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Defence: Budget

Volume 762: debated on Wednesday 17 June 2015

Question for Short Debate

Asked by

To ask Her Majesty’s Government whether they consider that the current defence budget is sufficient to enable the Armed Forces to meet the needs of the United Kingdom’s long-term foreign policy.

My Lords, may I say first how much I appreciated the help and advice of the noble Lord, Lord Astor, as Defence Minister in the last Parliament? I am delighted that my noble friend Lord Howe, our new Defence Minister, is going to continue the special briefings at the Ministry of Defence that many of us have found hugely useful over the years.

I am particularly grateful to have been given this opportunity to have an early debate on defence in advance of the Chancellor’s Budget on 8 July. I take it as rather a compliment that senior Members of the other place involved in defence have come here today because they are interested in this debate.

I understand that the new strategic defence and security review will be most thorough. I was very involved in the last review in 2010, which frankly turned out to be purely a cost-cutting exercise. The press has indicated that there will be a further cut this year of some £500 million, but I have no doubt that, in aggregate, this figure will turn out to be considerably higher. I fully understand the short-term expediency; nevertheless, I hope that this is not a strong indication of the Government’s approach to the long-term strategic requirements of the Ministry of Defence.

Many in this House and in the other place have been concerned for several years that the budget for the defence of the realm is inadequate to meet the needs of this country’s declared foreign policy, which was reiterated in the gracious Speech. Of late, this concern has undoubtedly accelerated and those in government must accept that the strength of feeling emanates from those who have considerable experience and knowledge of the subject and should not be taken as superficial observations.

A debate on defence and security cannot be held in the abstract. We have to consider the context—the full circumstances in which we find ourselves; the risks, the opportunities and all the Government’s wider ambitions and objectives, particularly in relation to foreign policy.

There are four crucial elements to that context now. The first is the Government’s commitment to a renegotiation of this country’s relationship with Europe. That is an election pledge and success depends on finding a truly new point of mutual advantage between ourselves and our European partners.

Secondly, there are unresolved conflicts around the world in many of which we have an interest, individually and as part of wider groupings, particularly NATO. As the Conservative manifesto said, the first duty of government is to keep us safe—and there is certainly no shortage of threats to that safety. In the Middle East there are unresolved conflicts—Iran, Iraq, Syria, Yemen—and also in north and west Africa, where we have a great commercial interest as well as a partnership with other EU member states. Then there is the development of international terrorism, which has roots in the Middle East but which has an impact that goes much wider and can hit us here at home. There is also, of course, the renewed hostility between Russia and the West, exemplified by what has happened in Ukraine. Afghanistan and Pakistan are still viewed with great concern, and China’s ambitions in the China Sea in relation to her neighbours are more than worrying.

The third element of the context is the surge in the humanitarian challenge caused by risks such as disease and forced migration. We cannot isolate, or wish to isolate, ourselves from these risks and our Armed Forces play a key role in these situations—hard power exercising soft power.

The fourth factor is the crucial need for financial strength, which is fundamental in order to achieve the first three. Reduction of the deficit and the full and sustainable re-establishment of a secure macroeconomic framework will give us that long-term strength. No one supports this view more than I do. Unfortunately, ring-fencing of government departments creates major distortions in the budget of those not ring-fenced and has the effect of losing the flexibility that one in management in organisations outside of government would always wish to retain. Indeed, the worst example is enshrining the DfID budget in law. There are areas where I certainly believe the utilisation of soft power is both worthwhile and morally correct and right, but there is much that I would heavily question.

Given all these factors, a clear, constructive, long-term defence policy, backed by an assured commitment of resources to the Armed Forces and underpinned by a modernised, long-term relationship with our defence sector is of key importance. In Europe, powerful, practical assistance on defence and security is the thing we can offer as we negotiate a new relationship. History has made some countries in Europe wary of all military activity. That is totally understandable. Others lack the necessary experience and capability. But Europe needs to be defended. It needs to be secure, internally and externally, and we are in a unique position to help. We are not in the euro but, through defence co-operation, we can make a contribution to Europe which few, if any, others can match. Our history is such that we can build on our unique historic relationships with the Commonwealth, the United States of America and Asia, but we must have the long-term resources to do the job.

That does not mean intervening everywhere. It means retaining and using the ability to help others to help themselves. It means that first-class hard power has the effect to deter potentially hostile action by others and to provide help and assistance when it is needed. The quality of our hard power is of crucial importance to having the flexibility to deal with the unexpected. Without doubt, history teaches us that.

Although the Chancellor has stated publicly that the Royal Navy will be the,

“most modern navy in the world”,

that still begs the question: what size should the Royal Navy be—or indeed the Army and the Royal Air Force—in order to meet the expectations of our foreign policy? Well-targeted defence spending can help sustain the very welcome recovery in the economy right across the country. The Chancellor has spoken eloquently about the northern powerhouse. I agree with him about the need to spread prosperity beyond the Home Counties. Nothing does that more effectively than the defence sector, which is the source of tens of thousands of highly skilled jobs in places such as Barrow, Derby and Warton.

May I reiterate what I said recently? The report commissioned by Professor Nick Butler and myself and produced by the Policy Institute at King’s College London a few weeks ago clearly shows that defence spending in this country has a strong multiplier effect. The best available evidence suggests that for every £100 spent, £230 of value is generated. As the King’s report says, defence spending is an undoubted benefit, not a burden.

Investment in defence gives us the ability to develop and produce leading-edge technology in a whole range of fields, from unmanned aircraft and command and control systems to cryptography, thanks to great collaborative work between people working in companies, the armed services and universities. That technology enables us to defend ourselves without being dependent on imported technology over which we might not have ultimate control. It also enables us to develop and sell products, earning export revenue, and again sustaining highly skilled jobs.

Ultimately, this is all about people. We are most fortunate to have the finest of our young people being prepared to serve our country, and indeed if necessary to pay the ultimate price. Through Motability I often see the sadness of those whose lives and whose families’ lives have been changed for all time. Morale—a word that most of us have always been involved with—is based, as we all know, on much more than money. It is being assured that those in power—the Prime Minister, the Chancellor and other senior Ministers—care about and are passionately supportive of long-term endeavours on our behalf, because it is the long term that is key.

Finally, in a way I consider this to be an emergency debate because I believe that we are at a crossroads. The Government have the clear opportunity to strongly regain our standing and influence in the world, but if we do not seize the moment, history will undoubtedly record that this was the time when we finally endorsed the decline of this great island nation. The choice is ours.

My Lords, I remind noble Lords that this is a time-limited debate. The remaining noble Lords except for my noble friend the Minister have a time limit of three minutes, so when the Clock shows three minutes, their speaking time is up.

My Lords, the first thing to say is that our nation is still a world power. This is not popular with many parts of the media and the chattering classes, but it is a statement of fact. It is important for our people’s well-being that our nation should continue to play a leading role in world affairs, and a surprisingly large number of nations in the world want us to remain fully engaged. We cannot be sure how much longer the US will be willing or able to bear the burdens of being the protector of last resort for the “free world”, and we know that as a result of our defence cuts, the US doubts our ability to be a true and worthwhile global ally as the world becomes more dangerous. To put it simply, in this unpredictable and potentially extremely chaotic and dangerous world, we must keep our armour bright and not elect to forgo our independent nuclear deterrent or cut the defence forces any further.

However, what has happened over the last five years? Far from keeping our armour bright, we have cut defence spending by 9.5% and reduced our military capability by 30%. There is insufficient funding to meet the requirements for Force 2020, which was the stated vision of SDSR 2010. Would the Minister tell us what happened to the Prime Minister’s 1% increase in the defence budget that, in 2010, he promised the chiefs would happen by 2015 when the economy improved? This is not the 1% purely to the equipment programme. We seem to be witnessing an unedifying scramble by the Secretary of State for Defence to find expenditure that can be slid into calculations of defence spending so that he can make the NATO target of 2% of GDP being spent on defence. We told other European nations to meet that target but seem unwilling to commit to it ourselves. On that point can I ask for assurance from the Minister that war pensions will not be included in our defence spending submissions to NATO for 2015-16 or that DfID or the intelligence vote expenditure will not be taken into account?

The reality is that we should spend more than 2%. Britain’s GDP is 46% higher today than it was in 1990, when we had three aircraft carriers, 50 escorts and 33 submarines. Today we have 19 escorts and 12 submarines. Decline is a choice. Why have this Government made that choice? The world is less safe as a result and it is not a choice we should make. If Ministers get defence wrong, the nation will never forgive them and the costs in blood and treasure are enormous. Our leaders seem to have lost their backbone. The world is a safer and better place when the UK is involved. The impressive array of soft power tools possessed by the UK needs to be complemented by a comprehensive hard power capability. Sadly, the current spending on defence does not allow for this and is insufficient to allow the Armed Forces to meet the needs of the United Kingdom’s long-term foreign policy. To put it simply, defence is in a crisis and needs an increase in funding.

My Lords, I very much welcome this debate, initiated by the noble Lord, Lord Sterling. I also welcome the fact that the Government have decided to look at an SDSR at the same time as a comprehensive spending review. Looking at the two things together seems to make sense, on the face of it. I am also very grateful that, in the gracious Speech, the Government reiterated the importance of giving defence whatever it needs. Yet the Government have, so far, failed to commit to the NATO 2% figure, although we are currently spending 2%. This is at a time when threats to the United Kingdom and its EU and NATO allies are growing. The context of 2015 is quite different from that of 2010. As the noble Lord, Lord Sterling, has already pointed out, we have the situation of Putin’s Russia and its incursions into Ukraine and its near abroad, which also happens to be our neighbourhood. We have the rise of Daesh and the prospect of returning jihadis, not to mention issues of cybersecurity, plus a whole raft of other security questions going on to the agenda. All of these have financial implications. They join a whole set of long-standing questions which came up in the previous Parliament but which I would like the Minister to consider.

Do the Government believe we are getting value for money in our existing defence procurement? Is the revolving door between the MoD, the services and business not a problem? Is our policy on reserves versus regulars fit for purpose? In the last Parliament, cuts were made in the Regular Forces that were to be filled with reserves, but it is clear that we have not yet filled the gap. We are still 11,000 down and it is not clear when those reserves are going to be recruited. Financially, the decisions of the last Parliament might have made sense to the accountants and for cutting the deficit, but we are left with a situation where the cuts have had an impact and we now need a fundamental reassessment of the threats to this country. If the successor is going to be voted on next year, the implications of that for the defence budget—which is not ring-fenced at a time when the Chancellor is still trying to make further cuts—create problems.

Will the Minister reassure the House that the Government will deliver on their commitments to UK security, despite the unwillingness, so far, to make good the 2% defence commitment? As the noble Lord, Lord West, pointed out, the Prime Minister was keen to press that on other Governments at the NATO summit in Wales last year. It is vital for this country that we deliver on these commitments.

My Lords, while congratulating the Conservative Party on winning a clear majority at the recent general election, but noting that senior members of that party were quoted in the election campaign as saying that there were “no votes in defence”, and noting furthermore that, unlike the position in some other political parties, there was, and still is, a steadfast resistance to committing to 2% of GDP being spent on defence other than in 2015-16, I do not think I am alone in being genuinely concerned that our new Government are not showing sufficient commitment to the security of our country or their citizens at home and abroad.

I know that the noble Earl—who we very much welcome to his position—will echo his right honourable friend the Secretary of State for Defence in saying that all these issues are being addressed in the forthcoming strategic defence and security review, but I do not think that that is good enough. Will President Putin wait until our SDSR is completed before he decides his next move in eastern Ukraine or the Baltic? Are the leaders of the so-called Islamic State going to wait similarly before they decide their next moves? Of course not, but the danger of another six months of prevarication is that the UK’s position in the world will continue to look weak. The US will remain anxious that a once-reliable partner is now enfeebled, and other European states which look to the UK for a lead on defence matters will follow our limp lead and kick the issue of defence funding into the long grass.

The former Foreign Secretary, William Hague, said before the 2010 general election that he sensed no national appetite for strategic shrinkage. Appetite or not, the reality is that we have shrunk in terms of defence and security, while the world has become a less stable and more dangerous place. What I find so depressing about all this is that, if the Government were to show some determination and leadership in these matters and make the commitment to spending 2% of GDP on defence, we are talking about only a billion pounds here or there. That is the delta in all this. That is a comparatively small price to pay to secure our place in the eyes of our allies and be of note to our enemies. More worryingly, I have heard it quoted from a Minister in the other place that, even if we did commit to 2%, we would not know what to spend it on. That remark, if true, is as naive as it is dangerous.

Many noble and gallant Members of this House who have had senior responsibility for defence programming matters know that there is always a list of compelling new equipments and capabilities competing for funding in the defence programme. I name but one—the Army’s medium-weight vehicle replacement programme. Articulated in 2002 and effectively cancelled in 2007 with the exception of the Scout vehicle, our land forces, if committed today, would be woefully at risk in another conventional combat operation of any size. If we have learned anything from Iraq and Afghanistan, it is that we must send our young men and women into battle, on behalf of our nation, with the right equipment, right from the start.

My Lords, I too welcome this debate and thank the noble Lord, Lord Sterling, for securing it. With the strategic defence and security review we have an opportunity for a wider debate on the politics of defence that might help to reshape our understanding of the purpose and task of our Armed Forces. The fundamentals that have underpinned UK foreign policy and defence spending in the past will need to be adapted to the changed circumstances we face, especially in the Middle East and our European neighbourhood.

Responding to this agenda will need a greater commitment to resource and to UN peacekeeping missions. That means looking again at the skills and equipment that are needed to help create the space for conflict resolution and post-conflict stabilisation. In this, we must invest as much in our ability to understand the religious dimensions to the conflicts we face as in providing our troops with the necessary means to mediate between the warring sides. The work of the UN with local partners in this area is vital but could be much improved.

Syria is a case in point. Is there a sense of how we enable Syrian opposition groups to build a coherent political process that will ensure future stability and avoid any further descent into extremism? Will Her Majesty’s Government be willing to contribute to any peacekeeping mission to uphold any future settlement and seek to be an active player in post-conflict stabilisation and reconciliation? I most sincerely hope that strategic thought is being given to supporting fragile and vulnerable minority communities, should there be further destabilisation in Syria, and that lessons have been learnt from the lamentable outcomes in Iraq, for which we bear proportionate responsibility. The vulnerability of the people of Syria is well known, and the same is true of Libya. It is but one reason why people are risking their lives in the waters of the Mediterranean.

The commitment to stabilising local powers throughout the Middle East and recognition of the long-term nature of that work must continue to form an essential part of our overarching foreign policy objectives. Our excellent and gallant Armed Forces, which we look to in this important and dangerous work, deserve our support in ensuring that they are properly resourced and equipped to meet these ever-evolving challenges.

My Lords, I have two points to make. First, your Lordships have rightly come to recognise that in the modern age it is the powers of persuasion and influence—so-called soft power—that can play a major or even decisive part in projecting our influence, safeguarding our interests and ensuring our national security and safety. It is also being recognised by noble Lords that the UK has enormous soft power assets although, frankly, we are not using them nearly as well as we might be.

We are today a staggeringly successful world influence in many areas, and we remain more determined than ever to play our part internationally. Moaning American generals are quite wrong when they say that Britain is in retreat. That is nonsense: we are not. Frankly, though, it is extremely damaging nonsense and the mythos is catching hold. Where the generals have a point, and what our recent soft power report made crystal clear, is that without the back-up of efficient hard military power our soft power is useless. The two work together. We call it “smart power”. Weak military power, or hard power with holes in it, simply undermines our authority and appeal, however persuasively we try to make our case.

My second point is that I am afraid I not at all fond of targets. This may be spitting in the wind when NATO is so keen on the 2% figure, but spending targets always distort. It is outcomes on which we should focus. Some of us opposed the 0.7% of GNI to be spent on aid; we argued that this might lead to millions being rushed into poorly planned international programmes just to meet the targets, and so exactly it is proving. As the official aid watchdog confirms, spending targets distort results—a point ignored by zealots who do not apparently care or understand how modern development works. Similarly, the much-vaunted 2% defence spending target may or may not produce solid national defence. A figure of 2% of GNP could well conceal huge procurement inefficiencies and has certainly done so in the past, while less than 2%, if well-designed and spent, may deliver a superior capability all round.

It is the results in terms of our efficient armed might that matter. What we just cannot afford, and what weakens us all across the board, are the kinds of gaps and hollowing out in our hard-power defence shield described so well and eloquently by my noble friend Lord Sterling.

My Lords, the defence budget is not sufficient, not least because we have no settled foreign or defence policy. We spiral down on defence before we have decided what we want to do.

At a time when the United States increasingly expects Europe to play a greater part in its own defence, we are failing America and Europe over the NATO 2% at the very time, as has been said, when it is most needed. The United States will do much less if it has to do so much alone. Moreover, it will do more of what it wants and less of what we might want.

I shall give two foreign policy examples where defence capability is highly relevant. The first example is Russia and Ukraine—and here I commend the excellent report of our European Affairs Committee of 2014-15. It should be painfully obvious that Russia will be alienated by perceived threats to its territory and historic areas of influence. Anyone who remembers the reaction to western deployment of intermediate-range nuclear and cruise missiles in the 1980s, with the almost paranoid cries of “encirclement”, readily appreciates this. Add to that the personal side—particularly important to a Russian—of the treatment of President Putin in the western media. Add to this his virtual isolation at the Australian G20 summit last year, and even the refusal of the Canadian Prime Minister to shake his hand, with the result that Putin left early. We still have the valiant efforts of Chancellor Merkel, but she does not have a helpful basis for a settlement of the problem of east Ukraine.

My second example is Iran, a country with which I have been long associated. From 1983 onwards, after the consolidation of the revolution, Iran, however difficult, was there to be talked to. A little later, under President Khatami, dialogue was positively encouraged. The main response came not from the Americans but from the British Foreign Office under Jack Straw, who made worthy efforts with European allies. But again, without the Americans this could get only so far. To deal with the hatreds and rivalries of the Middle East we must all, including Israel, think long term. Iran is a major regional power, but we have ignored her, thus strengthening her extremes. We then invade Iraq, destabilise the whole area and let the Iranians into Iraq in the Shia interest. All we do is weakly try to help unseat Assad without paying sufficient attention to the rise of ISIS, our main enemy. We again come up against Russia and Iran. Ironically, they are as concerned about ISIS as we are.

This is but some of it. Without a long-term foreign and defence policy involving Europe and the United States on more equal terms we will not succeed. This means a unified approach and increases in European defence expenditure as a whole.

My Lords, we know that the Government have a long-term economic plan; is there a long-term foreign policy plan? I suspect that the Minister’s brief will advise, “Wait for the SDSR”.

Let us surmise what cannot be in future policy requiring action by the forces. We claim to punch above our weight, but that is reality only if we have the strength to ride out the opponent’s counterpunch and still fight on to win. Thirty-three years ago we punched hard against the Argentinians. In less than a month we lost to their counterpunch six fighting ships, with others badly damaged, more than a third of deployed fighter aircraft and numerous helicopters. But we had the strength to ride out these setbacks—strength that had been procured many years previously and was operationally capable—and we beat the counterpunch. Now we lack strength in numbers to fight back so successfully.

We fielded a divisional force with air power in the first Gulf War. More than 50,000 UK personnel were deployed. The Iraqi counterpunch failed to materialise, but we still lost six Tornados and other aircraft. Then, those losses could be quickly replaced; today, even though we could field only a fifth of the 1991 level, nothing is left in reserve to beat off a counterpunch. In Afghanistan there was no Taliban air power to face. More airframes were lost to a freak hailstorm in 2013 than to enemy action.

In the past three decades surface ship numbers have gone down from nearly 60 to just 19 and the RAF is down from three dozen combat squadrons to a mere half-dozen. Platform for platform, fighting capability improves, but there is no scope for sustained fighting against any counterpunch—even hailstones. We need hard power to underwrite the credibility of the nuclear deterrent. By no measure of past experience are today’s Armed Forces large or resilient enough to do that, let alone to defeat a conventional counterpunch. This must be corrected. Does the Minister agree?

My Lords, when I arrived in your Lordships’ House in the early 1990s, there were many in both Houses who had fought in the Second World War—to name a few, Lord Whitelaw, Lord Callaghan, the noble Lord, Lord Healey, Lord Jellicoe, Lord Jenkin, Lord Mowbray, Lord Mackie of Benshie, the noble Lord, Lord Carrington, and of course, Lord Runcie. There were also some in your Lordships’ House who served in the First World War, and I will never forget Lord Houghton of Sowerby banging on about dangerous dogs with such skill and perseverance.

The problem today is that, so far as I know, none of our political leaders has ever been hungry or tasted defeat. Indeed, very few, if any, at the very top have any sort of military experience. Having been a special adviser is seen as being much more important. Opinion polls and focus groups tell us that the people are more interested in health, education and welfare than defence. However, I will wager anything you like that our people in 1940 bitterly regretted not having spent enough on defence, especially on the Army, when the Nazi regime was doing almost exactly what President Putin is doing now. The world paid dearly and the parallels with the present are uncanny.

The Minister will tell us that we have one of the largest defence budgets in the world. However, that includes the cost of the nuclear deterrent that we certainly need but will never use, provided we have enough conventional forces. We also have a relatively high cost of labour in the defence industry. If we maintain our current trajectory, I have no doubt that we will get our posterior kicked hard, and we will deserve it. Even if we do not have either to acquiesce to something unpalatable or to suffer a military disaster, so far as the Americans are concerned we will become militarily irrelevant.

My Lords, I welcome the debate. We never have a defence debate without reference being made to the importance of our personnel, whom I wish to concentrate on this evening. They are facing a strategic defence and security review but, before that is completed, we will have the 8 July Budget and the spending review. Indeed, one of the first actions of the Chancellor of the Exchequer after the election was to take half a billion pounds out of the MoD budget. That is all very concerning, particularly given the letter in the Telegraph last week, which was signed by a number of former defence chiefs. This is all extremely concerning for those of us who believe that we need to spend more on defence—and we do need Trident as well.

Our Armed Forces personnel are the only members of our workforce who, when they sign up to join the forces, also sign up to being prepared to pay the ultimate price. That puts a huge burden on us as a nation. I will refer later to the Armed Forces covenant. We have the Armed Forces Pay Review Body because members of the Armed Forces are not allowed to join a trade union. I was proud to chair that review body some years ago. The report issued by that body in March stated that people felt demoralised because of “continuing change and uncertainty”, and that many felt demoralised and “undervalued”. It stated that “personnel felt worn down”. I do not think that surprises any of us who have followed defence debates.

It is absolutely essential that this time the strategic defence and security review puts personnel right at the forefront of our considerations when our future policy is decided. I doubt very much that that was the situation last time. When the 2010 review was conducted, we did not have the problems of Syria, Libya, Ukraine and a whole host of other challenges. I make a plea to the Minister please to give a commitment that when we talk about personnel we do not talk just about their equipment and resources but also about their overall well-being and that of their families.

It is no good saying that we have the covenant. This year’s review from the Armed Forces’ Pay Review Body said that half the families had absolutely no idea that there was such a thing as a covenant. That is quite a challenge to the Ministry when it does the review this time.

My Lords, I declare my interests as in the register. SDSR 2010 was not sound. It failed lamentably in predicting the crises that have cropped up in the last five years and, for example, removed our carrier capability just as it could have been used to great effect off Libya. In all, it left our forces fundamentally weakened. This was acknowledged by the Prime Minister in 2010 when he said:

“My own strong view is that this structure will require year-on-year real-terms growth in the defence budget in the years beyond 2015.”

Notwithstanding that, and given the short time given to compile it, this SDSR looks like being a thinly disguised cuts exercise that will emerge with no properly thought-through strategic vision or recognition of threats such as those posed by Russia. Force 2020 is a distant pipe dream. It seems to be on track to reinforce the perception around the world that we are a “has-been” and no longer a serious player—especially on the part of the United States. We should be particularly alarmed by the latter; a huge, unquantifiable amount comes our way in defence terms, underpinned by the United States’ confidence in our capability. We are seriously imperilling this.

Much has been said this evening about the totemic 2%, and I use the word “totemic” advisedly. This is about more than just money; it is about leadership. It is no use Ministers saying that we are better on defence spending that other European NATO partners. Surely the United Kingdom should be above chasing the lowest common denominator. The Prime Minister set the 2% challenge at the NATO Summit in Wales—he needs to follow his own lead. We have, by the way, already sunk below 2% if you really look at the figures, even allowing for the creative accounting by the last Government in sweeping into the 2% items previously excluded, such as the costs of contingency operations. I have no doubt that further fudging is on its way.

If the Government are prepared to ring-fence aid to foreign countries, it seems bizarre that we are not prepared to do at least the same for the defence of our own country. It is interesting to note that some difficulty is being experienced in spending the aid budget at the rate it needs to be of £30 million a day. I am not surprised—nor will I be about how much of that will be wasted. Perhaps the Minister would like to comment on that. Is he prepared to say whether part of our strategy is to be a global player? If it is, he should recognise that we need to see a commitment to a bigger defence budget—or at least 2% unfudged—to allow us to have a global footprint and, especially, our destroyer frigate force, which is, as I have said before in this place, anorexic.

Turning briefly to the nuclear deterrent, it is good to see the Government’s affirmation that we should replace our Vanguard-class Trident submarines with four new boats. I recognise that the main gate for this is not until next year, but perhaps the Minister could say why it is not possible to get this intent approved in principle now. Finally, I totally endorse the comments made my noble and gallant friend Lord Craig of Radley regarding attrition.

My Lords, I, too, welcome my noble friend Lord Howe to his new responsibilities at the Ministry of Defence, but I am afraid that this is the only welcome I can give to the Government’s apparent attitude to defence. Do the Government understand that defence, and the strategic and foreign policy imperatives that make it so essential, underpins the security of every other element of their domestic, let alone their wider, ambitions, or are they simply prepared to take the risk that sound defence is a luxury that will never need to be tested?

Strict economic and financial policies cannot be at any price. Taking responsibility for defence, at every level from the Chiefs of Staff down to perhaps the tank crew commander, is not simply a matter of management. It is about command, it is about leadership, and it is about exhortation to operate in ways that are not matched in any other walk of life. Is my noble friend aware of the deep pessimism that so many serving members of the Armed Forces, let alone other commentators, feel about the current reducing state of our defence capabilities, about the provision of adequate equipment for the future and about the difficulty of motivating all ranks to understand that a career in the services is more a calling and a duty than a job, the experience of which will serve well both the country and the individual throughout his or her life? Were the assumptions underlying the previous SDSR correct at the time they were made? If so, were Libya, ISIL, Ukraine and Syria foreseen? Of course they were not. What of further Russian military developments in both the nuclear and conventional fields? What of China’s expanding sphere of influence and military capability? These are stark illustrations of growing global instability.

What is there to give us confidence that the new SDSR is likely to be based on assumptions that are any more realistic than last time? Do the Government agree with the House of Commons Defence Committee report, Towards the Next Security and Defence Review: Part Three, which was published in March, and the committee’s paper, Re-thinking Defence to Meet New Threats? Beyond the need to upgrade the nuclear deterrent, what are the foreign policy objectives that underlie our status as a nation, as part of the EU, as a member of the Commonwealth, within NATO and as a member of the permanent five?

Managing and developing defence capability within an even greater allocation of resources would be difficult enough. But the prospect of further cost reductions, which appear to have started already, with £500 million—perhaps more in reality—being cut before the SDSR is remotely complete, inevitably make it exceedingly difficult to match the 2% of GDP expenditure that the Prime Minister seems to exhort others to do. Not to commit to it or even more—or worse, to fudge the figure—is folly in the extreme. The Government have so far dodged every rational argument to halt, let alone reverse, the reduction in our defence capability and this is the height of irresponsibility. The current SDSR is an opportunity to arrest this perilous decline.

My Lords, last week, when I asked the chief of the Indian army, General Dalbir Singh Suhag—from my late father Lieutenant General Bilimoria’s regiment, the 5th Royal Gurkha Rifles—what is the strength of the Indian Army today, he said 1.3 million. Yet today we have cut the British Army to 80,000—not even enough to fill Wembley Stadium. I thank the noble Lord, Lord Sterling, for initiating this debate. As he said, the Chancellor has now asked for a further £500 million cut in defence spending even before SDSR 2015.

The US Defense Secretary, the head of the US army and the US President have warned Britain about the impact of defence cuts in no uncertain terms. In the debate I was privileged to lead on the 200th anniversary of the Gurkhas last week, I asked the Minister to confirm that there would be no more cuts to the Gurkhas. They are now down to 3,000. Even when pressed, the Minister could not tell us that they would be protected. I find this deeply worrying.

It has also just been revealed how out of tune the Government are with the public when it comes to defence. PwC has just prepared a report entitled Forces for Change after surveying the public’s views on defence. I declare my interest: PwC is the auditor of the Cobra Beer Partnership, my joint venture with Molson Coors. The PwC report says that 53% of the public want defence spending to be increased beyond the current £37.4 billion. Only 16% want the defence budget cut. Some 37% believe the cost of funding the military helps strengthen the economy. Frighteningly, 53% feel the Armed Forces are weaker than 20 years ago.

Words from the public that recurred throughout the survey were alarming: “underfunded”, “overstretched” and “unequipped”. The strategy of compensating for cuts in the numbers of full-time soldiers with reserves, as we heard from the noble Baroness, Lady Smith, is an oxymoron. Reserves are meant to be reserves and we have seen the challenge of recruiting high-quality reserves. Will the Minister confirm this? The PwC report said that 72% of the public had a positive view of the Armed Forces, and 69% rate the Armed Forces as trustworthy versus only 23% when it comes to Parliament. Some 65% also felt that modern threats are the biggest threats to the UK: terrorist groups, cyberattacks, known unknowns and unknown unknowns. No one predicted 9/11. No one predicted the Arab spring. No one predicted Libya. No one predicted Syria. Barely a year ago no one had heard of Islamic State.

As we have heard before, Britain has amazing soft power: the BBC, our universities—I could go on. But soft power alone, without hard power, is useless. As Professor Joseph Nye of Harvard University said, a combination of hard power and soft power gives you smart power. SDSR 2010 was the opposite of smart. Quite frankly, it was negligent. We have no carriers, no Harriers, no maritime reconnaissance, cuts to our troops—means before ends. I urge the Government to be in tune with the British public, to listen to our steadfast ally, the United States, which has spoken out at the highest level, and to commit to the NATO 2% of GDP defence spending.

To conclude, this debate is on the eve of the 200th anniversary of the Battle of Waterloo. The Duke of Wellington’s motto was, “Fortune favours the brave”. One word the public mentioned above any other in the PwC report about our wonderful, best of the best, cherished Armed Forces—the best in the world—was the word “brave”. I challenge the Government to be brave.

My Lords, I thank my noble friend Lord Sterling for giving us the opportunity this early in the Session to say some words on defence. I am also very thrilled that my noble friend Lord Howe is back—I think he has done one earlier stint in the Ministry of Defence. With everything that he has done, and all the disciplines that he has covered, I christen him the multi-role combat Peer, because he will be able to cover all the detailed aspects, including the financial ones.

I have very little to add but will ask one or two small questions about what I call the kit. Could my noble friend let me know, possibly in writing later, what the position is with the F35 aircraft? Is it carrying on in development? Is it up to date and at the stage we hoped it would be? Could he also ensure that the weaponry for the Army is up to date and performing as well as it should do and has been doing in Afghanistan, Iraq and elsewhere? I have not heard of any major problems but I hope he can assure us that this is well under way and that there are no problems with supply.

As far as personnel and manpower is concerned, I understand that Army recruitment is still healthy. I hope young men and women are still welcome in the Royal Navy and that places, training and facilities are available for them. My noble friend Lady Dean—I call her my noble boss, as chairman of the All-Party Defence Group in your Lordships’ House—made a most important and powerful speech telling us that we must make sure that the families are in prime position when it comes to personnel. Some of the married quarters that I have seen—and which no doubt she and many of your Lordships have seen—need refurbishing. I hope that my noble friend will be able to keep his eye on that in particular. The facilities for many of the single personnel and soldiers are second to none. With my noble friend’s help, no doubt we will make progress and there will be no slowdown in that progress over the next six months.

My Lords, it is customary to begin an SDSR with an analysis of the threat, but we should never forget that capability and threat are not independent variables. There is a direct and inverse relationship between the two, and the situation with Russia and Putin is a very good example of that. It is quite incredible to believe that a serious factor in encouraging Mr Putin to become much more aggressive in trying to retrieve parts of the former Soviet and Tsarist empires was not that, over the last few years, we and other European members of NATO have been steadily cutting our defence expenditure and our defence capabilities. What an appalling signal to send—I am afraid that we bear some of the responsibility for the deterioration of the international situation and the threat to world peace that has ensued.

What do we do about it? First, we must support, more than we are already doing, the Ukrainian armed forces. What they need most at present, as I have discovered in my visits there, is anti-battery radars and drones. We should supply those sorts of things and the training that goes with them.

Secondly, we need to prepare sanctions to deter Putin if he goes any further; if, for example, he decides to seek to grab a land bridge between the areas he occupies in eastern Ukraine and the Crimea. I think I was the first person anywhere to suggest, after the invasion of the Crimea, that we should contemplate depriving the Russian banks of access to the SWIFT interbank system. The suggestion has been taken up by other people since then, particularly in the United States, and we should explore it further.

Thirdly, and very importantly, we must make a commitment to the 2% defence spending target. We look perfectly ridiculous with the Prime Minister having had the effrontery to lecture other NATO members on the need to respect that NATO guideline when we are not doing so ourselves. Quite apart from the important signal we need to send to the Russians about this, it is vital that we do it for our credibility with the United States, which has become rather frayed. We cannot simply wait for the SDSR to achieve that because in our relations with the United States, the scepticism that it feels about our defence capability and commitment is increasing the whole time.

Finally, we should be taking forward the development of a common foreign and security policy within the EU; but the Government will of course not do this, because their Eurosceptics will not allow them to do it. First, nothing would be a more effective signal to send to the Russians of our joint commitment. It would involve not merely the existing NATO members within the EU but the five members which are currently outside NATO. It is very important to involve them. Secondly, it would be the only way to get a joint commitment to a realistic level of defence spending and deal with the free-rider problem, which has always existed, where the smaller countries have spent much less of their GDP on defence than larger countries, believing that they would always be defended by others. That is a very unhealthy and unsatisfactory situation. Thirdly, if we want to get value for money, it will be absolutely important to eliminate the waste and duplication in the armed forces of NATO and EU countries. That can be done only by a greater degree of specialisation and, therefore, of policy and decision-making integration. Finally, in procurement it is vital that we have much longer production runs, and gain the kind of economies of scale which the Americans achieve through those means, by joint procurement operations with our European allies. Again, that can be done only in the context of a distinct strengthening and improvement of a common foreign and security policy.

My Lords, 25 years ago we saw the end of the Cold War and there were people who talked at that time about the end of history, whatever that means. Indeed, now we have the end of wars but a quarter of a century later, where do we stand? It seems that we face two main threats. The first, as many noble Lords have mentioned, is that in Europe, particularly in the Baltic states and Ukraine, we face a serious threat from Russia—a wounded bear which is steadily rearming. Secondly, in the Middle East we face failed states, power vacuums, fragmentation, severe humanitarian problems and religious wars: conditions which in themselves produce fanatical extremism such as we see in Daesh, with 20,000 foreign fighters. Overlapping those in north Africa and northern Nigeria are similar problems, with a rising threat of terrorism to us all.

One of the dangers that I see is that we in this country have been lulled into a false sense of security. Many people regard even the Baltic states as far-off countries of which we know very little. There is no leadership in this country on defence. There was little debate in the general election about defence, and we have watched a steady decline in forces in Europe as a whole, as well as in this country. Unfortunately, the perception in the outside world is that we in Britain, let alone in the West, are in decline. Added to that is the uncertainty of Britain’s position in Europe and the future of the United Kingdom. We seem to be talking ourselves into decline—into pulling up the drawbridge—which is a very serious message to give to the outside world. The British interest is that we use what influence we have in a constructive way. We must remember that we are still members of the Security Council, of the European Union and of NATO. We are part of the Commonwealth family and we have soft powers. The economy is improving—it is the sixth largest in the world —and we still have some military strengths.

I conclude, first, that as far as NATO is concerned the maintenance of international order is at stake. All of us who are NATO members must make it clear to all that we are committed to Article 5—that an armed attack on one member will be considered an attack on us all—and NATO must be strengthened accordingly. Secondly, we must play an active part in selective conflict resolution in the Middle East and Africa but working intensively, multilaterally and with coalitions of willing regional partners and nations. We have had plenty of examples, such as reducing piracy in the Indian Ocean and Sierra Leone. We need to work with our friends in the Gulf and elsewhere. That will help to tackle terrorism and migration at source. I hope that the Minister will reassure us that we have a long-term set of foreign policy objectives before we make any decisions on our defence resources.

My Lords, our Prime Ministers have in the past often faced a dilemma over how much to spend on defence. Indeed, on 12 November 1936, Prime Minister Stanley Baldwin said during the debate on the Address:

“Supposing I had gone to the country and said that Germany was rearming and that we must rearm, does anybody think that this pacific democracy would have rallied to that cry at that moment? I cannot think of anything that would have made the loss of the election from my point of view more certain”.—[Official Report, Commons, 12/11/1936; col. 1144.]

The Prime Minister Winston Churchill took a very different view. He liked the Roman saying, “If you want peace, prepare for war”. The one who might give us the best clue as to what Governments should do today is Churchill. After all, he participated in more wars than any other world leader of the last century. Speaking in general terms, he was remarkably prescient. He said:

“It is no use saying, ‘We are doing our best’. You have got to succeed in doing what is necessary”.—[Official Report, Commons, 7/3/1916; col. 1427.]

By the way, I suspect that, as with us today, Stanley Baldwin would have liked to limit Churchill’s speeches on rearmament to no more than three minutes.

In the present situation, with the regular British Army at its smallest level for almost 200 years, the test of what is necessary should not be driven exclusively by Treasury considerations. There has to be significant recognition of strategic security requirements, and we subordinate these at our peril. When the President of the United States and the former Secretary-General of NATO both express grave concern at the possibility that Britain might fail to maintain defence spending at 2% of GDP, we can only hope that Ministers are listening to them and the concern of others who are Britain’s friends and allies—otherwise, I fear that the wrong signals will be given to those who do not wish us well. Just last weekend, former Chiefs of Staff revealed their concerns regarding further defence cuts. In the words of Admiral Sir Nigel Essenhigh:

“If the outcome of the Review is a further reduction in military expenditure and not a commitment to a sustained increase, then the Government will be neglecting its prime and overriding duty, the defence of the nation, by failing to halt the progressive decline of British military capability into penny packet numbers”.

He called on the Government to ensure that the forthcoming,

“Defence and Security Review does not degenerate into yet another cuts exercise”.

I note that the Secretary of State for Defence has recently warned in another place that,

“defence, to be deliverable, has to be affordable”.—[Official Report, Commons, 8/6/15; col. 885.]

My submission tonight is that affordability must not mean lowering our guard and losing the confidence of our allies.

My Lords, in preparation for this debate, I looked again at the book that is regarded as the foundation of English common law, published by Henry II’s Justiciar in 1189, called The Treatise on the Laws and Customs of the Realm of England. I realised that it was an extremely good definition of smart power, as well. It states:

“Not only must royal power be furnished with arms against rebels and nations which rise up against the king and the realm, but it is also fitting that it should be adorned with laws for the governance of subject and peaceful peoples; so that in time of both peace and war, our glorious king may so successfully perform his office that, by crushing the pride of the unbridled and ungovernable with the right hand of strength and tempering justice for the humble and the meek with the rod of equity, he may both be always victorious in wars with his enemies and also show himself continually impartial in dealing with his subjects”.

I find that one of the saddest things about this debate, for which I thank the noble Lord, Lord Sterling, is the frequent mention of the decline of this country and the frequent reports of less than adequate forces to defend the realm. I found the same as a member of the Joint Committee on the national security strategy, because one of the things that worried me—and, I think, other members—was that when we looked for a national security strategy on which an SDSR could be based we found no evidence of any, and nor did we find any evidence of national strategic thinking in the Government which might give rise to a national security strategy. I take the description “long-term foreign policy” in this debate to include the national security strategy.

Like the noble Lord, Lord Howell, I deplore targets in this because I believe that it is only sensible to base defence spending on what the defence of the realm requires. Without having a national security strategy on which an SDSR can be based, you have no idea when you are going into these sums whether you have what is required. I am very glad that the noble Lord, Lord Selkirk, mentioned the word “affordable”. I, too, think that when you are thinking “Can we afford it?”, you also have to ask whether you can afford to give up what you have to give up in order to afford what you say you want. I think that great swathes of government spending come into that second category when we are considering the all-important defence of the realm.

My Lords, I want to follow the line that the noble Lords, Lord Ramsbotham and Lord Luce, have taken and focus on long-term foreign policy and national strategy—because we are not at all clear on what either of them are. In the course of this debate, it has been mentioned that we should provide military force against China and build up our forces in the Gulf. I am very surprised that noble Lords have not spent more time talking about the problem of Africa, where we are going to have to be engaged in conflict prevention, state rebuilding and active peacekeeping in the next 20 years, partly because as those states collapse their desperate people will try to flood across the Mediterranean to Europe.

We do not know what our foreign policy is about, and that means it is very difficult to have a coherent defence policy. A Conservative MP of my acquaintance said in a private meeting some months ago, “Of course, our problem is that we don’t know who we are and we don’t know where we want to be in the world”. That is a huge problem. We have lost our standing in Washington over the past five years. There is a strong perception in Washington that we are, as the noble Lord, Lord Luce, suggested, withdrawing from a wish to be a power in the world.

We are also renegotiating our economic relationship with the rest of Europe without recognising that the European Union was always a security system as well as economic arrangement: that our Foreign Secretary negotiates and consults on foreign policy and security policy with his opposite numbers within the European Union framework much more frequently than in any other multilateral framework; and that in Washington NATO is regarded as “the European allies” and the message from Washington is that NATO and the European Union should work more closely in containing Russia and dealing with Ukraine. The question of whether we wish to be involved in containing Russia and dealing with Ukraine is there in the Foreign Secretary not being present when our German and French counterparts negotiate with the Russians on Europe. That is as visible a sign of lack of cohesion, lack of coherence and withdrawal as one could possibly have.

The noble Lord, Lord Bilimoria, talked about the 200th anniversary of Waterloo. Waterloo was Britain with our allies: the Germans, the Dutch and the Belgians. The question of whether we are standing alone and how far we are working with others is also fundamental to our defence policy. I welcome the extent to which over the past 15 years we have built a close defence relationship with the French, reinforced our relationship with the Dutch and helped the Nordic countries and now also the Baltic states. I deplore the extent to which Conservative Ministers have attempted not to tell the Daily Telegraph, the Daily Mail or Parliament the extent to which we now co-operate with them.

I agree strongly that sharing facilities, assets and procurement is one way to make short defence money go further. That is an important part of where we should be. However, unless we know what our relationships with France, Germany and the Nordic countries are, we will not go far enough. So, yes, we need a coherence defence budget—but first, we need a coherent national strategy and foreign policy.

The first priority of our Armed Forces is of course to defend and protect our own people. After that, it is a case of the Government deciding what further role they want our nation and require our Armed Forces to play beyond our shores, and having made that decision providing our Armed Forces with the capability to carry out that role. That is what the forthcoming strategic defence and security review and the spending review should be about. The last SDSR did not prove very accurate in forecasting many of the key events of the last five years. It was silent on the upheavals that have occurred in north Africa, the rise of ISIL, and on Russian activity and aggression in the Ukraine. I hope that the forthcoming SDSR will prove to be a rather more reliable document in that regard.

We then have the issue of money; defence is not a protected department, and there will have to be very substantial cuts—18%, say independent sources—in non-protected departments if the Government are to hit their own deficit reduction target. The Government have already committed themselves to no further reductions in the size of our regular Armed Forces, at least a 1% real-terms increase in the defence equipment budget throughout this Parliament, and the renewal of our nuclear deterrent. Can the Minister say what areas, if any, of the defence budget are being considered for cuts in expenditure, and what level of cuts, if any, the Government expect to make in the defence budget in real terms? In the Queen’s Speech the Government stated that they would,

“continue to play a leading role in global affairs, using its presence all over the world to re-engage with and tackle the major international security, economic and humanitarian challenges”.

The recent comments by the US Defense Secretary that our reductions in military spending were,

“actions which seem to indicate disengagement”,

suggest that not everybody has been convinced by the Government’s statement about our future global role.

That is a further reason why the Government should be open and promote debate, including in this House, on their view of the threats we face, our global role, and the military capability we need, prior to final decisions being made on the SDSR and the spending review, and not simply say in effect that anybody is welcome to write in with their thoughts. The 2015 SDSR has to be a credible document, with regard first to defence and foreign policy objectives, and secondly to the resources needed by our Armed Forces to deliver those objectives.

My Lords, I thank my noble friend Lord Sterling for giving us the opportunity to debate a topic of fundamental importance for the security and prosperity of this country. He brings to our deliberations a wealth of experience in both business and politics, and I listened to him, as I always do, with the closest attention. However, he has also enabled me, as the new Minister on the block, to benefit from the wisdom of the other speakers here this evening, and I am grateful to all of them for their contributions. I shall of course write on those questions that I am unable to address tonight.

As this debate has shown, the House recognises that the first duty of government is to protect its people and promote our interests around the world. Therefore, I preface my remarks by making clear that the influence that this country continues to exercise globally and the respect that we command through our military, diplomatic and development capabilities are major national advantages that the Government are committed to maintain.

The defence budget, and the way we use that budget, are of course key components in the way we achieve this. Listening to noble Lords this evening, I cannot fail to be aware of the anxieties that exist in some quarters about current and future defence funding. At the same time, I suggest that we need to take a realistic and measured view, both of what we are doing currently and of what we plan to do. At present, the UK has the fifth-largest defence budget in the world, the second-largest in NATO and the largest in the EU. That budget has enabled us to commit our Armed Forces, as we speak, to 21 operations in 19 different countries. It has enabled us to achieve genuine global reach in Iraq, Afghanistan, the Baltic, west Africa and, most recently, Nepal and the Mediterranean, to name only a few examples.

In Iraq we bring niche capabilities such as intelligence, surveillance and reconnaissance, air refuelling, counter-IED, and command and control to the US-led coalition which few other nations can replicate. We are the US’s largest partner in the coalition air effort against ISIL.

In Afghanistan we can be proud of what we have achieved in our largest coalition operation of recent times, Operation Herrick. We have helped to set the conditions for a more viable state, improving the lives of ordinary Afghans, while substantially reducing the terrorist threat to the UK from this region.

This year, our contribution to NATO assurance measures will be as significant as last year, with more than 4,000 UK personnel set to deploy on various reassurance exercises, including a number in eastern alliance territories.

In Nepal we demonstrated our disaster relief capabilities when we deployed one C130 Hercules transport aircraft, two C17 transport aircraft and more than 250 personnel to the region to support relief efforts, on top of our existing Gurkha presence. In Sierra Leone we led the fight against Ebola, committing 900 troops. In the Mediterranean we have demonstrated other elements of our naval capability, deploying HMS “Bulwark” along with three Merlin helicopters to rescue—so far—2,900 migrants in difficulty.

These are our Armed Forces as they are today—capable of responding to a complex variety of challenges quickly and effectively. But, as my noble friend has emphasised, we need to pay equal attention to the defence needs of the future. That is indeed why the Government are in the process of carrying out a full strategic defence and security review, along with a refreshed national security strategy. I say to the noble Lord, Lord Dannatt, that this is not prevarication. The SDSR will take as its starting point a hard-headed appraisal of our foreign policy, our security objectives and the role that we wish our country to play on the world stage. It will be informed also by a full evaluation of the risks and challenges facing us as a country.

Not all these risks can be foreseen but, through the work of the National Security Council and by ensuring that the national security strategy builds on the progress made since 2010, we will be well placed to define the military and other capabilities we need to ensure that Britain has the broad range of capabilities and strategies to respond to threats and maintain its position as a global leader. The noble Baroness, Lady Dean, can be reassured that this will indeed factor in the well-being of our personnel.

However, in so doing, the SDSR will need to balance strategic challenge with fiscal realities. It is unrealistic to think that any part of government can operate in a vacuum, without having regard to the resource constraints that the country faces. Economic security and national security are two sides of the same coin. I cannot therefore comment on what our defence spending will be after this financial year. Such decisions, as my noble friend will understand, will be determined by the spending review later this year, running alongside the SDSR. However, he should, I hope, be reassured in one respect at least. By its very nature, the SDSR will look ahead at the longer term as well as the short and medium term. And here, I suggest, we start from a good position. This Government were elected with a mandate to maintain the size of the Regular Armed Forces, to increase the equipment budget in real terms every year and to renew our four nuclear ballistic submarines.

We have committed to spending more than £160 billion on equipment and equipment support over the next decade; including on new joint strike fighters, more surveillance aircraft, hunter-killer submarines, two aircraft carriers and the most advanced armoured vehicles. We continue to spend 20% of our defence budget on major equipment and equipment support—one of only four NATO members to do so.

This equipment will be innovative and high technology, giving our Armed Forces a battle-winning edge. For example, our procurement of the Scout Specialist Vehicle will transform the way that the Army undertakes operations, enabling commanders to engage at ranges and at a tempo not previously possible.

The F-35 Joint Strike Fighter is a fifth-generation multi-role combat aircraft and marks a step change in capability for the UK. The Queen Elizabeth-class aircraft carriers will be the largest, most capable and powerful surface warships ever constructed in the UK, able to meet the widest range of tasks around the world. All these programmes have a positive impact on the UK’s defence industry, either through their manufacture or through many years of future support.

I assure my noble friend Lord Lyell that the equipment and weapons currently fielded by the British Army are genuinely second to none.

I have read the paper published by King’s College London and mentioned by my noble friend Lord Sterling. We know how important it is to be able to act independently. That is why key principles of the 2012 White Paper, National Security Through Technology, are open procurement and technology advantage. Where essential on grounds of national security, we will do whatever is necessary to protect our operational advantage over our adversaries and our freedom of action. This means being able to conduct combat operations at a time and place of our choosing with the assurance that capabilities will perform as required, when required.

We will spend 2% of GDP on defence in this financial year. But as my noble friend Lord Howell emphasised quite rightly, it is not just the size of the defence budget that is important but also how you spend it. That is why we are continuing with our successful defence transformation programme, which has balanced the defence budget, removing the £37 billion black hole left by the last Labour Government, and committed the department to finding £5 billion of efficiency savings over the last five years, reducing administration costs and critically examining our defence equipment needs, helping us to achieve better deals with our contractors.

I am aware that the Minister is very new to this brief, but I regret very much that he is continuing to mention this complete nonsense and propaganda about a £35 billion black hole deficit. If defence expenditure had gone on increasing at the rate of 1.5% per annum in real terms, which we were committed to, there would have been no such black hole at all.

My Lords, I totally repudiate that comment. Not only was there a black hole of that size, but I was briefed on it the other day and it is even greater than that figure—but we will not go into that now, if the noble Lord will allow.

There is no point in having a £34 billion defence budget if it is not spent efficiently. That is why it is important that we continue our work from the previous Parliament so that we can maximise defence spending on our Armed Forces. This is demonstrated in our 10-year fully funded equipment plan which we published in January. That plan gives industry certainty over MoD investment in different areas for the next decade, helping us to deliver the equipment we need for our Armed Forces. I say again, the fiscal challenge that has faced defence has not impacted on our ability to conduct operations to support our foreign policy objectives —far from it—as I have already indicated with examples of our many military operations around the world.

As has been said, we are not only using military intervention to protect our interests and promote our values; we have a leading diplomatic network which spans 268 posts in 168 countries and territories, and nine multilateral organisations. These unique capabilities have enabled the UK to play a leading role in talks to address Iran’s nuclear programme, disarming Syria of its declared chemical weapons stockpile and establishing a global arms trade treaty. We are also the only G7 nation to meet the UN OECD target to spend 0.7% of gross national income on international development, building stability and supporting economic growth overseas and contributing, importantly, to the security and prosperity of the UK.

The achievements of our defence and diplomatic services speak for themselves. The UK can be proud to have such world-renowned services to call upon. As my noble friend Lord Glenarthur said, the upcoming SDSR is an opportunity to look again at our foreign policy objectives and ensure that we have the assets necessary to address these in the context of the resources available to us. As I said to this House earlier this month, in the words of Churchill, we will do what is necessary to keep Britain safe and will remain part of the international effort to defeat the adversaries that threaten us.

House adjourned at 8.34 pm.