Defence

§ Mr. Speaker

Before I call the Secretary of State fo move the motion, I should announce to the House that I have selected the amendment in the name of the Leader of the Opposition. I have a long list of right hon. and hon. Members who wish to speak during this two-day debate. I hope that it will be possible to accommodate them all, but it will be possible only if speeches are relatively short.

§ Dr. David Owen (Plymouth, Devonport)

On a point of order, Mr. Speaker. I do not wish to challenge your ruling, but will you tell the House either now or later whether you are bound only ever to choose one amendment, or whether you may choose two amendments? Does Standing Order No. 35 relate only to the debate on Her Majesty's speech? It would be helpful to hon. Members who seek to place motions on the Order Paper for vote and for debate, if you will tell us whether you have such discretion or whether we must change the Standing Orders of the House?

§ Mr. Speaker

I am only able to choose one amendment on an ordinary day, but I can choose two amendments for the debate on the Queen's Speech. However, I am bound to choose only one amendment for a debate of this nature, and I have done so.

§ The Secretary of State for Defence (Mr. Michael Heseltine)

I beg to move, That this House approves the Statement on the Defence Estimates 1984, contained in Cmnd. 9227. I believe that the White Paper provides the information on which an informed debate can take place.

I was pleased to see that this was the view of the Defence Committee in its own valuable report, to which I shall refer.

Twice this century, the peace of the world has been shattered by world war. Two weeks ago we commemorated D-Day and the sacrifices of the second of those wars. Those who survived had one profound hope to sustain them as they surveyed the wreckage of nearly six years of total war. It was the hope that such cataclysmic events should not occur again. They regarded it as their duty to themselves and to the 50 million across the world who had not survived to ensure that international tensions should in future be resolved by means other than war. In practice, across much of the globe little has changed. The use of force and of violence in the pursuit of political ends is as commonplace today as it has been throughout history. The continuing loss of human life with all the attendant destruction remains a feature of day-to-day life, uncontrolled and apparently uncontrollable. In the realities of power politics too much of the evidence points to a determination to keep it that way.

But there has been one profound achievement during the past 40 years. Despite the constant reality of East-West tension, a world conflict has been avoided. The peace of Europe has been maintained, and in western Europe at least political freedom preserved.

We cannot be prepared to rest on the mere absence of war. Peace between East and West has been preserved, first, because of a perception on all sides that the alternative is too appalling to contemplate. Peace has also 37 been preserved because great resources have been devoted to military expenditures. Of course, peace based on fear and suspicion will always be uneasy and uncertain. Of course, the task of the statesman is to move to a position where peace is based on mutual understanding and on trust, but let no one doubt that the existence of peace itself is a prize beyond previous attainment. That we have not also moved to peace in a climate of trust is a challenge, but not a disaster.

The primary purpose of NATO is to preserve the peace and security of its member nations, and this is what it has achieved for 35 years. We have made it clear that we shall maintain our defences at a level sufficient to deter threats to our peace and security. We have also made it clear that we want to talk to the Soviet Union and to achieve a meaningful dialogue on reducing East-West tension and securing arms control.

I will not disguise from the House the fact that progress during the past year has been disappointing. That has not been for want of effort on the NATO side, but one thing is certain about negotiations: it takes two to achieve success. There must be a real and genuine will on both sides to be flexible and to seek a lasting understanding.

The House will judge whether the NATO Alliance has done all it could to pursue the chance of establishing common ground. Across the range of arms control negotiations, NATO has taken initiatives and shown its willingness to hold a meaningful dialogue. At the level of strategic arms, the Americans have made it clear that everything was on the table for discussion, but the Russians are refusing to meet. The intermediate range nuclear forces talks remain suspended.

Since those talks began in 1981, the United States has made it clear that it was prepared to remain at the negotiating table for as long as was necessary to reach an agreement. The only proviso was that the large and growing imbalance between East and West in intermediate range nuclear systems could not be allowed to persist. The zero option was on the table. Failing that, the Alliance made it clear that it was prepared to accept equality at the lowest level the Soviet leadership was prepared to negotiate. The Alliance also showed flexibility on other points of concern to the East, such as medium-range aircraft. As the talks continued, the number of SS20s pointed at Europe grew from 171 in 1981 to 243 in 1983, and at that time NATO had no comparable missiles. Yet as soon as the first NATO missiles arrived in Europe, the Soviet Union broke off the talks.

The House will contrast this Soviet rigidity with the Alliance decision taken in October 1983 to reduce the nuclear stockpile in Europe to the lowest level for 20 years. When implemented, the decision will mean that since 1979 the number of Alliance warheads deployed in Europe will have been cut by one third, by one half in the case of warheads for shorter range systems.

We are also committed to seeking reductions in conventional arms and to pursuing confidence and security-building measures to reduce tension. In Stockholm, the West is negotiating to reduce the risk of an outbreak of hostilities in Europe as a result of accident or misunderstanding. At the MBFR talks in Vienna we are committed to achieving fair and verifiable conventional force reductions in central Europe, and in Geneva we are striving for a total ban on chemical weapons, but the Soviet attitude remains inflexible and unyielding.

38 Most recently at the London economic summit, Western leaders expressed their wish to see early and positive results in the various arms control negotiations and the speedy resumption of those that had been suspended. The joint declaration on East-West relations at the summit reiterated the United States' offer to restart nuclear arms control talks anywhere, at any time and without preconditions. The words were hardly offered when they were being denounced by the Soviet Union—not only denounced, but with no constructive proposals to put in their place.

Of course, there are fundamental differences between the political systems of East and West. Leaders of the Western nations know that there is an urgent and compelling imperative in democracies towards the pursuit of peace. In free societies, people can express their desire for peace and reductions in tension openly, in the press, on the streets and through the ballot box. The leaders of the Soviet Union face no such pressures. I have no doubt that the vast mass of the Russian people also want peace, but they lack the means to impress their views on the leadership in the Kremlin.

The lesson for us is clear. We must recognise that we are dealing with a cautious but calculating leadership—a leadership obsessed with the security of their state but disregarding the threat which Soviet power poses to others. Their system is premised on the certainty of the eventual ideological triumph of Communism, but it will proceed carefully towards that goal. Opportunities will be grasped, but only if the price is acceptable. It is a bureaucracy which, by its nature, is slow moving, led by men whose whole experience is to play things long. We cannot expect to make rapid progress in negotiations with the Soviet Union, but equally we must persevere, and we must articulate to Western public opinion why meaningful and lasting agreements with the Warsaw pact can be achieved only as a result of hard, slow and patient negotiations conducted from a position of strength. It would be folly to encourage unrealistic hopes of easy and rapid progress which cannot be fulfilled.

For 35 years the policy of the NATO Alliance has been to deal with the Soviet Union from such a position of strength. The Alliance has made a realistic appreciation of the aims of the Soviet Union and its strengths and weaknesses. We recognise the Russian propensity to exploit instability in Asia, Africa and central America. We see the continuing repression of eastern Europe and the continuing attempt to crush Afghanistan. Above all, we know the size and power of Soviet military capability, which continues to grow.

The leaders of the Alliance nations believe that their fundamental duty is to preserve the freedom of their peoples through the maintenance of strong defence forces capable of resisting aggression. The White Paper describes the steps that the Government are taking to this end. The British contribution to NATO defence continues to be second only to that of the United States. We are spending £17 billion on defence this year, and the figure next year will be 18 billion. Our defence contribution outstrips that of our major European allies as a total figure, as a per capita figure and as a percentage of GNP.

We are continuing with the programmes which are in hand to modernise our conventional and nuclear forces. The defence of the United Kingdom homeland remains fundamental to our national survival and to the capability of NATO to reinforce in war. For the next 20 years the 39 backbone of the air defence of the United Kingdom will be provided by the Tornado F2 aircraft, which is a highly sophisticated air defence aircraft with excellent range, loiter and stand-off capabilities. Our early warning capability will be greatly enhanced by the entry into service later this year of the Nimrod AEW aircraft and the continuing modernisation of our air defence radar and communications facilities. Hawk with Sidewinder will provide a useful additional air defence capability at a relatively low cost. We are continuing to modernise our naval forces to counter the Soviet mining threat to our offshore waters.

On the central front of Europe we have in hand enhancements which will strengthen BAOR equipment to an extent not seen in the past three decades. They include the introduction of the MCV80 combat vehicle, the multiple-launch rocket system, the LAW 80 anti-armour weapon, Javelin, the successor to Blowpipe and the new range of small arms. We have already ordered sufficient Challenger tanks to equip four regiments. I am pleased to have been able to announce today that orders will shortly be placed for a further 62 tanks from royal ordnance factory Leeds to equip a fifth regiment. Two squadrons of the Tornado GRI strike aircraft are now in service with RAF Germany. The combination of Tornado, its JP233 airfield attack weapon and the ALARM system will be a potent one in the suppression of Warsaw pact air operations in the 1990s and beyond. Our air power in Germany will be further strengthened when the advanced Harrier GR5 aircraft enters service later in the decade.

In the case of our maritime forces, which play such a vital role in the eastern Atlantic and the Channel, weapons systems in or coming into service over the next few years include the lightweight Stingray and heavyweight Spearfish torpedoes, the Sea Eagle and Harpoon anti-ship missiles. There are now 37 warships on order for the Royal Navy, including one aircraft carrier, seven type 22 frigates, four nuclear fleet submarines and the first of a new class of conventional submarines.

I am also able to tell the House today that we shall shortly be inviting industry to make competitive proposals to design and build the first class of a new type of support ship, the auxiliary oiler replenishments, or AORs. This is a new concept for the support of the Royal Navy, a "one-stop" ship which will carry in one hull all the fuel and stores needed for replenishment at sea. It is also a new concept in ship procurement, since this is the first time we are going out to competition for proposals to design and build a first-of-class ship of such importance and complexity.

In strengthening our conventional forces, we are seeking to give an increasing emphasis to our reserve forces. Not only are these cost-effective, but they provide for wider participation in the work of the armed forces, which in itself is valuable. We have already announced the expansion of the Territorial Army to 86,000 by the end of the decade and the creation of the Home Service Force, and we are looking to strengthen the role of the other reserve forces. The Defence Committee commented helpfully on these developments. We hope to do more, but the pace at which progress can be made depends upon the response within the community.

We also plan to modernise our strategic nuclear deterrent with the Trident system. I accept at once that that 40 remains an object of controversy. The opponents of Trident maintain that it represents an unnecessary escalation of the arms race, that the alternatives are more acceptable, and that the cost of Trident will distort the rest of the defence programme. I do not believe that any of these propositions stands the test of analysis.

In comparing Trident with our existing force, we must take account of the deployment of Soviet anti-ballistic missile defences and the development of Soviet antisubmarine capabilities since Polaris—a system designed in the 1950s—came into service. The Trident force will be the minimum size necessary to provide a credible and effective deterrent. While we need for the 1990s and beyond a missile with a range which allows our strategic submarines increased "sea room", we chose the D5 missile because the longer-term cost advantage lay with maintaining the maximum commonality with the United States programme. But, having done so, we have made it clear that we do not envisage using the full warhead capability of the system.

It is argued that there are cheaper alternatives based on cruise missiles. This was gone into most carefully at the time and, for an equivalent weight of deterrent power, a cruise missile force was found to be more expensive to buy and to run than a ballistic force. Of course, ultimately what is required to deter is a matter of judgment. We can all change the basis of the calculation to suit us at the time.

What the Government must have in mind is that a cheap system which does not deter would be simply a waste of money, and one which was not invulnerable to preemption would invite the very attack it was intended to prevent.

There is also the question of cost. The White Paper gives an estimate of £8.7 billion at average 1983–84 prices and exchange rates, which is the common price base for the figure work in the document as a whole. As time moves on the estimate will, of course, change. The Defence Committee has quoted a higher figure in its report, and because it is a factor which can readily be isolated, it has focused attention on the exchange rate element of the equation. But, as the Committee also points out, there are other factors in the equation which could influence the estimate the other way.

I do not intend to depart today from convention and to introduce new figures on a different base. They would themselves only be overtaken in due course. The essential point is not whether the cost in isolation is £8.7 billion or some other figure, but whether this cost is affordable in the context of the defence budget as a whole. In this latter perspective, the scale of planned resources completely dwarfs marginal charges in a single project—even of the scale of Trident. We are talking of cumulative defence budget over the period of procurement of Trident of some £350 billion at today's prices.

In annual terms, Trident will cost on average, say, £500 million a year or 3 per cent. of the defence budget, but this Government have increased the defence budget by one fifth or some £3,000 million a year since 1979. In other words, the increase alone under this Government is around six times the average cost of Trident.

Trident, when it succeeds Polaris, will be one of the four main pillars of our defence programme. What I cannot understand is how a party that in government, through much of the 1960s and 1970s, maintained Polaris, and modernised it at great expense with Chevaline, now 41 in opposition and without any change in the policies of the Soviet Union, can argue for a defence policy without our own last resort deterrent.

The Government are committed to carrying through the modernisation of our conventional and nuclear forces. We are also committed to getting the maximum value for money from the defence budget. Our aim is to secure the maximum output of front-line capability from the resources of money and manpower which we devote to defence.

Chapter two of the White Paper outlines the comprehensive range of initiatives which are in hand. These apply across the spectrum of manpower, money and equipment. The results, in terms of extra capability for the services, are already apparent.

For the Royal Navy, we have announced that up to eight ships which would have otherwise been placed on standby from 1986 onwards will be kept in the operational fleet. As a result, the number of destroyers and frigates available at short notice for NATO and national commitments will be increased by up to 20 per cent. compared with previous plans.

§ Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Will the Secretary of State confirm that only one major surface warship and one submarine will be completed this year, the lowest number this century, and that only one additional ship—a frigate—joined the fleet last year, the smallest number since 1949? Where would the right hon. Gentleman now be without the shipbuilding programme bequeathed to him by the last Labour Government?

§ Mr. Heseltine

In no way do I wish to suggest that the last Labour Government did not make a significant contribution to our conventional forces. That is why at the last election I found it so extraordinary that Labour should threaten to reduce the very commitment that it had considered necessary when in government.

§ Mr. Duffy

Why have this Government not placed more orders?

§ Mr. Heseltine

I have already told the House of the number of ships under construction or on order for the Royal Navy. Those orders have been placed by the present Government, but I do not seek to diminish what the previous Labour Government did. I only wish that the Labour party consistently would follow the same policies in opposition as it did when in government.

For the Army, we intend to redeploy 3 per cent. of our manpower from the support areas to the front line. This will enable us to man the comprehensive programme of re-equipment for BAOR which is in hand. It will also allow us to strengthen our home defence forces and to improve the capability and readiness of our out-of-area forces based on 5 Airborne Brigade.

For the RAF, manpower levels will be held steady as the number of front-line aircraft increases by more than 15 per cent. over the decade.

I have announced proposals for the reorganisation of the Ministry of Defence which are designed to achieve greater efficiency in the conduct of our business. These are being worked through and I shall be announcing the results before the recess. Finally, we are committed to securing greater competition across the range of our equipment procurement and support services. Our analysis has shown that significant savings—up to 30 per cent. in some recent cases—can be achieved through competition.

42 It is argued by some that this pursuit of value for money, though laudable in itself, is not significant in terms of defence policy. I know that few people want to concentrate on it—it is detailed and uncomfortable, and it challenges the pressure groups within the defence community as a whole. Instead, there is a preference for focussing on marginal increments in resources — and these are regarded as central to policy. The Government have set about establishing a level of defence expenditure appropriate to the threats which we face and have made provision accordingly, but increasing resources cannot he a process without limit. We must shift the focus from the marginal increase to addressing the output that we are achieving from the whole of a much larger defence budget.

We intend also to pursue greater international collaboration in the development and production of new weapons systems. In particular, we seek greater arms cooperation within Europe and between Europe and the United States. Greater standardisation of defence equipment across NATO boundaries has obvious benefits for the battlefield commander, and the scale and sophistication of major modern weapons systems often rules out a national solution. European collaboration is important because it demonstrates to the United States that the European allies are prepared to play their full pan in NATO defence.

We are already involved with our partners on a wide range of collaborative projects — for example, the multiple-launch rocket system, the self-propelled SP70 gun and the EH101 anti-submarine helicopter. For the future we are discussing with our partners an outline concept for a European agile fighter aircraft to meet the air threat from the Warsaw pact in the 1990s and beyond. We are studying with other nations the feasibility of introducing a standard NATO frigate design for the mid-1990s. Of course the harmonising of national requirements and priorities is not easy. There are political, military and industrial obstacles to be overcome. But I am clear that more needs to be done if we are to take advantage of the potential of improving our defence offered by the new technologies which are now coming forward.

There has been some debate recently on the European contribution to defence. it is natural that there should be such a debate within the NATO Alliance. There are those in the United States who believe that the Europeans are not carrying their share of the defence burden, just as there are those in Europe who believe that the European voice should be projected more loudly in the counsels of the Alliance.

The White Paper sets out the extent of the European contribution to the defence of the Alliance. The European allies provide some 90 per cent. of the in-place ground forces, about 80 per cent. of the tanks, about 90 per cent. of the armoured divisions, about 80 per cent. of the combat aircraft, and 70 per cent. of the fighting ships in European waters and the Atlantic.

There is already co-operation between the European allies. I am currently the chairman of the Eurogroup of Defence Ministers which aims to harmonise European views, and to ensure that the European contribution to the common defence is as effective as possible. There is scope for a more European approach in the field of defence procurement.

§ Mr. Dick Douglas (Dunfermline, West)

The Secretary of State is making a comprehensive speech but 43 so far he has omitted any reference to the United Kingdom merchant marine or the NATO merchant marine. Is it his intention to look at the position of our merchant marine or the totality of the merchant marine in relation to defence?

§ Mr. Heseltine

That point was raised, appropriately, in the recent Select Committee report. That report has just been published and if the House will bear with me I want to deal with that important issue when the Government come to respond to the report, which we shall obviously do carefully and thoroughly.

The independent European programme group has a central role to play. Its work has been given greater impetus in recent months. European collaboration has been shown to work. The experience now exists upon which we can build. The forums exist to carry forward that co-operation. What is now needed is the political will to carry forward the harmonisation of military and industrial thinking and practice. We must have discussions about real issues with a fixed agenda and a set timetable. Against that target we have to recognise that every country has its own deeply based self-interest. None of us will negotiate from any other stand.

But if the negotiations are to move us beyond the highly fragmented industrial base and the diverse operational requirements of today, it will require a common sense and practical recognition not only of our narrow national self-interest but of the wider self-interest that cheaper and perhaps better collaborative equipment can produce. The Americans will not wait for us to catch up and we would not do so if the positions were reversed.

Those are most important issues, but they do not go to the heart of the matter—our defence strategy and the role of each of the services within it. I would be the first to accept that our defence policy must evolve in the light of changing circumstances. We as a country and NATO as an alliance must be prepared to be flexible and to adapt to changes in the threat and to the new opportunities presented by developing and emerging technology. We cannot afford to stand still.

The White Paper might have addressed those issues more fully and I intend to do so in future years, but I make no apology for offering no dramatic shifts of strategy at the national or the Alliance level. The White Paper avoids this not out of complacency but because there are no quick and easy alternatives—although I cannot help observing that the answers appear quicker and easier the further people get from the actual responsibilities of taking decisions in government.

In looking at the balance of our effort, I am enjoined by some to adopt a more flexible approach and to recast our policy to a strategy directed more to the open seas and to British interests across the world. The Government have shown their resolve to defend their wider interests in the clearest way possible. We intend to continue to strengthen the mobility and to enhance flexibility of our forces. That approach was significantly speeded up in the light of the Falklands campaign.

But there is no realistic defence policy that diminishes our concern for the threat on the European mainland. Because NATO has successfully stabilised her central front and the Soviet Union poses a threat elsewhere, it is not self-evident that we should now take steps which might lead to the destabilisation of the central front, which is at 44 the heart of Europe's defences, in order to bring to bear, in unspecified ways, military power in more peripheral areas. If a policy of stabilisation in Europe requires a British contribution of 55,000 troops and the forces of the RAF in Germany, that seems to me to be a price that we should unhesitatingly pay.

In judging our contribution to the Alliance, we have to address hard realities, not simply hark back to tradition. The first is the weight of the Soviet threat and of NATO's own forces. The Soviet navy has certainly expanded hugely over the past 20 years, but the preponderance of Soviet power is still on land and in the air in Europe. On the Western side, we have to put into the balance not only the capabilities of the Royal Navy and of other European powers but also the huge American maritime effort.

There is also the dominating reality of my job, that we do not start with a blank sheet of paper. We have to address the implications of change as well as where it might lead. Given concerns in the United States about the level of the European contribution to our defence, a reduction in the British effort in Germany would seem likely to stimulate a wider process of withdrawal from commitment to shared defence on the ground, and to begin the unravelling of the very fabric of the Alliance itself. I cannot believe that the world would be a safer place without our European commitment or with fewer American troops on the ground in Europe. I cannot believe that Britain would be a safer place with a looser NATO Alliance.

§ Mr. Keith Speed (Ashford)

My right hon. Friend mentioned the considerable contribution made by the United States navy. None the less, does he agree with remarks made by the previous American chief of naval operations that the United States had a one-and-a-half-ocean fleet with a three-ocean commitment?

§ Mr. Heseltine

I am never unsympathetic to statements of even the most distinguished admirals who always see a task wider than their capability to meet it. That never means that we should dismiss it, but we, as my hon. Friend knows as well as anyone, are faced with the language of priorities. It is never absolutely possible to meet all requirements that are put upon one as a result of the military analysis of the situation.

§ Mr. Duffy

Do not run down the Navy.

§ Mr. Heseltine

I am not running down any of the armed services.

I stand, therefore, for the underlying basis of the 1981 Defence Review because this best secures the collective defence upon which our own security must rest.

There is a deeper strand of criticism, also fashionable, which argues that NATO's strategy of flexible response is no longer relevant in the strategic circumstances of the 1980s. We face the charge that NATO is bent on a dangerous and immoral strategy of nuclear war fighting from which the world can be made safe by the removal of the weapons involved. We face the opposite claim—but sometimes from the same people—that in an era of strategic parity NATO's nuclear strategy is incredible and that the weapons which underpin it are just not worth having.

The truth is that from the time that it was established in the mid-1960s, the strategy of flexible response involved difficult choices in terms of the reliance to be placed upon the conventional and nuclear elements of Alliance forces.

45 The proposition that there might be certain circumstances in which a conflict would be escalated to the nuclear level and in which a protagonist would embark upon a chain of events with possibly awesome consequences for everyone involved was never an easy one.

In the 1960s, as now, the supreme rationalist could argue that no sensible leader would follow such a course. But then, as now, the issue to be addressed was a different one. Would a potential aggressor be confident that if he placed his opponent in desperate circumstances the only way out would be seen to be surrender? While there is uncertainty about the response that would come, there remains deterrence, and this deterrent effect applies to all war, not just nuclear war. Indeed, that is NATO's purpose in a strategy of flexible response. Too many of the Government's critics come to the wrong answers by asking the wrong question. They ask, "How do you fight a war?" We ask, "How do you prevent the war in the first place?"

It has always been recognised that there are choices over when the point is reached where conventional options start to be exhausted. A price can be paid in terms of additional conventional strength to buy additional freedom of action. I should myself be the first to extol the benefits of the doctrine of no early use of nuclear weapons, provided that it was not presented as some dramatic shift in approach which the Russians might see as a lack of confidence and will in the West to defend ourselves. That would make war more, not less, likely.

This Government are working to provide the underpinning for this strategy in the real world by strengthening the deterrent effect of our conventional forces by enhancing both their hitting and their staying power. This is not a cheap option, but it is fully consistent with the process of thinning out shorter-range nuclear weapons to the minimum needed for credible deterrence, on which, as I have said, the Alliance is already embarked.

Where I part company with some Opposition Members is over the merits of so-called nuclear weapon-free zones. Of course we must have the most stringent controls over the release of all nuclear weapons and keep to a minimum the numbers on the battlefield, but to go further by declaratory policy would not of itself remove the threat of nuclear attack in the area concerned, since many of these weapons are mobile and could be moved up in a period of tension, and systems of longer range could be targeted from further back. What such a zone might offer is a weakening of our ability to stop the concentration of Soviet conventional forces and an increased risk of Soviet pressure on some Alliance members to abandon their commitment to contribute to the nuclear element of deterrence.

It will, I know, be argued that emerging technologies offer new opportunities for putting at risk Soviet forces which would formerly have been targeted with nuclear weapons and that therefore the nuclear threshold can be raised. This is indeed an opportunity which we must grasp, but it is an opportunity for the future and not for today. We have to accept the world as we find it, and the world as we find it today is one in which there is a great deal of talk about future and not yet available opportunities and remarkably little recognition of the value of the practical steps which we have actually taken to reduce the nuclear stockpile to the lowest level for 20 years.

Some, of course, want NATO to adopt a strategy of no first use. For the reasons that I gave earlier, this strategy— 46 even if it were believed by the Soviet Union—could well weaken deterrence and not strengthen it. It is not self-evidently better in political or even in the moral terms in which these arguments are so often cloaked to pursue a policy that might make war itself more likely.

But let us put that to one side for a moment. What is, I think, incontrovertible is that the logic of such a policy—if it were put forward seriously on defence grounds—is that the West would deter Soviet conventional power by the threat of a conventional response. Nuclear weapons would then essentially deter only Soviet nuclear attack.

In following through such a policy seriously, we would expect to find a commitment to large increases in conventional forces to the level needed for the job of conventional deterrence, a concern to maintain NATO solidarity and in particular the transatlantic link, and a sharing of the burden of essential nuclear deterrence. That is what the Labour party would have to proclaim.

What do we actually find from those Opposition Members who proclaim this cause with the fanaticism of the new convert? They have the clearest conference commitment to cut back on our conventional forces. They have a policy of removal of our contribution to Alliance nuclear deterrence as though this might magically square the financial circle of more conventional forces and a slashed budget. But, as always, the figures do not add up. They have in reality a policy which would strike at the heart of the NATO concept and leave this country with quite inadequate defences. They have an approach motivated more by the need to try to blend the two extreme wings of the Labour party, political expediency and the anti-Americanism of a faction of the hard Left which they try to dress up as an alternative defence strategy.

I make no apology for the fact that the statement contains no fundamental shift of strategy. Our current strategy is the right one for Britain at this time. It is based on a successful policy which has preserved the peace and security of the nation for the longest period of contemporary history. Our forces are not over-stretched, the balance of investment in the programme is satisfactory, and we have modern and effective fighting services of unequalled quality and calibre.

My task as Secretary of State is to keep our forces efficient to enable them to face the challenge of the future. I have outlined in my White Paper the ways in which this will be done. I commend it to the House.

§ Mr. Denzil Davies (Llanelli)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: `believes that the plans outlined in the Statement on the Defence Estimates 1984, Cmnd. 9227, avoid the real and fundamental issues relating to the defence and security of the United Kingdom; is convinced that the enormous and increasing cost of buying the Trident nuclear system from the United States will mean further cuts in, and a weakening of, our conventional nonnuclear forces; deplores the fact that the White Paper contains no initiatives to stop and reverse the escalating and dangerous nuclear arms race; and calls upon the Government to work within NATO for a change from its existing strategy to a strategy based on the no-first-use of nuclear weapons, to cancel Trident and to remove all nuclear bases, including cruise missiles, from the United Kingdom.". I suppose that it is too much to expect a defence White Paper to be very lively and exciting. The Secretary of State more or less admitted that his intention was not to make it very lively, constructive or exciting. Judged by the 47 turbid standards of the past, the White Paper is rather negative, like the right hon. Gentleman's speech, and unrealistic about the problems facing Britain in terms of its defence policy. It fails to say, as the Secretary of State failed to say, anything constructive about the two most serious issues facing the Government and the country. The first is the frightening nuclear arms race, which, clearly, is getting out of control. The second is the financial crunch that will fall on the defence budget over the next few years, because it is clear that the right hon. Gentleman's figures will not add up.

The right hon. Gentleman touched on the nuclear arms race. Far from showing any initiative to try even to moderate it, the Government are playing a full part in the escalation and proliferation of that arms race. They are still determined, apparently, to go ahead and buy Trident, a weapon which is massively more lethal, more accurate and more powerful even than Polaris and a weapon which even those who still want to see a second generation of British nuclear weapons believe to be inappropriate and totally unnecessary. Even Trident, with its 360 warheads—or is it more? — and its massive overkill, will not be enough to satisfy the Government's nuclear mania. We have to have a further 160 cruise missiles located on British soil.

The figures in the defence budget do not add up, and the right hon. Gentleman will need to have a further defence review. Britain's extensive commitment, stretching from the central front to the south Atlantic, combined with the massive sums needed to fund and finance Trident, a rapidly declining industrial base and with the contribution that oil revenues make to public expenditure and the balance of payments gradually getting less, inevitably mean that there will be further cuts in the defence budget and, when they come, they will fall on our conventional forces, as they have in the past, and so make us even more dependent on nuclear weapons.

Rather than facing these problems in the White Paper—apparently the Secretary of State said that he had no intention of facing them—he has done again what he has done in the past and escaped into a managerial cocoon. He has been playing with his MINIS, sticking pins into his wall charts, shuffling the top brass around and packing the Ministry of Defence with private arms manufacturers. He emerges occasionally from that cocoon to take a ritualistic bash at the peace movement, and then returns to his wall charts. He is not prepared to face the real issues.

After 1985–86, when the NATO commitment of 3 per cent. lapses, as I understand it, the commitment is that defence expenditure should barely keep pace with normal inflation—that is, inflation as worked out and calculated according to the retail price index. However, as the House knows, if inflation exceeds 4 per cent. — nobody believes that it will come down below 4 per cent.—that will mean cuts in defence expenditure even on the grounds of the estimated inflation. In addition, there is also something called, perhaps inaccurately, defence inflation. That means that the costs of defence equipment tend to exceed the general effects of inflation.

Let us call it defence inflation, although this may be inaccurate. It has been found—and there has been no denial of this—that defence inflation tends to exceed the retail price index by between 5 per cent. and 10 per cent. That means that if we take normal inflation and defence 48 inflation, while ignoring for the moment the cost of Trident, even before its cost starts to bear heavily on the budget, there are bound to be cuts in the defence budget.

I shall now quote from a favourite newspaper of Defence Ministers, the Daily Telegraph. I thought that I would bring a smile to the face of the Minister of State for Defence Procurement with that. On Wednesday 16 May, under the heading "The Flaw in Defence", the Daily Telegraph said: the document is ultimately disappointing, even disturbing. The truth, which no amount of managerial reform can disguise, is that after next year defence expenditure may, for the first time in nearly a decade, begin to decline in real terms … Whatever economies Mr. Heseltine secures, the future appears to hold only the promise of further defence reviews and an erosion of our conventional fighting capability. That is the Daily Telegraph talking, not the Left wing of the Labour party. It continues: That is a prospect which the Government has shown no sign of confronting. The Secretary of State showed no signs of confronting it either.

§ Mr. Cyril D. Townsend (Bexleyheath)

The right hon. Gentleman used the word "flaw", but there is a basic flaw in what he is saying. He is suggesting that there should be an increased level of defence expenditure, when his party is committed to getting down the NATO average. That would mean a one third reduction in conventional forces, which would greatly increase the chances of nuclear warfare. Perhaps the right hon. Gentleman will talk about that.

§ Mr. Davies

The word "flaw" comes from the Daily Telegraph. I was merely reciting the situation as I see it, and the Daily Telegraph touched on that. If the Government think differently, perhaps the Secretary of State will deny it. He has not as yet, and he knows that the crunch will come.

§ Mr. Heseltine

I went to some length to deny it in my speech, but perhaps I should do it specifically. There is no foundation for what the right hon. Gentleman is saying. This Government have increased the defence budget by £3,000 million a year, and that is broadly the enhanced level at which expenditure will continue. There is a vast enhancement in our defence capabilities, and there is no danger such as that to which the right hon. Gentleman is drawing the attention of the House.

§ Mr. Davies

The figures look different. Perhaps the right hon. Gentleman should read the public expenditure survey for the year 1985–86, which pencils in an increase of about 3 per cent. and assumes that inflation will be 3.5 per cent. I am merely going on the figures and the Secretary of State has not yet shown that those figures are wrong.

As we all know, the real Trojan horse—with which the Secretary of State went to great lengths to deal—that has been slipped into the system is Trident. The cost of Trident is out of the Government's control. The Government have little idea, at the end of the day, what the final price or cost will be. In July 1980, there was an estimate of £4.5 billion to £5 billion as the cost of Trident. In March 1982, the cost had risen to £7.5 billion—an increase of a mere £2.5 billion. In March of this year, the Secretary of State rather shamefacedly slipped a new horrendous figure into a defence question. Apparently, the cost will now be £8.7 billion. Last week, the Select 49 Committee on Defence, using optimistic figures for British and American inflation, estimated that the cost will be £9.5 billion, and so it will go on and on.

In four years under this Government, and on their best case estimate — I should like to see the worse case estimate, which no doubt is locked up carefully either in the Ministry of Defence or the Treasury—over the past four years there has been a 100 per cent. increase, which is an increase of 25 per cent. a year, in the estimated cost of this missile system. That is all without a penny, or cent, being spent. This has come about under a Prime Minister who keeps lecturing the country and the House about the financial rectitude that was practised so well in that little grocer's shop in Grantham. If financial lack of control such as this had been practised in that little shop, the bailiffs would have been in with their white chalk long ago, marking the furniture.

This point was well made by Mr. Neil Collins in The Standard. I read the financial columns of the newspapers, Conservative Members may like to know. Mr. Collins is a distinguished City editor and on 15 March, just after the Secretary of State's announcement of another almost £2 billion increase, under the heading, "Trident surfaces as a £9 billion horror", he said: It would be some comfort if we could be reasonably confident of Mr. Heseltine's new figures. Naturally, we can't … The case for the Trident missile is not even widely accepted. I do not think that it is on the Conservative Benches. The tactics employed by the Ministry of Defence to get us committed to the project are familiar enough—little public debate beforehand, gross under estimate of the cost followed by a quiet series"— [Interruption.] I know that this is painful for Conservative Members, but as it is clear that most of them do not read the financial columns of newspapers, I shall read the article to the end. It continues: gross under estimate of the cost, followed by a quiet series of 'revisions' of the price to take account of 'relevant inflation'. The Government have no idea what the final figure for the cost of Trident will be, because so much of the cost is outside the control of the Secretary of State, he well knows. Indeed, the Government do not know what kind of weapon they will get at the end of the day. In 1980, it was going to be C4 and Trident 1. Now, apparently, it will be D5. Who knows, if the Americans change their minds, it might be E6.

§ Mr. Nicholas Soames (Crawley)

No, it is ET!

§ Mr. Davies

There could be modifications. The Secretary of State will have to pay the cost if he wants the missile.

The Government have got themselves into an absurd position of locking themselves and one of the main pillars of their defence policy into the military technology and defence strategy of another country—at that, a superpower—over which they have no control. That is why the Government do not know what the cost of Trident will be.

I deal next with the exchange rates. The Secretary of State is coy about the exchange rates, and I understand why. We have been told by the Select Committee that the exchange rate means a 1 per cent. fall in the dollar exchange, equalling £25 million. If one goes back to 1980, the picture is an interesting one. In 1980, the estimate was based on $2.36. In 1982, it was based on $1.78. In March 1984, the estimate of the Secretary of State was on the 50 basis of $1.53. The exchange rate of the pound to the dollar today is down to $1.37. That is another reason that the cost of Trident—the 45 per cent. cost in the United States—is outside the control of the Government. Not only do those figures on the exchange rate tell something about Trident, they show the rake's progress of Tory economic policy from 1980 to 1984.

Let us examine what the exchange rate might be in 1988–89. Let us say that it might be $1.20—I think that it will be lower, but let us be charitable and optimistic. That will mean another £500 million on the cost of Trident 3, all sunk apparently on the foreign exchanges. We believe that the Government decision to buy Trident will turn out to be a disaster militarily and financially, and the sooner it is cancelled, the better.

§ Mr. Churchill (Davyhulme)

Is it not humbug for the right hon. Gentleman to suggest that Trident is the single most expensive piece of military procurement that the country has undertaken, especially bearing in mind that, when the Labour party was in power, his Government, which he chooses conveniently to forget about, were responsible for the Tornado programme, which cost 25 per cent. more than the latest estimates for Trident?

§ Mr. Davies

My point is that Trident is expensive, the Government have no control over it, so much money has been spent in the United States that it is not possible to have control over it, and no estimates can be believed.

I deal next with flexible response, which was dealt with in an offhand and depressing manner in the White Paper in paragraph 124. The Secretary of State read us a long civil servant bureaucratic essay about it, but said nothing new. The Secretary of State must know—the fact that he raised it in his speech shows that he must know—that a considerable body of opinion on both sides of the Atlantic believes and argues that the strategy of flexible response is now out of date, unrealistic and dangerous, and that it should be re-examined and, over a period, gradually changed. The strategy simply means being prepared and ready in a war fought by conventional weapons—I think that the Secretary of State would agree with this—to be the first to unleash nuclear weapons in central Europe. In fact, it is a strategy of first use of nuclear weapons. The basis of the strategy was set out in a joint article in the American publication Foreign Affairs in spring, 1982. This joint article was written by Mr. Robert McNamara, Mr. McGeorge Bundy, Mr. George Keenan and Mr. Gerard Smith. [Interruption.] The hon. Member for Dorset, North (Mr. Baker), the Parliamentary Private Secretary to the Minister, shows his ignorance, because obviously he has not heard of these gentleman, or read the article. The article was written by individuals who are experienced in this matter. They are not members of CND or any of the peace groups that the Secretary of State dislikes so much. The authors traced the history of NATO strategy before flexible response, because flexible response to some extent is a jargon phrase, and not very different from what happened previously. On page 754, the article said: A major element in every doctrine has been that the United States has asserted its willingness to be the first—has indeed made plans to be the first if necessary — to use nuclear weapons to defend against aggression in Europe. It is this element that needs re-examination now. Both its cost to the coherence of the Alliance and its threat to the safety of the world are rising while its deterrent credibility declines. This policy was 51 first established when the American nuclear advantage was overwhelming, but that advantage has long since gone and cannot be recaptured. Indeed, the basis of the strategy—this is where it is dangerous—envisages what is ridiculously called fighting a limited nuclear war, apparently a war of controlled nuclear escalation where we start with the landmines and the shells, then go to the bombs, and then to the ultimate, flexible response weaponry—the cruise and Pershing 2 missiles. The danger is that it demands the matching of every missile against every missile, every bomb against every bomb and every rocket against every rocket. That is why we had Chancellor Schmidt's speech in London in 1977, and it is one reason that we have cruise missiles in Greenham common today. Cruise missiles are as much a product of flexible response as the landmines on the Fulda gap on the central front. Nobody is arguing that it is possible to make this change overnight, but we would like to know of some thinking by the Government — no indication of this was given in the White Paper, nor in the speech of the Secretary of State—showing that they realise what the problem is, and are prepared to move towards a policy on no first use of nuclear weapons.

§ Mr. Soames

Will the right hon. Gentleman say what is his assessment of the Russian plan for European battle and, if he were in the position of my right hon. Friend the Secretary of State, how he would lay his plans to respond to that threat?

§ Mr. Davies

I know that the hon. Gentleman has been to Moscow, and I understand that he is fairly full of it. I would be happy to discuss these matters with him, but not at the Dispatch Box. One argument that will be put forward, which was touched on by the Secretary of State, although he was not too certain of it, is, "Yes, all right, let us go to no first use, but it will mean a massive increase in conventional weapons." I do not believe that that would necessarily be the case. It will certainly mean a re-ordering of the way that defence on the central front is to be carried out, a change from a forward defence to something quite different. That I accept. However, I do not believe that it would mean such an increase in conventional weapons.

To return to the article, I stand by what Robert McNamara and others said in the article in Foreign Affairs. I know that the hon. Member for Crawley (Mr. Soames) is not interested. He is still thinking of his glory in Moscow when talking to the generals, but perhaps he should listen to what the article said. The article continued: Yet it would be wrong to make any hasty judgment that those new levels of effort must be excessively high. The subject is complex, and the more so because both technology and politics are changing … there is no need for crash programs, which always bring extra costs. The direction of the Allied effort will be more important than its velocity. The final establishment of a firm policy of no-first-use, in any case, will obviously require time. What is important today is to begin to move in this direction.

§ Mr. Peter Bottomley (Eltham)

Will the right hon. Gentleman now answer the question asked by my hon. Friend the Member for Crawley (Mr. Soames) — irrespective of whether my hon. Friend has just been to Moscow—and say how he would prepare against possible aggression from the Soviets? What is his answer?

§ Mr. Davies

I thought that I had tried to give an answer. I said that the doctrine of flexible response might once have had some validity but that, once there was parity between the United States and the Soviet Union, it was important to move away from that policy towards one of greater reliance on conventional weapons.

§ Mr. Julian Critchley (Aldershot)

Will the right hon. Gentleman give way?

§ Mr. Davies

No — and what the hon. Gentleman writes in the Daily Telegraph is not acceptable to many of his hon. Friends.

The Secretary of State plans to increase competition in the procurement of defence equipment. Apparently there is to be more competitive tendering, more privatisation, more contracting out and more hiving off from the Ministry of Defence with the aim of getting better value for money. Like many people, I do not believe that we shall get better value for money. Speaking in another place, the noble Lord Carver said — [HON. MEMBERS: "Oh."] I am bringing him in again, but this time not on flexible response. He said of the Secretary of State: If he thinks that his gimmickry will make it possible for him to fund Trident without adversely affecting the conventional equipment programme, he is deceiving himself." — [Official Report, House of Lords, 14 June 1984; Vol. 452, c. 1277.] I agree, and gimmickry is a strong word to use in another place. The irony, however, is that there will probably be less competition because there will be mergers in defence indstries. There have already been tentative moves in that direction. Is GEC to take over British Aerospace? If so, there will be a loss of competition and the Secretary of State knows it. If that merger is allowed, other defensive mergers will take place. Ultimately, the small subcontractors who are such an important part of the defence industrial base will be gobbled up. There will be a repetition of what happened to our civilian manufacturing base in the 1950s and 1960s. With all the mergers, the industry emerged weaker. The result of mergers will be a weaker industrial base and no gain in terms of price.

The Secretary of State is packing the Ministry of Defence with directors and managers of arms industries. The White Paper says that there are to be another 50 such people. That trend is disturbing and distasteful because the Secretary of State started with Mr. Peter Levene, the chairman of United Scientific Holdings. He is given the run of the Department, produces reports on the dockyards and finds out about the royal ordnance factories, which will be extremely convenient for his Alvis subsidiary if it decides to buy the tank factory at Leeds. Moreover, I see from the Daily Telegraph that he gets information and is given a public exhibition in that bazaar in Aldershot which the Secretary of State opened this morning. Only yesterday Mr. Peter Levene, chairman of United Scientific Holdings and personal adviser to the Secretary of State, wheeled Lord Trefgarne, who I understand is some form of Minister, down to the private exhibition in Aldershot and got great publicity for his Ferret 80 armoured scout car.

I shall quote the Daily Telegraph, which is careful about what it writes on these issues. It said: 53 The exception is the specially publicised politically extraordinary personal launching yesterday by Lord Trefgarne … Alvis was well-advertised as being part of United Scientific, of which Mr. Peter Levene—temporarily on loan to Mr. Heseltine …—is managing director. The Financial Times said that Mr. Levene stood close to the Minister, just as we would expect.

§ Mr. Robert Atkins (South Ribble)

The right hon. Gentleman has shown once before in a debate on this subject that he is not a great lover of the private arms industry. He shows that by describing as a bazaar the Army equipment exhibition, which contributes enormously to exports and provides the jobs that he is always on about. With regard to Mr. Peter Levene, is the right hon. Gentleman aware that people in the procurement and the defence industries have said for some time that there is a need for a mixture of the arms industry and serving officers in the Ministry of Defence and in industry? Is not what the right hon. Gentleman is saying flying in the face of that development, which should be welcomed rather than attacked?

§ Mr. Davies

I have regard and respect for the private arms manufacturers and do not mind poachers being turned into gamekeepers. What I object to is, after six months of being taught the art of gamekeeping, people being turned into poachers again. That is precisely what the Secretary of State is doing, but then perhaps the modern Tory party does not understand that analogy. I do not know, but perhaps the right hon. Member for Cambridgeshire, South-East (Mr. Pym) understands it.

The Secretary of State should stop running for a while. He should stand still if he can and try to muster the courage to face and tackle some of the fundamental issues that he has not tackled in the White Paper and which will have to be tackled before long. If he cannot do that, or has not the courage to do it, his successor will have to do it.

§ Sir Humphrey Atkins (Spelthorne)

I am always pleased when the right hon. Member for Llanelli (Mr. Davies) speaks. He has a pleasant voice, to which I enjoy listening, and I always live in the hope that I shall discover what the Labour party really thinks is the proper way in which to defend the country.

The trouble is that we do not find out. We have the Opposition amendment, which is designed to be read by the Opposition's supporters to make them feel comfortable, and we have heard much material from an extraordinary variety of newspapers, but we still do not understand how the Labour party would defend Britain. We know how it used to defend the country when it was in government. Although I and others had some quarrel with it about how it did that, in principle we did not disagree that much. However, I have never yet heard what has caused the Labour party to stand on its head in regard to this issue. Perhaps the right hon. Member for Lewisham, Deptford (Mr. Silkin) will tell us in his winding-up speech.

We should like to know why the Labour party is standing on its head—other than that it perceives an electoral advantage in doing so. The Labour party should know better than that, as the arguments that it propounds receive no support on this side of the House and little support on the Opposition Back Benches. Last June showed that those arguments do not receive much support 54 in the country either. We are left wondering, but perhaps we shall find out later why the Labour party pursues that course.

The Defence Select Committee published its first report last Thursday. I do not intend, the House will be glad to know, to go through all of it. Right hon. and hon. Members are perfectly capable of reading it themselves. I shall draw attention to a few parts that are of special significance. We thought and said that the White Paper was long on management but perhaps rather short on political and strategic prospects. In paragraph 3 we said that the White Paper confines itself to analysing the present situation and the United Kingdom response to it. We strongly recommend that future White Papers include a review of long-term political and strategic prospects, both within the NATO area and beyond. That was the first point that we put to my right hon. Friend when he gave evidence to the Committee. He replied: I think the first task that one as to do on taking over the Ministry is to recognise that it is going to take quite a long time to become familiar with the workings of the Minstry and the assumptions of the policies of the Ministry and it is unrealsitic to think that a Secretary of State is going to come in from domestic political experience and very rapidly change the policy assumptions of a Ministry as steeped in its own world and its own defence environment … as the Ministry of Defence. We all accept that as undeniably true.

Indeed, my right hon. Friend went further and said that the political and strategic aspects were satisfactory, but that he would return to them another year. I hope that he will, because the Committee has recommended that he should. We said: The interests which the present level of defence spending is designed to serve and protect must be clearly identified, and their prospects discussed, if the annual Statements on the Defence Estimates are to make a proper case for the size and shape of defence spending. I am sure my right hon. Friend accepts that and that the review recommended by the Select Committee will be included in next year's White Paper.

I do not want the House to think that criticism of the White Paper means that we believe that it has no policy statements—indeed, it has plenty. Two of them repeat what we know already—the Government's decision last year not to continue after 1986 planning to increase defence expenditure by 3 per cent. in real terms each year, and my right hon. Friend's proposals — which he announced in March and mentioned this afternoon—for the development of the Organisation for Defence.

We have been promised a White Paper on the latter point before the end of next month and, no doubt, there will be an opportunity to discuss it in the autumn. I hope that the Government's business managers are listening. On the former point, the Select Committee has announced that it has begun a major inquiry into the effects of ending the 3 per cent. annual increase. The inquiry will take place during the autumn and we hope to report to the House at Christmas.

I give a special welcome to two other policy matters — the proposal for a substantial improvement in our front-line forces by tail-to-teeth transfer, and the decision to keep eight frigates in the operational fleet rather than move them into the standby squadron. That must be the right decision, provided that the training of sailors to man them does not suffer. The Select Committee was assured by my right hon. Friend's officials that that would not 55 suffer. Indeed, I also welcome the decision to strengthen the Army's front line by 4,000 men and the RAF's frontline aircraft by 15 per cent.

I welcome my right hon. Friend's decision to establish an arms control unit within the MOD. It is a good decision, which is much overdue. Of course, the Foreign and Commonwealth Office takes the lead in all negotiations about the control, reduction and elimination of weapons. I have no complaint about that. I have nothing but admiration for the patient, determined and skilful way that it has gone about its task over many years — and, I greatly fear, will have to go about it for many more years.

Those who know most about weapons are to be found in the MOD. They know the capability of nuclear, chemical and other weapons; they know the conditions necessary for the operation of nuclear weapons and the preparation needed for any such operation; they are skilled at interpreting information from photographs taken from far above the earth or gained from other sources; they know the minimum requirements for ensuring that any agreements on the limitation or reduction of weapons are being kept.

Of course, the MOD has been closely involved with disarmament negotiations, but the formation of a special unit, to use my right hon. Friend's words, capable of advising any member of the Cabinet involved in this field, on all matters to do with arms control is a clear step in the right direction, and I congratulate my right hon. Friend.

It comes as no surprise that my right hon. Friend is pushing ahead vigorously with his plan to increase competition in the supply of defence equipment. It is exactly what we would expect of him and, as a believer in the benefits of competition, I have no quarrel with him. His aim is to achieve better value for taxpayers' money. Paragraph 237 of the White Paper shows that savings of up to 30 per cent. can be achieved in certain areas. We have been told that that policy is already having a marked effect. In 1982–83, only 21 per cent. of contracts were awarded on a competitive basis. One of my right hon. Friend's officials told the Select Committee that during the first four months of this year that figure had risen to 49 per cent.—so far, so good.

Others with more knowledge of defence procurement than I will no doubt make their contributions in the debate. I want to mention one doubt about taking the policy too far. A great deal is rightly being done in NATO to collaborate with our allies, especially our European allies, in the development and production of new weapons. My right hon. Friend mentioned one or two in his speech. Paragraph 315 of the White Paper lists six—the multiple launch rocket system; terminally-guided warheads; self-propelled gun; new generation of anti-submarine warfare helicopters; new generation of anti-tank guided weapons and the advanced short-range missile. I have no doubt that there will be others.

If, as we hope, that collaboration bears fruit, I fear that we may find either that competition on an equal basis becomes impossible or, if it is possible, we must recognise that British industry will not always win the orders. It may win part of the orders, but that would mean that only part of our defence industrial base would survive. I know that my right hon. Friend regards a healthy defence industrial base as vital. I can envisage an area of difficulty in 56 marrying two desirable objects—increased competition and collaboration. I mention that as an anxiety in my mind which I hope will not come to fruition.

My penultimate point relates to something not in the White Paper, which should be in it — the Merchant Navy. Paragraphs 49 to 53 of the Select Committee report dealt with that point. I was glad to hear my right hon. Friend say that he would deal with the issue in his reply to the Select Committee. However, I want to go a little further now, because no one who lives in these islands can doubt the absolute necessity of there being sufficient ships in the Merchant Navy, either in peace or in war. Ninety-seven per cent. of everything that we import and everything that we export comes or goes by sea. If supplies could not come to us, our industry would come to a standstill and we would starve, just as we almost starved 40 years ago. I cannot tell, any more than anyone else can tell, whether the NATO countries will ever again be engaged in a major war. If they are, I cannot tell precisely what sort of war it will be.

It is at least arguable that if the nuclear stalemate—and the contemplation of the uselessness of engaging in a nuclear war in which everyone loses—prevents that kind of war, as it has done for over 35 years, a hostile power such as the Soviet Union, bent, as we know it is, on extending its boundaries and creed, might seek to bring us to our knees by the threat of starvation. To be sure, we have allies, but the British Government have a duty to look to our resources, too, and these are pitifully thin and getting thinner.

The Falklands conflict two years ago could not possibly have been described as a major war, yet to mount our operation there—not to supply the Falkland Islanders with food and materials, but to mount the operation—it was necessary to take up from trade no fewer than 45 merchant ships, all of which performed magnificently.

One might say that that was not a great number, because we have plenty of merchant ships. There were enough two years ago, but there are a lot fewer today. In round terms, five years ago there were 1,200 British-owned and registered merchant ships. Last year there were just over 750 and the forecast of the General Council of British Shipping is that in two years' time there will be only 400.

Those figures put a totally different complexion on the matter. If, to mount an operation the size of the Falklands campaign, we needed 45 ships and there were only 400 in all, how on earth could we contemplate engaging in anything more serious? Four years ago, when the Merchant Navy was much bigger than it is today, our predecessors as a Defence Committee said in their report: Given the strategic significance of merchant fleets, details of their strengths should be included in future White Papers. The Government agreed, and that was done in 1981. It has not been done since; it was not done in 1982, 1983 or this year. I do not know why not, but it should be done, and I hope that I will be assured by the Minister at the end of today's debate that it will be done, because it is extremely important.

I should like information—if not today, soon—about another matter. The ships to which I have referred are British-owned and registered and the Government can lay their hands on them if they need to. But many British-owned ships are registered under flags of convenience, and we have all heard of Liberia, Panama and places such as that. Can the Government lay their hands on those ships 57 in times of emergency and crisis? The United States Government can lay their hands on United States-owned ships registered in Liberia, either by agreement or under American law. I do not know whether we can, but we might need to if the Merchant Navy goes on diminishing.

Part of the trouble lies in the nice distinctions of departmental responsibility. Sponsorship of the Merchant Navy is the business of the Department of Transport—all of them excellent fellows, I have no doubt, but not particularly concerned with defence. The Chancellor of the Exchequer is not concerned with defence, either. He searches for revenue and for fairness in taxation, and in his Budgets makes alterations to our tax law which he knows will inflict considerable damage on our merchant fleet.

My right hon. Friend the Secretary of State, in answer to a question by a member of my Committee, said: At this moment I have not been advised to pursue policies involving myself in the present situation. He should be so advised. If he is not, he should advise his advisers. The Government, to use a colloquialism, must get their act together, for it is an increasingly dangerous situation, and the Secretary of State is the right person to raise it with his Cabinet colleagues. I hope that he will do so

I conclude on a personal note. I was particularly pleased to read paragraphs 126 to 129 of the White Paper in which tribute is paid to the Regular Army, to the Ulster Defence Regiment and, by implication, to the Royal Ulster Constabulary for the work that they do in Northern Ireland.

They all have a hideously difficult time. Regular Army soldiers must act not as soldiers, which they are trained to be, but as policemen. We should be, and are, proud of the way in which they conduct themselves. I was delighted to note that—thanks, no doubt, to the increasing size and efficiency of the RUC—the number of battalions of the Regular Army in Northern Ireland has declined from 13 in 1979, when I first went there, to eight today. Furthermore, the total number of units doing a tour in Northern Ireland in any one year has gone down from 40 in 1979 to less than half that number today. That must be extremely welcome not only to the soldiers and the Ministry of Defence but to our NATO allies.

The UDR is in a different situation. It contains some of the bravest men I know. They work harder than almost anyone. They live where they work, as do their families, and everybody knows where they live. They are never off duty and they are at risk 24 hours of every day, 365 days of the year. We owe them an enormous debt, and I am glad to acknowledge it.

§ Dr. David Owen (Plymouth, Devonport)

I cannot remember an occasion since 1966 when I have been more worried about the defence budget projections for this country. In 1966 we had a decision to cut defence spending and a refusal to cut our defence commitments. That situation was not put back into balance until 1968.

This is the first defence debate since 1978 in which we have clear evidence of the Government—for 1986–87—making an actual reduction in defence expenditure. In 1978, against a background of great difficulty in public expenditure, Europe made one of its best decisions of the last 10 years. That was the collective NATO decision to increase defence spending by 3 per cent. per year, inflation-proofed, and it is to the credit of this country that 58 that decision was taken across Governments; it was taken by a Labour Government in difficult circumstances and fulfilled by this Government.

It is fair to say that we have fulfilled that commitment better than any other European country. However, the extent to which we have kept to that commitment is not as even as some hon. Members might think. We have not actually spent 3 per cent. per year. The figure has shown a great deal of variation, and if we look back over the defence budgets we see that, in terms of constant prices, in 1979–80 it increased by 5.4 per cent., in 1980–81 by 2 per cent.; in 1981–82 by 2.7 per cent.; in 1982–83 there was a substantial increase, for reasons of which we are aware, of 7.2 per cent.; in 1983–84 it increased by 3.4 per cent.; and in 1984–85 we are planning an increase of:3.5 per cent.

The assumption this year is that our spending will be on the NATO commitment target, but that is not the case. Already we have seen that 3.5 per cent. reduced by 0.9 per cent. because of the pay rise to the armed services. Effectively, therefore, we shall achieve a year-on increase in 1984–85 of only 2.6 per cent. Thus, we have already slipped this year from that 3 per cent. commitment.

For 1985–86 the Government are planning an increase of only 1.7 per cent., but if pay exceeds the guidelines and is 5.7 per cent.—rather than the 4 per cent. which is assumed for that year—we shall have zero growth. In 1986–87, unless pay is held to an average of 2.5 per cent., rather than the estimated 3 per cent., there will be no real growth.

The inflation assumptions that are fed into the Government's expenditure White Paper are ridiculous and absurd under-estimates. That is manifest for the fiscal year 1984–85. Conservative Members must face the fact that they will tomorrow evening be supporting in the Government's Division Lobby a Government who are making deeper cuts in defence spending than were ever envisaged by Sir John Nott. Whatever one's views about Sir John's proposals, within the constraints of having to accommodate the Trident expenditure, at least there was an intellectual basis for what was done. I fear that there is no intellectual basis for the Government's proposals. The Secretary of State is playing to the gallery.

The right hon. Gentleman has nominally reversed the Nott cuts. The force of three aircraft carriers has been restored. Sir John opted for two carriers. The amphibious assault ships are to be kept, when they were to be scrapped. HMS Endurance remains. The frigate and destroyer fleet will still decline from 59 to 50. The eight ships that Sir John wanted to hold in reserve will now be put on full duty, but without any increase in previously planned manpower. Overall Royal Navy manpower levels in the early 1990s will be 11,000 fewer than in 1981.

All the signs are that we are doing under the stewardship of the present Secretary of State exactly what we were warned against doing by the previous Secretary of State. We are keeping more hulls, but we are not equipping them with modern equipment and staffing them with properly trained crews. We are generally pretending to have an increased defence commitment, but not investing in weaponry was the shortcoming exposed around the Falklands. It is dangerous in modern, highly technological warfare to put ships at risk because of a lack of necessary capital expenditure. It is the capital 59 expenditure programme to which we must address ourselves, and which is severely threatened by the Trident programme.

The Trident programme is not a simple and clear-cut issue, it is true, but I have always opposed it. I did so from 1977, when in government, to 1979. I opposed it on arms control grounds, but above all I opposed it because I considered it to be the cuckoo in the nest. It was clear even than that it would pre-empt valuable resources being spent on areas of defence that we needed desperately to strengthen. If we want the Trident programme, we should have it plus a 3 per cent. growth in defence expenditure.

As the Chairman of the Select Committee on Defence, the right hon. Member for Spelthorne (Sir H. Atkins), said, it is estimated that the Trident programme will cost an extra £700 million. The effect of the movement in the exchange rate alone is £400 million. These extra costs mean that in 1986–87, the year which is causing most anxiety, there will be not just zero growth, but an absolute cut of 1 per cent. If the expenditure on Trident continues, that will go forward through 1987–88 and 1988–89. The Government have given no sign that they have anything more in mind for the defence budget than to hold the planned levels for 1986–87.

The likely consequences for the defence budget are extremely serious. If we want Trident, there should be a greater increase in the overall defence budget so that we can pay for Trident and improve our conventional defences. I do not believe that it is possible for the Secretary of State, when no doubt he is off to greener pastures, to fulfill the commitments which are before us within the forward defence expenditure—[Interruption.] The pastures that await him may be green in many senses.

The question that we must face is what is likely to happen to various programmes. How is the Secretary of State going to fit in replacements for HMS Intrepid and HMS Fearless and the amphibious assault vessels? How will he finance the new replacement for Tornado aircraft, which will be starting to make an impact on the capital budget at exactly the time when the Trident budget is at its peak? How will he be able to accommodate all these items of desirable new capital expenditure?

The majority opinion is that it will not be possible for all these items of expenditure to be accommodated within the budget and that there will have to be sacrifices, which will be felt in two or three years' time. The Secretary of State can proudly boast about what he is spending now, but those who are examining the budget are anxious about what it will look like in three or five years' time. There are not enough resources to maintain the present SSN build rate, to carry on with the Saxon programme or to continue with the agile combat aircraft programme. Something will have to give and the right hon. Gentleman knows it.

The obvious answer is more expenditure in addition to what is planned or the sacrificing of Trident. If we sacrifice the Trident programme — I believe that that should be done—I do not believe that we can earmark the moneys that are saved for the Health Service or the education service, much though I would wish that to happen. The moneys will be needed to improve conventional defence forces, which we must do if we are to raise the nuclear threshold.

In the middle and late 1990s we shall have to have contingency provision for a replacement for Polaris if there 60 has been no movement in arms control and no change in the Soviet-US negotiating positions. It is not unreasonable that the Secretary of State should say that if the Trident programme is stopped we shall have to have something to replace it unless we choose to go into the next century with no nuclear deterrent for the United Kingdom

The Secretary of State must face some of the realities of the action that has been taken in the United States over the Tomahawk cruise missile programme. Tomahawk missiles are being fitted now to nuclear submarines and nuclear-armed Tomahawk missiles will become operational this month. The Americans have implemented this programme because they believe that Tomahawk is an effective weapon system. In my view it would fit ideally into a minimum deterrent system if we decided to replace the Polaris system, which we shall not have to replace until the end of the 1990s. The Secretary of State currently plans that some Polaris boats should remain in service until 1997.

Tomahawk is not the most ideal or sophisticated deterrent system. It is not as good technically or strategically as the Trident system and it would be foolish to try to pretend otherwise. However, bearing in mind what we hear about the capacity to shoot down missiles in space, the ballistic missile system may not prove as advantageous in the next century as many thought. The submarine-launched cruise missile is a cheap deterrent because it can be fired from a conventional torpedo tube in existing SSNs. Only eight missiles are being fitted initially to submarines of the United States navy. There will be an extra 12 with vertical launch, to make 20 in all. Eight will be compatible with our existing SSNs. The cost will be about $1.2 million per missile at 1982 prices. The programme will not be cheap and much will depend on the SSN build rate. The maximum initial deployment would be about 100 missiles, which would be about one tenth of the cost of the Trident programme. There would be no extra refitting charges and it might be possible to increase the SSN build rate.

The Secretary of State says that there is no alternative to the Government's proposals, but he knows that there is and that it is one that I have presented to the House. It is an alternative which was considered seriously in the late 1970s. The Ministry of Defence was against it then because it wanted Trident. However, more and more senior armed service men are realising the consequences of going ahead with the Trident programme and there is a definite change of mood. I beg the right hon. Gentleman to listen to some of the younger serving officers.

§ Mr. Speed

Is the right hon. Gentleman aware that the Tomahawk strategic nuclear warhead could be fitted in the new SSK 2400 programme?

§ Dr. Owen

That is true. It could be fitted also to surface ships if we wished to do so. One way out of the political problems surrounding the deployment of cruise is to put cruise missiles to sea. Helmut Schmidt was rather too easily cast aside when he asked for maritime deployment. They need to be in Europe, but it would be much less politically damaging — and there would be fewer midnight flits from Greenham common—if they were deployed at sea. I hope that we shall come back to the question of deployment at sea at a later date.

It is extraordinary that the Secretary of State did not mention that the United States Senate is even now 61 beginning to debate the possible reduction of 100,000 United States service men in Europe, phased over the next five years. That is being put forward by Senator Nunn, who has great authority. If a person of his calibre and distinction can advocate that degree of reduction, it will not be long —even if it is not voted on tomorrow—before the Senate insists on a reduction of United States forces.

For The Times at this stage to produce an editorial asking for reductions in BAOR seems to be extraordinary, but at least The Times is recognising that, under present arithmetic, the Secretary of State's forward projections simply do not add up and that we shall have to look at radical alternatives. I do not believe that it is possible to reduce BAOR, tempting though it might be, as a cut in forward defence expenditure. What I fear is that, as always, capital expenditure will be cut.

§ Sir Patrick Wall (Beverley)

It would be fair to Senator Nunn to remind the House that he advocated cuts only in order to persuade the European Governments to meet their proper defence expenditure targets. Most of them are not doing so.

§ Dr. Owen

The hon. Gentleman makes a fair point. There is a mood of exasperation in the United States, which has increased its final deficit, with very serious medium-term consequences for the world economy. One of the reasons for that increase is their increased defence budget. If we want the United States Government to work on reducing their deficit, it will be more credible for Europe to be prepared to fill the gap by increasing its conventional defence spending. We would then be able to make a serious suggestion to the United States to do something about its deficit and to accept some of the political problems of raising taxes.

The problem is that Europe — including the hon. Gentleman's own Government — is cutting defence expenditure by very large amounts. I urge Conservative Members to look at the question with great concern. I do not worry too much about the Labour Opposition, because they are not capable of understanding that, if they wish to be logical and consistent in