Contracts (Cancellation Charges)

Oral Answers to Questions — Defence – in the House of Commons at 12:00 am on 24th February 1987.

Alert me about debates like this

Photo of Mr Derek Fatchett Mr Derek Fatchett , Leeds Central 12:00 am, 24th February 1987

asked the Secretary of State for Defence which of his Department's contracts are currently subject to cancellation charges of 125 per cent.

Photo of Sir Archie Hamilton Sir Archie Hamilton Parliamentary Under-Secretary (Ministry of Defence) (Procurement)

There is one contract where the maximum potential liability is set at 125 per cent. of the contract price; it is for the first Trident boat, HMS Vanguard. It has been agreed, however, that once the contract for the second boat has been placed, the normal liability limit of 100 per cent. of the contract price will apply to both contracts.

Photo of Mr Derek Fatchett Mr Derek Fatchett , Leeds Central

Does the Minister's answer not show the extent to which the Government lack confidence in their ability to sell the Trident project to the British electorate? Is not the high level of surcharge simply an illustration of the Government's attempt to try to bind a future Parliament — a Parliament in which there will be a majority of Labour Members opposed to the Trident scheme and keen to cancel it?

Photo of Sir Archie Hamilton Sir Archie Hamilton Parliamentary Under-Secretary (Ministry of Defence) (Procurement)

No. Cancellation charges of 125 per cent. were offered on the first contract to take into account the massive investment that had to be made by VSEL on the first boat and the long lead times. That is the maximum amount that might be spent. The work must be done before the money can be paid out.

Photo of Mr Michael Meadowcroft Mr Michael Meadowcroft , Leeds West

What contracts will be under threat from the prospect of United States auditors being able to look at the books of United Kingdom companies? Is the Minister aware that this activity may well fall foul of the Official Secrets Act 1911 and lead to the companies involved being placed on the denials list and not being able to obtain equipment from the United States?

Photo of Sir Archie Hamilton Sir Archie Hamilton Parliamentary Under-Secretary (Ministry of Defence) (Procurement)

I do not think that there is any indication of contracts being under threat in that way.