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Lord Campbell of Croy: My Lords, I thank the noble Lord for his reply. Since his reassuring Answers to my Question on 30th June, at least one large racket has been broken up, with convictions of the culprits. Is he aware that that confirms our impression that his power and influence extend far beyond this House? Is he satisfied, though, that the special investigators whom he mentioned then can now detect the sophisticated forgeries which play a major part in these frauds, and which are so damaging to industry and retailers?

Lord McIntosh of Haringey: My Lords, I cannot tell a lie: I did not do it all by myself. The noble Lord is of course right. The assignment of 130 additional investigators under the spend-to-save initiative has been notably successful. However, I fear that the ingenuity of fraudsters advances as well as the skills of the investigators.

Lord Mackie of Benshie: My Lords, how did this type of evasion become so profitable and so widespread? Was it due to a reduction in staff in the Revenue? How did it happen? It used to be that one could hardly get a nip in a distillery and now apparently the land is flowing with duty free alcohol.

Lord McIntosh of Haringey: My Lords, legitimate duty free goods form a separate issue. As the noble Lord will be aware, it is planned to come to an end in July of next year. As to his first question, there has been an increase in the amount of fraud over a considerable period. There are many reasons for that. They include, but are not dominated by, differences in duty.

Lord Mackay of Ardbrecknish: My Lords, is not part of the problem that, as a result of the single market, we have had to take certain steps with regard to excise duty and how people can take whisky out of bond for export which allow these crooks to get into the business? Does the noble Lord realise that I greatly welcome his assurances that steps are being taken, and

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will be taken legislatively if necessary, to prevent that? Does he further agree that the problem is not just one for the Excise, it is one for legitimate businessmen who find that other businessmen can, by buying this whisky which was due for export, indulge in predatory pricing?

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord for nearly everything he says. He is right to say that we are taking action to review--if that is not a dirty word, too--the whole issue of fraud, smuggling and cross-border shopping. That was announced in the July Budget. The results of the inquiry are in their final stages and will be used in the run up to the forthcoming Budget. Concurrently, a high level group of member states of the European Union is due to report by March this year. Therefore, as the noble Lord suggests, a great deal is going on.

Lord Campbell of Alloway: My Lords, as part of the review system, could consideration be given to offering the bond system so that a rebate is paid against viable shipping or transport documents at the time the goods are removed from the warehouse for export? In other words, could we not introduce a new system which could be verified at the time with documents that are difficult to forge because they can be checked by Customs and Excise?

Lord McIntosh of Haringey: My Lords, the noble Lord's question contains two aspects. The first is a review of whether and when duty should be paid. Drawback fraud--that is when duty is paid and then claimed back as though the goods had been exported--is an important source of fraud and I do not think that the noble Lord's solution would work well. Secondly, documentation is as simple as it can be consistent with keeping proper records. The difficulty is the sophistication of those who continue to forge the documentation. We spend a great deal of time on checking cases of fraud and forged documentation.

Lord Stoddart of Swindon: My Lords, my noble friend mentioned the end of duty free shopping next year. Is he aware that many people are concerned that the end of duty free shopping will cause not only a great deal of discomfort to the ordinary public but will result in the loss of more than 100,000 jobs? Has my noble friend had representations from my old trade union, the Amalgamated Engineering Union--I declare an interest--which is concerned about the matter and is mounting a national campaign to oppose it?

Lord McIntosh of Haringey: My Lords, I am aware of the concern and that claims of job losses are circulating. They seem to the Government to be grossly exaggerated. The ending of duty free shopping has been presaged for many years as a natural and necessary part of the single market. The continuation of duty free shopping would require the unanimous vote of all member states.

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Strategic Defence Review

2.53 p.m.

Lord Chalfont asked Her Majesty's Government:

    When they expect to complete the strategic defence review.

The Minister of State, Ministry of Defence (Lord Gilbert): My Lords, the strategic defence review is now looking at possible missions for our forces, military tasks, future force structures and capabilities, procurement and a wide range of efficiency-related issues. Once all work on the review has been considered by Ministers, we will publish a White Paper setting out our overall conclusions. I envisage that the White Paper will be published in the first part of this year.

Lord Chalfont: My Lords, I thank the Minister for that Answer. Can he assure the House that the defence review is still determined by foreign policy and defence requirements and not by pressures for further cuts in the defence budget? In that context, will he take an early opportunity to discuss these matters with officers and men and women of the Armed Forces, where he will find considerable concern and anxiety about their future?

Lord Gilbert: My Lords, I am happy to confirm that the review is and will remain foreign policy-led. The noble Lord is right in saying that we are discussing, and will continue to discuss, these matters with members of the Armed Forces. It is particularly important that we maintain well equipped and well motivated forces and that is part of the strategic defence review. I am happy to be able to tell the noble Lord that later this week I shall be visiting British service personnel in Kuwait and Bahrain. I shall also be visiting Qatar, when I hope to be able to brief our friends in those countries about our efforts to find a diplomatic solution to the Gulf crisis.

The Earl of Carlisle: My Lords, if the strategic defence review recommends measures which will entail greater expenditure, will the Minister appeal to the Treasury for an increased defence Vote? If that is not forthcoming will Ministers in the Ministry of Defence resign their offices of state?

Lord Gilbert: My Lords, it is a little premature for us to be considering resignation. We are not without hope of obtaining certain enhancements to our capabilities as a result of the review.

Lord Bramall: My Lords, does the Minister agree that with defence commitments as they are and as they are likely to continue, with the Armed Forces so manifestly overstretched and undermanned, and with previous defence studies going back for at least nine years prying into every nook and cranny of defence value for money, there can be no logical case for reducing further the resources allotted to defence?

Lord Gilbert: My Lords, I note what the noble and gallant Lord says. He speaks with great wisdom on these

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matters, but, even after his tenure as Chief of the Defence Staff, we believe that there is still waste and that we can gain efficiency enhancements. We hope to be able to obtain additional resources for the defence Vote out of those savings.

Lord Howell of Guildford: My Lords, can the Minister confirm whether the Eurofighter is included in the strategic defence review? It is an expenditure of about £15 billion, which is possibly the largest portion of defence expenditure. It is a lot to exclude. Looking at our foreign policy as a whole and the review as part of that, can the Minister also confirm that the budgets and figures will take account of expenditure in other parts of our international policy, including a small part of the budget taken up by the Foreign and Commonwealth Office diplomatic wing?

Lord Gilbert: My Lords, the noble Lord is right that the Eurofighter is an expensive project. It will be the biggest single drain on our resources in the years ahead. We have made it clear that we are committed to buying 232 of these planes in conjunction with three of our leading allies in Europe. I am pleased to say that the programme is making a great deal of progress.

As regards other elements of expenditure, I draw the noble Lord's attention to the initiative of my right honourable friend the Secretary of State for Defence on defence diplomacy. As the noble Lord indicated, it costs a great deal, but we believe that it will bring considerable bonuses in enhanced security.

Lord Dean of Beswick: My Lords, the Minister must be aware that one of the major features of our survival during the last war was that we had the largest merchant navy in the world. It was able to suffer tremendous losses while continuing to supply the logistics. During the past 25 years it has disappeared from the oceans. Can the Minister tell us whether the White Paper will deal with the delivery of logistics? We have no merchant navy. We were called to action in the Falklands and managed to get away with it, but we could not do so again because we have no ships.

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