Airborne Early Warning System

Part of the debate – in the House of Commons at 8:31 pm on 18 December 1986.

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Photo of Mr James Prior Mr James Prior , Waveney 8:31, 18 December 1986

I declare a fairly large interest in this debate. I make no bones about it. I do not see why hon. Members who have an interest should not declare it or should not take part in the debate. I think that the House gains something when people who have outside interests are able to play a part in debates.

There was criticism because, on Tuesday, I asked the Prime Minister a question. I gather that the Whips said that they thought that it was unethical that I should do so. I have taken and given a good deal of stick over the years, and I bear no malice. The Government are a good deal better at giving stick than I ever was.

I unreservedly accept that my unpopularity in certain quarters has had nothing to do with this decision. I hope that all hon. Members will accept that I genuinely believe that, even if the national press does not. I regret the decision. It is wrong and it is a setback for Britain. This is an important contract because of its size and, of course, its prestige. It is one large job and it will not materially affect a company as large as GEC. Many lessons are to be learnt from this contract and from what has happened. I hope that there are no more cost-plus contracts, except during the early stages of development. Frankly, this contract has been thoroughly badly handled. GEC must take some of the blame, but the main culprit must be the Ministry of Defence. It was responsible for deciding on the money and the way in which the contract should be operated.

It is common knowledge that, time and again during the course of the contract, there were delays in obtaining equipment that GEC said was necessary. Years ago, it was said that the project would require a much greater capacity computer. I have seen the minutes of the meetings. GEC was not allowed to get the computer.

When it became clear that there was a clutter problem when looking towards land, it was said that there would have to be a traffic correlator, but we were not allowed to put one in. The transmitter is the most important item. Unless the transmitter works effectively and with power, nothing else in the aeroplane can work. The transmitter should have had a complete series of tests on the ground, but they were cut out during the moratorium of 1980–81 because there simply was not the money. The contract was handled on the basis of money, not performance. That is the lesson that we must learn for the future.

Eventually, the contract came to an end. A mistake was made by GEC. It should have stopped work on this contract at least five years ago, but it did not. It is tempting to take the attitude that one is being paid cost plus 4 per cent., so one goes on and hopes that something will turn up. It is a cosy relationship, but it simply does not work.

Since March, we have been operating on an entirely different basis. The right hon. Member for Llanelli (Mr. Davies) was wrong to say that it is £50 million of GEC's money. Since March it has been £25 million of GEC's money and £25 million of the Government's money. Since that time, we have been the main contractor. We told the Ministry of Defence what we would be able to achieve from March to 3 September. During that period, we achieved or exceeded all the items which we set out to improve. Two items in particular were clutter when looking towards land, which required the correlator, and the ability to see targets.

The spirit of the agreement that we entered into was that we would work together. We said that if, at the end of the six-month period, we were not able to make the necessary progress, we would accept that other firms would have to be approached and we would give up the contract. During that period, we made all the progress that we should have made. During that period, five progress reports were sent to the Ministry of Defence. On only the first report was any criticism made to us. I do not believe that anything is now known about the operation of Nimrod as against AWACS that was not known in March or earlier. One of my main contentions is that, quite frankly, from what we have heard today, they should not have gone on working after March. They should have cancelled the project then and gone for AWACS.

That was a difficult time for the Government because it followed the Westland and Rover incidents and there was a lot of anti-Americanism. The Government did not pursue AWACS. They kept on with the contract. There was a case then for cancelling it. The Government should not have taken £25 million of GEC's money in the way that they have since that time. [HON. MEMBERS: "Oh."] I do not expect any sympathy for that point, but it is an important ethical one that we should not forget.

I appreciate that the Secretary of State has had a difficult job. I wish to ask him a few relevant questions about the statement. His fifth point was that the Under-Secretary of State for Defence Procurement announced that, for Nimrod, we had negotiated with GEC revised contractual arrangements involving a sharing of financial risk with the company and giving it adequate incentives for completion. I should like to know what were the adequate incentives for completion. To my knowledge, the only incentives for completion were that, if we were successful in the final contract, we would be paid only 50 per cent. during the course of the contract until we had completed it to the final specification laid down by the Minister of Defence. Until that time, we would have been working entirely with our own money, and it could have cost us as much as £200 million which, even for a company the size of GEC, is a considerable amount.

I agree with my right hon. Friend the Secretary of State that the ASR 400 has not been changed. That is not what matters. The interpretation that has been put on it is what matters. Since 1979 there have been no fewer than 3,845 modifications. That tells us something not only about the complications of the project but about the interpretation of the ASR 400. The truth is that we could have got on with the ASR 400 if we had not been denied or delayed in the resources required at the right time. If we had been able to test the transmitter and it had worked, many of the problems that occurred when the aircraft was in the air and the radar was being tested could have been overcome more quickly.

Point 5 of the speech by my right hon. Friend the Secretary of State refers to the final time scale which is laid down for the provision of these aircraft. My right hon. Friend is right; we would have delivered the aircraft by 1990. The only outstanding problem at that time would be the joint tactical information distribution system. JTIDS is something that the Americans have to produce and that the Ministry of Defence has to buy and something over which GEC would have no control, so please do not let anyone blame us for the delay after 1990. We would deliver the aircraft by 1990. We have said so. If we refused to do so, we would be paid only up to 50 per cent.

My right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) made a remark with which I fully agree. He said that, generally, our technology has been of high quality but our costs have been too high. I talk to our technicians regularly. They are bitterly disappointed because they feel that they have been judged unfairly on their technical performance. During the past few weeks, they have said to me repeatedly, "We would not have minded if we had been beaten on price, but we mind desperately that we have been judged as being beaten on our technical performance."

There have been technical disappointments, but, as I have said, we set out with limited objectives in March and we have fulfilled them. I shall not go into the problems that remain—I have written to my right hon. Friend the Secretary of state about them—but they can be solved. We have shown not only the improvements which we have made but how further improvements can be made to bring us up to the necessary specifications. I do not think that "technical disappointment" is a fair way of expressing what has happened.

I come to the figures in paragraph 10. Frankly, I simply do not understand them. The total figure put in by GEC Avionics for the whole job on a fixed price, including inflation, was £508 million, which was to provide 11 Nimrods to the specifications laid down in ASR 400. Today we were told that we shall get six AWACS for £860 million—which does not allow for inflation, as we heard from my right hon. Friend the Secretary of State—and my right hon. Friend is taking an option on two more. Those eight AWACS are hardly equivalent to 11 Nimrods—in fact, to be on equal grounds, there must be 10 AWACS. But let us say that there are eight AWACS, which is £860 million plus the cost of the two on option, which takes the amount to about £1·1 billion. A little must be added for inflation, because the first aircraft will not be delivered until 1991, so let us say that the amount will be £1·2 billion. That is precisely double the amount that the 11 Nimrods are due to cost, and which we have guaranteed. It is not £200 million more but more than double.

We delude ourselves as a country if we do not get these figures in the right perspective now. I shall not be in the House to complain—I dare say that my hon. Friend the Member for Macclesfield (Mr. Winterton) will be on his feet quickly to complain—in five years' time when the cost has gone up and it is shown that it is double the cost of Nimrod. I am not at all happy about the figures that have been produced.

I can understand that there was not a great argument about the cost by the defence chiefs, because they know that there is not much cost for the next three years. They know that there will probably be less of a cost for the next three years and that the main cost comes later. As we all know from our political experience, we do not really care what happens in four or five years' time because we do not know whether we will be here. It is a problem for someone else to sort out. That is nearly always where we go wrong.

Many subjective judgments have been made, and I do not doubt that I am making a few. It is extraordinary that, in a contract as technically difficult as this, the advice from everyone in the Ministry of Defence has been unanimous. This must be the only time that this has ever happened. It is too good to be true. It leaves me with a sad feeling.

The defence industries are important to this country. It is essential that we do not have this terrible hiatus ever again. The Ministry of Defence must recognise not only that it is a major contractor and customer, which is responsible for a tremendous number of orders, high technology and employment in Britain, but that other countries look at us and see what we are doing. If they see that we are making a mess of this, no matter whose fault it is—we take some of the blame—it has an impact on what happens to other defence contracts. Our competitors abroad will be going around saying to our customers, "Look what they have done. They have left it. They were not satisfied." That is a very dangerous position for this country to get into.

We must co-operate more. There is not enough co-operation between the defence contractors and the Ministry of Defence. In my experience, we talk much more to our other customers than to the Ministry of Defence. We need quickly to look at that aspect. GEC and the Ministry of Defence need to repair a few fences quickly. I say that not necessarily because my making these comments may obtain more orders but because I genuinely believe that, unless there is that good contact and good understanding between the two sides over what is important for Britain, we cannot possibly get it right.

Grave charges are being levelled by GEC employees who have had good relationships with the radar establishment and with the Ministry of Defence for 15 to 20 years and who feel that this time something has gone wrong. They do not know what it is. They have not been told during the past few months what it is.