions that favour the resolution of those conflicts ignored, while those that ratchet up sanctions and actions against Muslims are upheld—sometimes, even recently, with the force of arms. It is unsurprising that on the Muslim street there is a sneaky respect for Iran’s standing up to the West, as it is seen.
If the Prime Minister is serious in now taking the lead towards re-engaging with disarmament in his Road to 2010 Plan, he needs alongside that to begin a fresh approach to a resolution of those twin conflicts in Israel/Palestine and Kashmir. They are both as old as or older than 1945 when in Hiroshima and Nagasaki we saw the full power of man’s propensity for destruction.
My Lords, I, too, am grateful to the noble Baroness, Lady Williams, for the opportunity to debate the issue and to learn from her long experience and key role in it. No less, like other noble Lords, I would like to pay tribute to the late Sir Michael Quinlan. I was privileged to be a member of a number of groups thinking hard and long about the ethics of nuclear deterrence in the 1980s. In nearly all those groups, he was the formative influence. His recent book, Thinking about Nuclear Weapons, once again put us all hugely in his debt. I once asked him whether it was his long years in the Civil Service that had given his thinking such rigour and precision. He said, “No, Richard, it was my education with the Jesuits”. I say that with all apologies to noble Lords who were senior civil servants.
During that time, I remember being surprised when he suddenly stated that we must never lose sight of the goal of a nuclear-free world. It seemed a surprising thing for the architect of British nuclear policy in both its strategic and ethical aspects to say at the height of the Cold War. Yet that is what he holds out and considers seriously in the last two chapters of his recent book. He does so, first, because since 1946, that has been a repeatedly stated goal of our Governments—for example, in the recent speech of the present Prime Minister. Closely linked to that is what he describes as an essential load-bearing element in the Nuclear Non-Proliferation Treaty. He argues that both righteous abolitionists, who think that states can give up nuclear weapons as if they were giving up smoking, and dismissive realists are wrong and that there can be a convergence of both approaches in working towards that eventual goal, however far off and however massive the difficulties to be overcome on the way, which he spells out with his characteristic unblinkered realism.
If I am suspicious of some of those who emphasise the goal of an ultimately nuclear-free world, it is because I worry that they may ignore that sober realism and slip into an unhelpful and perhaps even dangerous utopianism. My emphasis is therefore rather different: not on the goal as such, but on the essential steps that need to be taken now, whether or not that goal is ever achievable. We know that a nuclear-free world would need to be very different from the one that we have now. Above all, it would need much stronger international arrangements to resolve disputes without recourse to war. In short, we must continue to do all that we can to support and strengthen the work of the United Nations, not least the Security Council, and the work of the United Nations through its other instruments and organisations.
Many people can get depressed or cynical about the United Nations. Although that is understandable, we cannot allow it to happen. If nations are to be encouraged to reduce their reliance on armaments, particularly nuclear armaments, they must have the confidence that, when potential conflicts arise, there is an international body with both the authority and the means to resolve them in as impartial a way as possible. In short, if we are to budge even an inch in the direction of a nuclear-free world, we will have to change the political landscape. That means not only resolving the conflicts that have been before us for 50 years or more—as was just mentioned—over Israel and Palestine, Kashmir, and China and Taiwan, but, no less important, strengthening a whole range of international instruments.
As several noble Lords have mentioned, that particularly includes the work of the International Atomic Energy Agency. As civil nuclear power is essential for the future, and countries are to be encouraged to acquire it without at the same time acquiring a nuclear weapons capability, there must be a tough inspection regime and the means to enforce its requirements. As we all know, important points have been made by Dr Mohamed El Baradei, which I will not repeat because they have already been mentioned several times in this debate.
Strengthening the international instruments for resolving conflict is a prime requirement in the pursuit of a nuclear-free world. The second, very closely linked to it, is the reduction in nuclear arms by the nuclear weapons states. If we are realistic, that is not because, say, 200 nuclear weapons and the capacity to deliver them is less of a deterrent or threat than, say, 400 such weapons. The point is simply that a willingness to reduce numbers can build confidence and trust. As we all know, “confidence building” was a vital phrase in arms reduction talks in the 1980s. I was very glad that the Prime Minister put stress on that in his recent speech, when he said:
“With each step we must aim to build confidence, confidence that action to prevent proliferation is working and that states with weapons are making strides to live up to their commitments ... this is the time to act together to take the next steps in building that confidence”.
On the issue of Trident, I am not one who believes that, if we divest ourselves of nuclear weapons, others will necessarily follow. Countries such as Pakistan and India have their own strategic reasons for the possession of such weapons and are not likely to be much influenced by us at this stage. Nevertheless, without exaggerating the effect of going non-nuclear, on 24 January 2007 in a debate on nuclear deterrence I argued that on balance—it is very finely judged—we would be better off without a nuclear capability ourselves. That would at least be some contribution to building trust and confidence. This afternoon that argument has been put particularly powerfully by the noble Lords, Lord Owen and Lord Ramsbotham.
It is interesting that, when Sir Michael Quinlan wrote about replacing Trident, he said that the case for going ahead was not so plainly and “unconditionally compelling” that it should be taken as entirely beyond reconsideration. We all know that weapons themselves are not the cause of war. Wars are caused by human beings—sometimes by overt aggression but often through mutual fear and mistrust. So the prime aim of the twin-track approach, both in relation to nuclear weapons specifically and in building up the political instruments and means of enabling people to feel secure, must be to build up trust and confidence.
The nuclear genie cannot be put back in the bottle. The knowledge of how to make nuclear weapons is with us to the end of time. There is a risk even in a nuclear-free world of a race to use that knowledge to build such weapons again. The only way in which such a race could be prevented would be the existence of authoritative and strong international instruments for conflict resolution. Furthermore, as Michael Quinlan used to emphasise, the final move from a small but effective nuclear arsenal to none at all would be a particularly fraught and dangerous time for the world. That again highlights the need for much stronger internationally agreed political mechanisms than we have at the moment.
As a Christian, I accept the goal of a nuclear-free world as an “impossible possibility”, to quote Niebuhr, and as such I am simply not allowed to lose sight of it. My emphasis would be on doing all that we can to change the political conditions of international life, for without this nothing is possible. Closely linked to that—we are talking about a twin-track approach—we need to take all the steps that we can not only to strengthen the non-proliferation treaty, taking account of all the wise and important things that have been said this afternoon, but to build confidence by reducing reliance on nuclear weapons and having international safeguards on the use of all forms of nuclear energy.
My Lords, I, like other speakers, must congratulate and thank the noble Baroness, Lady Williams of Crosby. As a preliminary, I owe her an apology as I was late and came in when she was half way through her speech. I misled myself as to the hour when the debate was likely to begin.
This has been an extremely interesting and important debate. However, an aspect that has not been mentioned, or even alluded to, is, curiously, that at present we have the pleasure of an opera being staged at Convent Garden on the subject of disarmament called “Doctor Atomic”, which is about Oppenheimer. Also, a month or so ago, the Duff Cooper prize, a primary literary prize, was won for a biography of Oppenheimer. This is perhaps an example of art preceding politics. I hope that it is; it would be very encouraging if it were. Certainly, the history of the slave trade showed that there was a great deal of discussion about abolition long before its possibility was achieved.
It is worth while coming to the questions raised by the opera and the biography. Those events were the first reaction to nuclear weapons after the war in 1945. Oppenheimer was the genius who presided over the creation of the atom bomb but he was also interested—who would not be?—in its control and subsequent abolition. The Oppenheimer Plan was based on a document written by him, changed by Dean Acheson and David Lilienthal, author of the Tennessee Valley project, and changed again subsequently by Bernard Baruch. It was the first effort to control nuclear weapons in 1945. That is worth considering now that we are discussing methods of control once again.
The interesting aspect of the control mechanism suggested by Oppenheimer was that it would be an effort to articulate the wishes of those who wanted to work in the nuclear field but not in nuclear weapons. The Oppenheimer-Baruch Plan suggested that this difficulty could be overcome by having all nuclear weapons and nuclear material owned by an international authority. Perhaps we should reconsider this. It may seem as fanciful as the idea of a world without nuclear weapons; nevertheless it is an approach which could be tried again.
Another point to be emphasised is that these plans, which informed the plans of the West for the next 20 years, were all to be integrated in conventional disarmament. Thus, the plan between 1946 and 1950 was for nuclear weapons to cease to be produced at the moment when the conventional weapons of the great powers had been cut by one third. As one who took part in such discussions, I remember very well the one-third cut proposal being a controversial one. We were to try to find a method of enumerating the number of Soviet tanks, infantry and aircraft, and when they had cut a third of those items, we would begin to consider nuclear weapons. I am not sure it was such a bad plan. I speak as a veteran disarmamentist, since in those days I was a secretary of the British delegation to the UN Disarmament Commission and had the pleasure and interest of serving that lost leader of the Conservative Party, Sir Anthony Nutting. His dedication was remarkable and deserves to be remembered more than it is.
A third point I would emphasise in relation to our present problems and possibilities is that, unlike in the 1940s, a large number of countries are involved in nuclear weapons. We and other possessor states could approach them by suggesting that we might be prepared to consider abolition if abolition was also considered by them. I do not know if the noble and gallant Lord, Lord Bramall, could conceive of such a suggestion in his plan for not possessing nuclear weapons, but it could perhaps be considered now in a way that it could not when he launched his sensational speech a year and a half ago.
My Lords, the world faces three major threats or challenges: an economic and financial threat; the threat of climate change involving food and water shortages; and of course nuclear catastrophe, perhaps by accident as was referred to by my noble friends Lady Miller and Lord Dykes—he referred to the submarine collision—or by design. While there is a relationship between all three, as the right reverend Prelate said, for me the nuclear threat is unquestionably the most deeply worrying. As the noble Lord, Lord Hannay, said, time is not on our side.
In preparation for the debate, I looked at the estimated nuclear arsenals, dominated of course by the United States and Russia, with over 10,000 nuclear weapons each—surely a massive overkill with substantial opportunity for reductions, as acknowledged by Kissinger and Shultz, and by the noble Lords, Lord King and Lord Owen, this afternoon. Then we look at those countries with three-figure stockpiles, France with 300 nuclear weapons, the United Kingdom with 160 and China with perhaps 125-plus. Fortunately, they are disciplined nations with no current obvious major adversary. Then Israel—never admitted—has 80-plus nuclear weapons. It is a disciplined nation, but potentially ruthless if its survival is ultimately threatened. It would be marvellous to think that we could work long term towards a nuclear-free zone in the Middle East but that looks as though it will be a long time coming. With 50 to 60 nuclear weapons each, India and Pakistan face each other in a state of considerable tension, as was referred to by my noble friend Lady Falkner. North Korea—an enigma, dangerous and unpredictable, with severe power and food shortages and large conventional forces—has maybe up to 10 nuclear weapons. Then one must add Iran, whose intentions are uncertain, but many believe that it is intent on acquiring nuclear weapons. Our Defence Secretary, John Hutton, clearly believes that, as do United States military chiefs. The noble Lord, Lord Owen, made it clear that he is also convinced that Iran is very much on that path.
I congratulate my noble friend Lady Williams, not only on securing this apposite debate but on all her work in disarmament, as has been referred to. Of course, her work was warmly acknowledged by the Prime Minister in his 17 March speech on nuclear energy and proliferation.
It is not all gloom and failure. Something like 40,000 warheads have been destroyed since the end of the Cold War, mainly United States and Russian weapons. We in the UK have cut our warheads by 50 per cent since 1997 and have disposed of all our freefall and tactical nuclear weapons. A number of countries—not many, but some: South Africa and Libya—have been dissuaded from continuing on the nuclear journey.
As my noble friend Lady Williams said, the basic principle of the non-proliferation treaty is that, while non-nuclear powers are free to develop civil nuclear power, the nuclear powers commit to pursue and develop significant reductions in their nuclear arsenals. With the expansion of enrichment and reprocessing capabilities, the director-general of the IAEA, Mohamed El Baradei, estimates that 35 to 40 states could have the knowledge to acquire nuclear weapons.
We should take some encouragement from the Prime Minister’s recent speech—the pledge to work towards a world free of nuclear weapons; the step-by-step approach; pledges to set out a “road to 2010” plan, with detailed proposals on civil nuclear power, disarmament, non-proliferation and fissile material security; a role for the development of the IAEA; and the hosting of a conference for recognised nuclear weapons states on nuclear disarmament issues. With the START treaty expiring later this year, there was a welcome commitment to find and to work for a legally binding successor and, finally, if possible, a commitment to reducing the number of UK warheads further, consistent with national deterrents.
The role of Trident has been increasingly questioned today. The noble and gallant Lord, Lord Bramall, is not with us, but he has written on this subject, which was referred to by the noble Lords, Lord Ramsbotham and Lord Owen. There would be a replacement cost of between £15 billion and £20 billion, and a possible annual running cost of £1.5 billion. Both major parties presently are committed to replacement. The Lib Dem policy is that the Trident nuclear system should be continued and maintained, and its operational life extended. The final decision of any successor system should be taken around 2014 when significant capital spend would begin to be incurred.
However, questions must be asked about the independence of our deterrent, to which the noble Lord, Lord Ramsbotham, referred. Apart from the points that he made, the Atomic Weapons Research Establishment is virtually American controlled. Who is our likely enemy? If we have to use nuclear weapons, the deterrent will have failed. We wonder what instructions are in the sealed letter from the Prime Minister to Trident commanders on missile launch. No one is suggesting that Trident should be given up immediately, but, surely, it could be considered to be used as part of future negotiations, to which the noble and gallant Lord, Lord Guthrie, referred. Perhaps we may be able to develop a joint force with the French. Cancelling Trident would obviously be a momentous and serious decision for this country, which could not be reversed. Certainly, at least part of any financial savings must be devoted to building our conventional forces.
On Iran, I can do no better than to quote from the book, Under a Mushroom Cloud, by Emanuele Ottolenghi. He writes:
“Iran has chosen concealment over transparency. Its nuclear programme remains opaque and it continues to prevaricate and deny the international community the opportunity to conclusively verify the real nature of its programme. Iran is not to be sure refusing to co-operate with the IAEA, but it is engaging in an elaborate stratagem of delay, obfuscation and deception”.
Having said that, we must welcome the new American conciliatory tone under President Obama and must not be put off by the initial dismissal of the overtures he has made. I would suggest that the United States must talk to the other major regional powers, apart from attempting to talk to Iran, and involve Syria, Turkey and Russia, which, it is believed, are considering supplying Iran with a substantial, defensive missile shield.
On terrorism, clearly, there are considerable worries about the dirty bomb and the stability of Pakistan, as have been referred to earlier. Only today, there is an article in the Times on the way in which Pakistan seems to have abdicated and withdrawn from the Swat Valley and the Taliban have moved in. Numerous stockpiles remain unaccounted for in the former Soviet Union. Some claim that there is enough uranium or plutonium to make a further 40,000 weapons, to which I believe the noble Lord, Lord King, referred. Security Council Resolution 1540 obliges nations to improve stockpile security and allows teams of specialists to be deployed to other countries to assist monitoring and accounting. We have to expand the IAEA’s budget.
In conclusion, while we cannot disinvent nuclear technology and while, ultimately, I do not believe the world’s superpowers will ever totally give up their nuclear arsenals, we have to speed up the disarmament process, reduce excessive stockpiles, support our Government’s step-by-step approach and take a hard look at our Trident replacement policy. Above all, we have to believe that substantial nuclear disarmament can be achieved in the Obama slogan “Yes we can”.
My Lords, I, too, thank the noble Baroness, Lady Williams, for raising this debate. I was hugely impressed with the elegant way in which the noble Baroness delivered her speech, which, as my noble friend Lord King said, contained some very complicated points, while only once referring to her notes.
Given the Prime Minister’s recent statement on this issue and the publication of the Foreign and Commonwealth Office policy paper, Lifting the nuclear shadow: Creating conditions for abolishing nuclear weapons, I am particularly grateful for the opportunity to debate, as the noble Lord, Lord Owen, said, this “immensely important” issue. I commend the FCO’s policy paper and helpful two-page summary to the House and very much welcome it. Its launch, by the Foreign Secretary, was the last public appearance of Sir Michael Quinlan. Like other noble Lords who have spoken in today’s debate from both sides of the House, I pay tribute to his unique contribution to these debates.
The Minister will be aware that we have long called for this country to lead a drive to revive and reinvigorate the non-proliferation treaty. Thirty-nine years after it came into force, it is showing strain. Problems have increased because today much of the WMD technology is 50 years old, and so much more accessible both to states and non-states. We know that up to 40 countries have the technical expertise to produce nuclear weapons. Despite the exposure of AQ Khan, the nuclear black market continues to thrive. My noble friend Lord King, the right reverend Prelate the Bishop of Bath and Wells and the noble Lord, Lord Anderson of Swansea, mentioned the letter to the Times of last June. In that letter, former Foreign Secretaries the noble Lord, Lord Hurd, the noble Lord, Lord Owen, and Sir Malcolm Rifkind, and the former Defence Secretary and NATO Secretary-General the noble Lord, Lord Robertson, argued that,
“During the Cold War nuclear weapons had the perverse effect of making the world a relatively stable place”.
Today, however, nuclear proliferation means that,
“the world is at the brink of a new and dangerous phase—one that combines widespread proliferation with extremism and geopolitical tension”.
This prospect seems all the more real because of the attacks of 9/11 and 7/7, and those against other western targets. These attacks have shown our increasing vulnerability to terrorist assault and opened up the horrific possibility of a nuclear or chemical device being detonated in one of our own cities.
We can see that the NPT is being stretched and is not providing sufficient support because of these developments and strained relations—or complete lack of agreement—between nuclear and non-nuclear weapon states. Discussions with North Korea, for example, involved immense diplomacy, incentives and isolation, which we will now have to direct towards Iran. Furthermore, as high oil prices and concern about climate change mean that people move towards nuclear energy, there is an increasing possibility that countries may obtain nuclear weapons through the nuclear fuel cycle. We have seen this already in North Korea and now Iran may be trying to do the same. We therefore welcome the Prime Minister’s speech of 17 March in which, among other things, he pledged to hold a conference of the recognised nuclear weapons powers, action to strengthen the International Atomic Energy Agency, and a leading role for Britain in tackling proliferation.
It is unsurprising that we should welcome these measures, as they are Conservative proposals. The next review conference of the NPT will take place next year, and we very much hope that real progress will be made, given the failure of the 2005 conference to reach an agreement. We look forward next year to what we hope will be very productive discussions, followed by a substantive agreement that includes a mechanism for safe access to nuclear fuel.
My noble friend Lord Jenkin of Roding raised some important issues, particularly the increasingly urgent need to find a mechanism for providing a host of new countries with low-enriched fuel for peaceful use and to enable them to comply with the NPT. Iran is a signatory to the NPT.
Efforts to revive the NPT will be in vain if we cannot stop Iran from undermining it fatally by acquiring a nuclear weapons capability. President Obama has announced his intention to engage with Iran. Does the Minister agree that this diplomatic strategy must be underpinned by resolute action from the EU as a whole if Iran is to be persuaded to return to negotiations?
It is now well over a year since the Prime Minister said that the UK would seek tougher sanctions both at the United Nations and in the European Union, including on oil and gas investments and the financial sector. Will the Minister say why these sanctions have not yet been adopted? Will he also say what is being done to secure a formal ban on European export credit guarantees to Iran, which subsidise trade to that country?
While we welcome the fact that the Government are adopting so many Conservative proposals, they must also do more in an area which the Prime Minister did not mention in his 17 March speech. Will the Minister say whether the Government are making progress in addressing the financial underpinnings of non-proliferation? There is an utmost need for the Government to ensure that we have the capacity, at a national and international level, to isolate nuclear proliferators from the international financial system. By identifying and blocking these financial activities, illicit nuclear programmes can be slowed down and pressure can be put on the Governments behind them. What action have the Government taken to ensure that government departments have the right expertise and experience to cope with this rapidly expanding area? Given that defence against nuclear proliferation depends in vast part on multilateral action and co-operation, will the Minister say what the Government have done to ensure that we have sufficient capability to help other countries to co-operate with this policy?
We look forward to next week when President Obama meets the President of Russia here in London. We hope that their negotiations will mark the beginning of a new era in the prevention of nuclear proliferation. The noble Lord, Lord Owen, pointed out the importance of new Administrations consolidating progress made by their predecessors.
Finally, I will, in the friendliest way, make an observation about comments made by the noble Lord, Lord Dykes, about HMS “Vanguard” and “Le Triomphant”. I understand that, although the two vessels made contact while travelling at a very low speed, no one was injured, the nuclear security of the submarines was not compromised, and both boats returned to their bases under their own power. I trust that the Minister will, so far as he can, correct me if I am wrong.
My Lords, let me immediately join all who have paid tribute to the noble Baroness, Lady Williams, for the debate today. She has set a tone, which many have matched, of extraordinary historic sweep in describing the development of nuclear weapons since the testing of that first weapon in New Mexico.
I was forced to reflect that there is probably no other legislative Chamber in the world, except perhaps China, where the average age of the Members is greater than that of nuclear weapons, which gives us a historical sweep not allowed to others. Perhaps that is also what makes many of us so certain that we want to see the age when nuclear weapons, too, are pensionable.
On listening to the debate, I came back to the point that I always come back to in my own mind: the nuclear weapon of the greatest threat to our security and to world security today is no longer very sophisticated nuclear warheads but pirated fissile material. That reflects the fundamental change in global security, the relatively reduced threat of war between states—states being the owners of those high-technology nuclear weapons—and the rising threat of terrorists and other groups taking advantage of asymmetrical warfare to use pirated fissile or other weapons, chemical and others, to bring desperate harm to defenceless civilian populations.
I want to return to that theme later because I do not think that ultimately you can have a view of nuclear weapons separate from a view of the changing nature of security in the 21st century. Let me at this stage pick up on, I thought, the very interesting, if mildly provocative, suggestion of the noble Lord, Lord Owen, of a Duff-Mason summary that the Prime Minister might leave on the desk, by implication, for his successor. I would only argue, as I am sure the noble Lord would agree, that such a memorandum which sought to systematise, synthesise and sequence the next steps we need to take would be as much value to the author as to a fresh reader. In that sense I think it is a very good suggestion, even if I hope that it will be Prime Minister Gordon Brown who gets to read that memorandum at some point next year. If there were such a memorandum, I think that it would pick up points made in the debate today.
The first is the enormous importance of securing a safe nuclear fuel cycle in a way that makes nuclear power available to countries that have a legitimate demand for it and are willing to accept the safeguards. That was the purpose of the conference in London last week, to which a number of kind references have been made. In his speech at that meeting, the Prime Minister observed that we would need to build 32 nuclear power plants a year between now and 2050 to achieve our goal of halving emissions and bringing us into line with the climate change commitments that we envisage. It is worth repeating that to remind ourselves of the astonishing challenge we have in terms of the peaceful use of nuclear power and the need to expand access to it on a dramatic scale if we are to go down that road.
I take the point of the noble Lord, Lord Jenkin, and thank him for having attended that conference. I recognise that there may not have emerged as much clarity on the way forward as we might wish. Some customer countries voiced confidence in being able to continue to access the commercial market. However, as more countries knock on the door—they will very shortly as the need for nuclear energy increases—the fuel bank and fuel assurance proposals of the kind that we and others have put forward will become indispensable.
There is progress. Jordan and Turkey, for example, made it clear that they see a valuable role for assurances of supply. We understand that Armenia and Ukraine are likely to become stakeholders in a new international uranium enrichment centre in Russia. Kuwait and the United Arab Emirates have helped to raise the $150 million for the creation of the IAEA fuel bank proposed by the Nuclear Threat Initiative. We have not boiled everything down to one approach, but there is strong progress and we hope that after the conference we can advance it.
Beyond the safer fuel cycle, the issue of weapons and the disarmament example that the UK can or cannot make in terms of Trident is a key next step in the prime ministerial memorandum. The Prime Minister said last week that we would reduce the number of tubes on submarines from 16 to 12. It would not be possible to reduce the number of submarines in service from four to three, because that would not allow us constant coverage at sea. I acknowledge that these are marginal changes that we are contemplating, which fall far short of the prospect that a number of noble Lords properly raised of the retirement of the weapons system.
I share the view that there will potentially come a time and place when this is an extraordinarily important card to play. The noble Baroness, Lady Williams, was quoted in the Times as saying that it was the queen on the chess board that we could play at the right time, but that you only play the queen at the very end of the game, when you have secured the right concessions from the other side. In that sense, any changes to Trident would have to be made at the culminating stage of a careful, multilateral bargaining process.
In an era of very tight defence budgets—as the noble and gallant Lord, Lord Guthrie, and others, mentioned—it is a significant cost, accounting for about 3 per cent of the defence procurement budget, and on an ongoing basis, about 5 to 6 per cent of the defence budget. At that level, it is an expensive insurance, but not one that necessarily crowds out other vital expenditures. A new Government will need to look at the issues of the military strategies that we are adopting, not just in Afghanistan and Iraq, but the need going forward to project British power in a realistic, plausible way in this new age of failed states and terrorist threats. Simply taking Trident off the books would not solve that: fundamental issues of right-sizing and properly resourcing our military capabilities are not addressed by just removing Trident.
The argument for removing Trident comes entirely from a successful multilateral negotiation the ultimate purpose of which, as so many noble Lords have said today, is a no-nuclear world. On the intermediate steps towards that, we must deal with the issues of doctrine that in some ways provide building blocks. The noble Lord, Lord Hannay, talked about the “no first use” issue, and the assurances to non-nuclear states that if they came under nuclear attack, they would be defended. As the noble Lord knows well, we have signed up to three of the nuclear weapons-free zones. Between them, we have signed and ratified protocols that provide 100 countries with that essential protection. The great opportunity—I do not pretend that it is easy—comes in forming such a nuclear-free zone for the Middle East. There was at a recent NPT meeting some indication from Egypt of an interest in that, but we are obviously a long way from the countries of that region being likely to be willing to bury the nuclear hatchet and allow us to put those kinds of arrangements in place.
Critical to moving forward is the strength of the institutions involved in this whole area. First among them is the IAEA. The noble Lord, Lord Jenkin, asked about today’s votes. I know that nothing alerts a politician more than news of an election. There were two votes today in Vienna, and neither the Japanese candidate, Mr Amano, nor the South African candidate, Mr Minty, secured the two-thirds majority of votes cast that is required on the second round; Mr Amano led Mr Minty by 20 votes to 15. We expect that there will be another vote tomorrow to determine the leading candidate, but the fact that neither candidate has secured that two-thirds of votes means that the process is likely to extend for a while. It is worth noting, however, that Mr El Baradei’s term does not expire until the end of the year, so there is still plenty of time to resolve this.
Behind the election of a new director-general of the IAEA is this critical point of resourcing it and giving it the authority to be the broker in the important nuclear issues that lie ahead. We have made contributions, for example, towards its efforts in Pakistan to control fissile material. We have been big supporters of its efforts to increase monitoring in difficult countries such as Iran and North Korea. However, this organisation, together with its director-general, won the Nobel Peace Prize just several years ago, but has perhaps not been given the status and recognition that it needs to perform the increasingly difficult task with which we have charged it—a task that it obviously carries out through a role that is clearly, in some ways, secondary to that of the Security Council. I would argue that it is nevertheless indispensable. In many cases it is a less political forum in which to resolve some issues of monitoring and controls than the council itself.
I turn to the great enchilada of all of this: the NPT. There are important issues, such as the potential progress on a CTBT as well as a non-fissile materials treaty, which have been commented on this afternoon and move us towards the prospect of a more successful NPT review conference in 2010 than we might otherwise have foreseen. Again, however, as has been said, it was only in 2005 that we had a completely disastrous failure of a conference. In some ways, the NPT’s authority hangs by a fairly thin thread. That said, it remains one of the most contemporary and forward-looking treaties, with its balance between the requirement of the five original nuclear powers to engage in a process of extensive disarmament and the requirement upon the no-nuclear powers not to proliferate and gain nuclear weapons. Combined with that, there is the third commitment that there be availability of civilian nuclear power for those who wish to access it. That remains a formidably strong framework on which to deal with these issues.
While on the one hand we have avoided the kind of proliferation that was feared 40 years ago, where we would have dozens of nuclear powers today, the fact is that a number of regional situations are on the edge—Iran and North Korea have been mentioned this afternoon. The important India negotiation is not, but it shows the difficulties we face: absent a strong multilateral framework there is a risk that we will fall back on single-country solutions to proliferation issues, which, while they may be of value in themselves, as the India one clearly was, undermine the kind of multilateral approach that is so critical to maintaining a secure world and driving towards the eventual goal of a nuclear-free world.
In that regard, I remain of the view that the fact that such formidable figures on both sides of the Atlantic in the field of national security have signed up to the letters and articles promoting the idea of driving towards a nuclear free world has changed the debate. Promising a nuclear-free world is the kind of thing political leaders may have done lightly over many decades, but I do not think that Henry Kissinger or George Schultz have done it lightly, and I suspect not the noble Lord, Lord Owen. In that sense, this has created a very different environment in which we can proceed with the negotiation and conversation. Moreover, if, as the noble Lord, Lord King, said, Sam Nunn talks of the mountain that you cannot see the higher reaches of through the fog, the fact that you know you are climbing the mountain marks a critical change in the direction of discussion and the seriousness of purpose with which you proceed.
In closing, let me come back to the extraordinary importance of an effective multilateral way forward. I began by observing that the nature of insecurity in our world has changed. For now, at least, it is less a threat between states and more of one within states. One has to qualify that by saying that both Iran and North Korea have on occasion made some very old-fashioned remarks about rockets that would reach Europe or North America, so one cannot discount the fact that old threats may resume. One cannot assume that the use of nuclear weapons between states is unlikely for ever. But as we focus on today’s threat, it makes the case for multilateralism more than ever because it is a multilateral negotiation to control nuclear materials and bring down nuclear weapons, move forward on disarmament and, above all, move forward on access to nuclear power. But it is also multilateralism that offers us a means to deal with the broader underlying security threats that shape this. It is within a multilateral approach that we hope we can move forward to find regional security for Iran, and to deal with the issues of North Korea and the Middle East. It is to multilateralism that we look to deal with the grotesque inequalities in the world that fuel so many of the political divisions of our times.
In welcoming the debate, I close in saying that it is important that, just as we seek to revive the NPT and for Britain to lead as a multilateral player willing to make concessions itself where it sees pragmatic and realistic advantages of moving the process forward and signing up strongly and forcibly to a no-nuclear-weapons future while recognising, as has been said, that it may not be achieved in our lifetime, we must also sign up to and lead on multilateralism to change the underlying security conditions and create a more just and fairer world where, truly, these weapons become unnecessary.
My Lords, I very much thank noble Lords on all Benches and in all corners of the House who have contributed in such a constructive and foresighted way to this very important debate. I was moved by the sensation that the spirit of Sir Michael Quinlan, who was the friend and acquaintance of so many of us, appeared to be present in the debate.
Many noble Lords have referred to the Prime Minister’s speech of last week, which was, indeed, groundbreaking. The Minister deserves the congratulations of us all as an advocate of that speech, capable of building on it beyond the capacity of most of us. Having travelled with him, I am well aware that the high respect in which he is held in this House is multiplied and reflected in other parts of the world, where he is also accorded the highest respect. If anybody is to push forward the programme on which, I think, we are all agreed, he is the right person to do so. It gives me great pleasure to thank him once again and to withdraw the Motion.
Immigration (Biometric Registration) (Amendment) Regulations 2009
Motion to Approve
My Lords, on 25 November 2008 we issued the first identity cards for foreign nationals through regulations made under the UK Borders Act 2007 to applicants granted further leave under student, marriage and partnership categories. The regulations will enable the UK Border Agency to expand the rollout of identity cards to new categories.
These amendment regulations are designed to allow identity cards for foreign nationals to be issued to additional categories of foreign nationals seeking either to extend their stay in the UK or transferring evidence of their limited leave into a new passport or travel document. The regulations will continue to apply to those covered by the 2008 regulations, but we have updated the student categories to reflect the launch of tier 4 of the points based system, for students, at the end of this month.
Introducing compulsory identity cards for foreign nationals to those who are subject to immigration control is a component of the national identity scheme. At the heart of this scheme is a simple ambition to use biometric technology to fix the identity of an individual. Using the powers in the Act, we have been able to lock a migrant to a single identity and provide them with a secure and reliable immigration document. By checking fingerprints against our centrally held records, we have been able to find out whether we have seen an applicant before under a different identity and/or nationality; such as a failed asylum seeker who has now returned to the UK and is passing themselves off as a student from a different country.
This is evidenced by the fact that since 25 November 2008 we have successfully prosecuted three foreign nationals attempting to or having obtained leave by deception. Several other applications are currently under investigation and we expect similar results, and other applications for leave have been refused as a result of a failure to disclose information relevant to their application.
In addition, these regulations enable the UK to comply with European Regulation (EC 380/2008), which requires the residence permits that grant leave to remain to be in the form of a card containing the biometric features of the holder.
In July last year, the House approved the Immigration (Biometric Registration) Regulations 2008, which enabled the UK to launch its identity card for foreign nationals. To date, the rollout has largely run smoothly, with the majority of successful applicants receiving their cards within a week of being notified that their application for further leave was granted. Those who are required to enrol their biometric identifiers can do so at any one of the network of offices around the UK. We are investigating expanding enrolment facilities to other locations across the country. The card is already benefiting holders who have used it in a variety of ways, including applying for driving licences, opening bank accounts and as proof of age in licensed premises.
I will briefly set out the categories to which these regulations apply. The rollout categories cover the existing marriage and partnership applications to extend leave, updated student categories, and include a small number of immigration categories that fall outside the points based system, which attract relatively small numbers of applicants.
Starting with academic visitors, the regulations apply only to those who are already in the UK and are applying to extend their leave as an academic visitor beyond six months. As with all these categories, this will enable the UK to comply with EU regulations. Visitors receiving private medical treatment in the UK, who need to extend their stay to complete their treatment, will also need to apply for the identity card. We have also included domestic workers in private households under these regulations. That category concerns overseas domestic workers who have accompanied a person entitled to live in the UK, and who subsequently apply to extend their stay here based on that employment.
The next category covers those applying to extend their leave under UK ancestry rules, which includes people who are Commonwealth citizens, have a British grandparent and can demonstrate a link with the UK. The penultimate category relates to retired persons of independent means; this category is no longer open to new applicants, but a person who is already in the UK under it may extend their leave on the same basis. It applies to persons aged over 60 with substantial means to support themselves. The final category covers those overseas employees recruited by an overseas company to act as their sole representative in the UK. The requirement to apply for an identity card will again apply to those seeking to extend their stay in the UK. Where Immigration Rules allow dependants to join the applicant, the biometric regulations will also apply to them.
Your Lordships may, perhaps, note that postgraduate doctors and dentists are covered by these regulations. Those applicants are not currently required to enrol biometrics, but this category of the Immigration Rules will be deleted at the end of March as we introduce the points-based system and the student tier 4 within it. From the end of the month, postgraduate doctors and dentists will, along with all other tier 4 applicants, be required to apply for leave to enter or to remain under that tier and, as part of their application to extend their stay in the UK, to apply for an identity card.
In addition, the requirement to apply for an identity card will apply to those with existing limited leave who are applying to transfer immigration documents into a new travel document or passport. That will enable holders of less secure documents to upgrade them to the identity card. Those applications are usually made when a person with leave has to replace an old passport, or if they had no travel document into which their vignette could be placed when originally applying for leave and, therefore, received their status document attached to a letter. Those applying to transfer their conditions of leave will have to apply for an identity card and enrol their biometric features irrespective of the type of leave they hold.
The other changes that these regulations make to the 2008 regulations include lowering the age that determines the date on which a biometric immigration document ceases to have effect. That is now in line with UK passports, so that where a card is issued to a person aged 16 or over, its validity period will be no longer than 10 years. We have also brought in two additional requirements where the Secretary of State may require the surrender of an identity card. The first is intended to be used when a foreign national who enters the UK produces an identity card, but not their passport; the other applies to holders who have demonstrated that they are a British citizen and no longer required to have an identity card for foreign nationals. In addition, the regulations enable the Secretary of State to cancel the card in those circumstances. We have also tidied up Regulation 19 in the current 2008 regulations, so that persons whose cards are cancelled as a consequence of them being British citizens are not subsequently required to apply for an identity card. Finally, we have introduced a saving regulation to ensure that any identity cards under the previous regulations are not affected by Regulation 5 of the amending ones.
These regulations build from the previous biometric registration regulations, as I stated, which reflects our approach to rolling out identity cards incrementally. We believe that they are proving to be a useful tool in tackling illegal immigration and other identity abuses. We consider that they support those who are staying in the UK legally, and form part of our wider national identity scheme. When we intend making further inroads to the categories of foreign nationals who are required to apply for an identity card, we will return to Parliament and seek further approval. This is what these regulations seek to achieve and I commend them to the House for its support. I beg to move.
My Lords, I thank the Minister for introducing this statutory instrument; I recognise, at the outset, that this is becoming an annual event and will, I guess, continue to be so. The implementation of the full-scale identity card system is, obviously, gathering pace. The Government’s experience in issuing ID cards to migrants to this country, in increasing numbers and categories, is surely not unconnected to their desire to see them carried, ultimately, by every citizen. As the Minister will know, we are against such use, we are against the ID system, which we believe to be quite unnecessary, and we are not particularly impressed by the back-door implementation through the excuse of border control. However, it is with us, so we have to deal with it.
The biometrics on the identity cards that are to be supplied are limited, as I understand it, to two fingerprints with a facial image. Is the facial image a full face photograph or a digital eyeprint? At present, the information is also said to include biographical details such as—I quote the Minister in the other place—name, status, nationality, date and place of birth. Is that the entirety of the information held on the vignette, as I think it is called, or is any other additional information put in? If so, what is it? Is the intention to add additional information in due course?
The Minister has outlined the categories included in the regulations today, and they seem to fall into what we would call the soft-touch areas. They are existing marriage and partnership applications to extend leave, updated student categories and a number of small categories, such as postgraduate doctors and dentists—that is clearly limited—academic visitors, visitors for private medical treatment who need to extend their treatment, domestic workers, our long-suffering Commonwealth colleagues and, almost unbelievably, retired persons of independent means, who will ultimately no longer be entitled to come here. We have had that discussion before, but it does no harm to say again that this seems to be a very strange decision.
Most of those groups are hardly the most likely to breach immigration laws or requirements. The fact that they are among the first to have identity cards seems to suggest that the more difficult categories, and those which will require more work, are being left to the last. I have one or two questions about that for the Minister. I am at a loss as to how the system will work to ensure that someone who is here receiving private treatment, perhaps confined to hospital or having to attend each day, is going to get to a centre to have their biometric details taken. If they are going to be here only for a week or 10 days, are they still going to have to have an ID card? Or is there an expectation that people on private treatment are going to be here for much longer than a short-term visit?
It is clearly not sensible or practical to suggest that someone who will be here for a limited period is going to have an ID card. Perhaps we can know some more about that. As a former chairman of an NHS trust, I recognise that people who come here for private treatment, or who end up having it while they are visitors here, are not always the most scrupulous about paying either the NHS or the private facility. I am not sure that an ID card will make much difference there. Having to obtain an ID card seems to be somewhat excessive. Perhaps the Minister would enlighten us on the process of how they would go about doing that.
I am glad that visas for doctors and dentists are now being extended to the full extent of their training; that is a very practical and sensible decision. When will those who are already here need to obtain an identity card if they wish to further extend their stay? Or would they have to do that during their limited visa time?
I am concerned about the cards being provided to domestic workers. Many of these people, as the introduction to the regulations suggested, are extremely vulnerable. What would be the penalty or the result of their employers taking their cards and refusing to give them back? We already know that often their passports are taken away as soon as they get into the country, which potentially leaves them subject to trafficking and abuse. There have been enough cases for us to know that. I wonder whether that has been taken into account and whether there is some criminal penalty for not returning someone’s card.
I was going to ask the Minister how long it takes to obtain an ID card, but I believe he said a week. There are centres across the country. The Minister nods, so I have my answer to both points.
Finally, is an ID card supposed to work with a passport as a travel document, or can it operate on its own? I know that if you obtain a passport you probably have to obtain an ID card at the same time. I wondered whether you had to show both when required to at a border. I would be grateful for a reply to my questions, but I have no more observations on the regulations.
My Lords, it will not surprise the Minister that, having opposed the very concept of ID cards, we shall continue to oppose their rollout. Choosing to introduce them to the categories of people who do not even have a vote here is a backdoor way of bringing them in. I was surprised to hear the Minister claim their usefulness as a tool. I think that he said that since November three people had been apprehended. Given the cost of implementing this scheme, three does not seem to be a very great number.
We object because we do not think that this is necessary or cost-effective. The Minister referred to the categories of people, but they all have passports. One downside is that the scheme is likely to be divisive. Perhaps the Minister could remind us of the penalties for any of those categories of people who do not apply for ID cards. The Minister in the other place said that the cards would be useful for employers. That in itself produces a difficulty. Will employers ask anyone who just looks foreign to produce their ID card? If proof of identity was needed, people could produce a passport. The whole idea is anti-cohesion, which the Government spend so much time talking about.
The Government claim that ID cards will help to protect domestic workers from abuse. That is an extreme claim. There are many reasons why domestic workers suffer abuse, but I think that the claim of the Minister in the other place that ID cards will help to alleviate that is definitely a claim too far.
The noble Baroness, Lady Hanham, has posed several useful questions, so I shall not rehearse those. My main question to the Minister is: how on earth does he think that this scheme can possibly be cost-effective?
My Lords, I thank the noble Baronesses for their contributions. If we had been more ambitious and produced what the noble Baroness called the harder categories or a much larger number, I wonder whether I would be standing here accused of pushing this through with great speed when we were not sure that we had the capacity to deal with it. Therefore, we have chosen to do exactly what we said we would do, which is to move incrementally in logical steps. The T4 regulations on the points system come in at the end of this month, so it makes perfect sense to bring those two things together. I am slightly hurt by the suggestion that we are doing it for reasons other than for those that we said.
I know that both noble Baronesses have much less affection for identity cards than the Government or, indeed, I do, but I recognise the practical points that they made. Whatever their views, they are perfectly entitled to make them. They asked relevant questions about what these regulations will do. I shall try to deal with them, although not necessarily in the order in which they were asked.
Postgraduate doctors and dentists need to apply to extend leave before their current authority to stay expires, which can be done up to three months before that date. There are a number of centres. At the moment, they are in Armagh, Cardiff, Croydon, Glasgow, Liverpool, Sheffield and Solihull. Over the coming months, we intend to make other venues across the country available. The question of mobile unit capacity where required brings me to a point made by the noble Baroness, Lady Hanham, about people who come for private medical treatment. The requirement applies only when the person has been here for six months and wishes to stay beyond that. She made a point about people not being able to visit any of the centres that I named. There will be capacity to bring the equipment to the person rather than demanding that the person goes to the equipment. There is an ability to provide for an individual to have his biometrics taken without too much trouble or hardship for him.
The biometrics are a facial image; they are not of irises. The card will contain the information that the noble Baroness identified. It will not have a great deal of information beyond that. It will hold basic biographical data. I have mentioned fingerprints and facial images. It will also hold the national identity registration number, which will be unique to the record of the individual. It will also record changes made and when a check is made against a record to verify identity. It will not hold information about a person’s medical, tax, pension or benefits records, any criminal history, occupation or any information about ethnicity or religious beliefs. I hope that that is reassuring. The vignette will have similar information.
Both noble Baronesses asked why we have included domestic workers. The truth is that we have done so because we recognise that this group is particularly vulnerable to abuse. I am rather surprised that the Benches opposite would draw the conclusion that this would not be helpful. In the regulations and in normal life, we have regard to the fact that this is a particularly vulnerable group of people. We consider that enrolling their biometric features and fixing their identity is an additional measure to protect them from exploitation and trafficking. If abuse is taking place or passports or identity documents are being withheld and that comes to the attention of the authorities, it would be pursued.
If someone is required to apply for an ID card and does not, would there be a sanction? The civil penalty would be in line with the code of practice that seeks to ensure that particular circumstances are taken account of. The civil penalty is up to £1,000, but circumstances would be taken into account.
I am not sure that I have covered all the points made by the noble Baronesses. The final point was about the cost-benefit of this against the total cost of the operation. I do not think that that can be seen against just this part of the operation. We are talking about bringing this in over a period of years. It is a fully costed operation and we can make a judgment on it only when it is complete.
The noble Baroness raised another point, which I am desperately trying to remember. I shall have to write to her on it. If she could remind me of the question that I have not answered, I could probably respond to it.
My Lords, forgive me for my momentary lapse of memory. The noble Baroness made the point that there were only three. That is not the whole point. First, there were three successful prosecutions. Also, I stated that others are in the pipeline which we expect to go down the same route. The other important thing is the number of people refused on the basis that they failed when coming to seek the documentation. Therefore, this has had rather more impact than the noble Baroness suggested by saying that only three people had been apprehended. That is in the first few months, so one would expect, as it rolls out to greater numbers and there are people seeking entry by subterfuge, there to be more prosecutions and more successful detentions and successful refusals.
I hope that that takes all the points made into account. This has been a thoughtful debate and I appreciate the points made. We believe that the introduction of ID cards is supporting our efforts to secure our border and reduce abuses of our Immigration Rules and laws. It is also part of our wider national identity scheme. We focused initially on issuing cards to foreign nationals to make it easy for employers, education providers and public services to check whether a person is entitled to work, study or access benefits in this country. That is where we believe that employers would gain some benefit from individuals having those documents. In support of that, we have engaged widely with stakeholders from various organisations, from representatives of employers of foreign nationals to student bodies and government departments. That fits in with our efforts to challenge illegal working and other abuses of our Immigration Rules and laws.
Having recovered from my pain at being accused of choosing only soft targets, I will add that selective rollout will enable us to increase this gradually and, at the same time, increase the availability of places where applicants may enrol their biometric features, expanding the system across the country. We will again return to Parliament to seek further approval when we decide to roll this out to other categories of foreign nationals required to apply for identity cards. We are determined that only those foreign nationals here legally will benefit from the privilege of working and living in Britain. As such, I commend the regulations to the House.
My Lords, I thank the noble Lady for reminding me of my inability to answer that question. Off the top of my head, the answer is that I believe that there are no plans so to do. I will look for any confirmation or otherwise, but, if this becomes an annual event, as has been suggested, there will be opportunities for that to be engaged in exploration and debate the next time the issue is being discussed. We are committed to bringing it back if we determine to add other categories, but I know of no determination to add information that is not already being collected.
Immigration and Nationality (Fees) Regulations 2009
Motion to Approve
My Lords, the Government are delivering the biggest shake-up of the immigration system in 45 years. The improvements and the new services do not come for free and our policy is that the burden for paying for them should not fall entirely on the UK taxpayer. For 2009-10, we will spend about £2.2 billion on securing our borders and managing the immigration system. There is widespread agreement with the Government’s policy that those who benefit from the services should contribute towards the cost of the system. In total, about 30 per cent of the costs of securing our borders and managing the system are recovered through charging for applications and services. The remaining costs are met by the UK taxpayer.
These regulations are made under Section 51 of the Immigration, Asylum and Nationality Act 2006 and in accordance with the powers granted in Section 42 of the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004, as amended by Section 20 of the UK Borders Act 2007. Under Section 42, the Secretary of State can set a fee for an application at a level that exceeds the administrative cost of determining the application. We set these fees above cost to subsidise some of the lower fees and to contribute an extra £100 million for enforcement. We also specify fees in separate regulations under the powers in Section 51 of the Immigration, Asylum and Nationality Act 2006. These regulations set the fees for applications, processes and services that are provided at or below the administrative cost of determining the application.
We take into account a broad range of factors to set fee levels. We welcome the contribution that legal migrants make to the economy and cultural life in the UK and we have ensured that the proposed fees will maintain the UK’s position as an attractive destination for work, study, visiting and cultural exchanges. We have considered the fees in other countries and have set our fees at levels that will not damage the UK’s international competitiveness. We have also ensured that the charging system is fair to those using the system in terms of the price paid for consideration of their application. We think that it is right that those who benefit most from the immigration system should pay proportionately more towards its costs.
For each fee, we have analysed the estimated impact of price increases on demand and have built the revised volume demands into our fees modelling. We maintain a balance between our need to recover costs and keeping our fees at fair and sustainable levels. Our fees are set within strict financial limits agreed with the Treasury. The fees also balance wider policy aims set by the Government. For example, we set student visa fees below cost in accordance with the Prime Minister’s initiative to increase student migrants coming to the UK and in response to stakeholder consultation and feedback. We have also held sponsorship fees paid by business and maintained the lower fees for small businesses and charities in recognition of the difficulties facing UK businesses at this time. Given the economic circumstances and the action that we are taking to be more selective, we expect the number of migrants coming to the UK from outside the EEA to fall during the next financial year. This year’s fees take account of that, to ensure that UKBA can continue to offer a world-class level of service.
Finally, in accordance with the Government’s declared policy to create a fund to help local service providers to deal with transitional pressures of migration, we have agreed with the Treasury to recover the money for this fund through these fees. Our overall aim is to ensure that income from these fees makes an appropriate contribution to the end-to-end costs of the immigration system, thereby reducing the burden on the UK taxpayer. Our method of fee setting balances a number of complex factors. It will continue to help to protect some routes from significant increases and will contribute to the additional revenue needed to fund enforcement and other necessary improvements to the immigration system. I commend this instrument to the House.
My Lords, I thank the Minister for introducing these regulations, which have already been considered by a committee in the other place. The basis on which fees are set has been very honestly described as one where one applicant is overcharged in one category to subsidise someone in another category—a sort of Robin Hood system. The fees now being charged are relatively substantial, even though I note what the Minister said about taking account of the current situation. I am perfectly willing to accept the argument that to be in this country, at whatever cost, is good value for money. However, the desirability of that may be tested to destruction if the current economic disasters continue and this country becomes less of a magnet for the type of applicants for entry that we are considering today.
It would be useful to know which of these fees are inflated to provide the subsidy and which ones are the recipients of the largesse. The Minister suggested that the student fees, even after above-average increases, which I believe has happened this year, are among those that are set below cost. Is that a correct interpretation of the situation? The Minister in the other place suggested that there was an additional element to all the fees to contribute towards the cost of administration. Presumably that is the cost to the UK Border Agency, but the £100 million that the Minister said was for enforcement—perhaps he can say whether that includes administration—seems a sizeable additional pot to raise. Is this based on a business case of a specific number of applicants? Is the total amount subsumed annually by the UK Border Agency on this aspect alone or, if it is in profit from this, can it vire to other cost bases?
As the Minister knows, there has been considerable concern about the size of the increased fees for students coming to the UK to study. What consultation was carried out with Universities UK and the representative bodies regarding the impact that the increases might have on numbers applying to come? What response was made to that consultation and was the consultation formal or informal? I appreciate that the university fees for overseas students are considerable in themselves and the Minister may well say that the visa charge is only a small additional sum, but somewhere the camel’s back will be broken if both fees and visa charges continue to rise above expectations.
What is the situation regarding the licensing of colleges and universities for sponsorship? Have they all now been included so that there is no difficulty for students who wish to apply for courses? What is the situation regarding sponsors for migrants in other categories? Have any concerns been raised that migrants who wish to come to this country to work are finding it difficult to find a licensed sponsor? How much is the fee for a “small sponsor”—presumably a small business? Regulations 23 and 24 refer to either £1,000 or £600 per sponsor, depending on the size or category, but they give no indication of how much the fees are for a small sponsor.
In addition to the administration and other costs for the UK Border Agency, as the Minister has said, a contribution from the fees is made to the Migration Impacts Fund. How much is currently in that fund and who is it paid to? Presumably, some local authorities will benefit if they have costs over and above their local communities. Apart from them, what other bodies or persons are the beneficiaries?
As with the biometric cards, these fee increases are obviously going to become an annual event, so this will not be the last time that this House is able to discuss them. However, I hope that, with the answers to some of my questions, we may be a little better advised.
My Lords, we have heard several times about the benefits migration can bring to the UK economy. I do not think that the Government would dispute that. There is a principle here that we are now charging much higher fees to those who enter legally. They are increasingly helping to pay for the cost of securing our borders, but they are securing them against those who would be entering illegally, possibly with malign purposes. So those entering legally are paying an increased price for our wish to secure our borders and they have to pay up front in one go rather than the cost being spread and paid for by the general tax base. If these fees are going to increase year on year to pay for border security, this will begin to pose quite a problem.
The issue of student fees has been quite widely explored. The universities were nervous about falling behind in terms of competitiveness. The Minister is likely to say a little more about that. The best value bit of the entire proposition seemed to be the long-term visit visas for people wishing to visit a multiple number of times, which seems a fairer move in terms of fee basis.
I was surprised by the checklist for all the specific impact tests in the Explanatory Memorandum. Somebody obviously must have done all the tests, and the answer was no in every case, all the way down the list, in both “Results in Evidence Base?” and “Results annexed?”. If that is the impact on the cost-benefit analysis—apparently there is no impact on anything at all, including rural-proofing, which is interesting; I cannot imagine that there was real rural-proofing—was the checklist filled in in a fairly casual way down the back of the Explanatory Memorandum? The impact tests are supposed to be the first place you check what you need to look at in more depth, so they are quite serious.
My Lords, I thank the noble Baronesses for the points that they made. I might help to answer some for both of them, but certainly for the noble Baroness, Lady Hanham. I shall sketch out some of the total sums involved. If I do not do justice to the subject, I am more than happy to expand it in writing.
The question of administrative costs was raised. The administrative cost base for 2009-10 will be £566 million, which in itself is a £2 million reduction on this year. The agreement with the Treasury is to raise £100 million above the cost base to contribute to the full end-to-end cost of the immigration system. I do not apologise for the fact that people coming here are asked to pay a little more because the benefits of citizenship—of being here, of education here—are things that they value, or they would not be here. I take seriously the point at which you test to destruction, but I hope to demonstrate that we are not doing that.
In addition to the £100 million that we seek to raise to the cost base, we also have an agreement to raise £35 million through fees to deliver the fund to manage the transitional impact. I will come back to who the beneficiary of that will be in a while. In 2009-10, the estimate is to raise some £700 million through the fees for applications and services, which will of course be a 30 per cent contribution to the total cost, so the bulk of the cost is still borne by the UK taxpayer. Clearly, as has been said, some are beneficiaries of underpricing the real price, and some are paying the contribution beyond the real price. Let us look at student fees and tier 4, for example. The increase in student fees is from £99 to £145. The fee for the tier 4 visa remains significantly below the cost of processing the application, which is over £250. That is how we will continue to attract foreign students. Yes, the total costs of a foreign student coming to the UK, including their fees and upkeep, will be considerable, but the increase from £99 to £145—little over half the actual cost of producing the visa—will not be a great disincentive.
As has been noticed, we are extending the period of leave that can be granted, so that it is up to the end of the course. The one fee of £145 will cover the whole of the student’s period in the UK, even when the degree course goes longer than the period. In addition, we offer students who wish to undertake short-term courses of not more than six months an ability to enter the UK as student visitors. The fee for that, £65, will go up to £67, which effectively takes into account the increases of last year. The figures for April to December were issued today and the total number of students who benefited last year from lower application fees was 43,038. I hope that that gives a flavour.
The fee is a small part of the costs incurred by students. We have looked at the price of a tier 4 visa, which represents, we believe, about only 1 per cent of the total cost of coming to the UK. The costs of student visas compare favourably with our key competitor countries. In Australia, the student fee is £219 and, in the United States, it is £300. Price demand research suggests that £200 is the point at which the tier 4 visa might influence a decision on whether to come to the United Kingdom. Interestingly, the Home Office and independent analysis on the impact of historic visa fees increases has failed to find any direct link between visa pricing changes and migration behaviour.
In answer to the question about licences and colleges, most colleges have already registered. The fee for small sponsors is £300 for a four-year licence. Long-term visas provide benefit because the cost of a long-term visit visa—five to 10 years, which is a unique product in the global market—still offers very good value for money. The five-year visa at £400 is less than the cost of six separate short-term visit visas. A 10-year visit visa at £500 is less than the cost of eight short-term visit visas. These products offer a substantial additional benefit, and people do not have to resubmit applications and biometric data.
Sceptical is possibly too strong a word, but the noble Baroness, Lady Miller, was not entirely convinced about the impact assessment, which relates to the costs of business. The fees here are paid by migrants and not by businesses. In that sense, we do not believe that there is anything in the impact assessment that is not considered to be robust. I do not feel that I have done justice to all the questions, but I undertake to read Hansard and to write to the noble Baronesses on any points that I have not covered.
In terms of some of the detailed information, I could perhaps set it out in a more comprehensive form than perhaps even the questions asked. Pulling it together in data form can be reassuring to those who are concerned about these increases having an adverse impact on our migrant student population on entry or on those who come here to work.
I thank noble Lords for the debate. I believe that the proposals in these regulations are in line with our objective to recover the costs of the Immigration Service from users of the system, rather than rely wholly on the UK taxpayer. As such, that policy is widely supported in the community. I commend this instrument to the House.
My Lords, certainly, it includes local authorities which can make the case, the police and other bodies which have increased costs and primary healthcare trusts. All those organisations are eligible for benefits under the fund. We do not want to overlay prescription in terms of what the fund might be used for. It is essential that local services have the opportunity to shape the use of the fund in their local area. However, police services and hospitals could use the fund to reduce the cost burden of interpreting, the recovery of police community support officers from migrant communities or providing a pool of interpreters across services. The fund could be used to provide extra support for teachers and children’s services in areas where migration has led to a high turnover of pupils in schools.
In addition, the fund could help with projects to improve community safety, ensuring, for example, that migrants are aware of the rules. Without being comprehensive, there are several areas and eligible bodies that will find themselves under strain as a result of migration flows. They can make very good use of what is a modest amount of money. It is a sensible policy to price into migration some of the social costs that are borne by communities. Many of these issues have been raised by Members in the other place, on behalf of local authorities and other constituency bodies. I hope that is a more comprehensive answer.
House adjourned at 5 pm.