Defence Procurement

– in the House of Commons at 12:55 pm on 2nd February 2006.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Watts.]

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence 12:58 pm, 2nd February 2006

As Minister for the armed forces I have the privilege of working with and meeting our servicemen and women on a day-to-day basis and know that they are the finest in the world. The nation is fortunate to have them. In an uncertain and difficult environment, they stand ready to respond to any challenge, whether in support of operations in Iraq, Afghanistan, the Balkans or elsewhere, or assisting in civil disaster relief, such as in the aftermath of the Pakistan earthquake or the 2004 Boxing day tsunami.

As the House will be aware, following the recent deaths of Lance Corporal Allan Douglas from the 1st Battalion the Highlanders and Corporal Gordon Pritchard from the Royal Scots Dragoon Guards, 100 British personnel in Iraq have now lost their lives, 77 of them as a direct result of hostile action. Our thoughts go to their families, friends and loved ones at this difficult time.

As well as those who have tragically lost their lives, we should not forget those who have been injured. As my right hon. Friend the Secretary of State for Defence made clear on his visit to injured service personnel, some 230 UK personnel have been treated at UK medical facilities in theatre for wounds as a result of hostile action between March 2003 and December 2005. Over the same period, some 40 UK service personnel have been categorised as "very seriously injured" as a result of injury in Iraq, whatever the cause, meaning that their life was imminently endangered. Between February 2003 and December 2005, about 4,000 military and civilian personnel were medically evacuated from theatre, the majority of whom were not casualties of hostile action. Given the focus on that issue, I assure the House that the Ministry of Defence is taking steps to ensure the accuracy of our information on casualties, which we will publish in the next few weeks.

Our care for our personnel is world-class and it will continue to be so. I know that the whole House will join me in paying tribute to the men and women of the armed forces in Iraq and elsewhere who have done, and continue to do, a tremendous job serving their country.

Despite those tragedies, we cannot let ourselves be distracted from the job to be done in Iraq, where we are acting to assist the Iraqi people and their elected representatives. We must honour our commitment to the Iraqis and we will leave once our job in Iraq is done—once the conditions for the handover of security to the Iraqis have been met and we, the Iraqi Government and our coalition partners are confident that the Iraqi security forces can operate without our support.

The UK also remains committed to the emergence of a prosperous, democratic, secure and stable Afghanistan. We have already transformed the country from a pariah state that harboured international terrorists into a functioning democracy. For the first time in 36 years Afghanistan has both a democratically elected President and Parliament.

Life for ordinary Afghan people has changed and is continuing to change for the better. More than 6 million children are back in education, a third of them girls, and many thousands of children have been immunised against serious diseases. We are seeing the staged progression and development of the ISAF—international security assistance force—mission across the whole of Afghanistan.

The south is a less benign and more complex environment, where insurgents, the drugs trade and corruption pose a greater threat to security—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I take it that these are the Minister's preliminary remarks. Today's debate is specifically about procurement.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

Very much so, Mr. Deputy Speaker. But we have to have set our procurement strategy against the environment and theatres in which our people operate. I was setting the scene, but I shall come on to the specific issue.

Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre

On a point of order, Mr. Deputy Speaker. You alluded to the subject of the Minister's opening remarks, so I am looking for your guidance. The Minister opened his remarks with casualty figures that have until now been unavailable to many of us who have tabled parliamentary questions about the actions in Iraq and Afghanistan. Is it in order for the Minister to release the figures in a debate on procurement?

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

The Minister's remarks are a matter for him, but I repeat what I just said to him: this is not a general debate about Iraq or Afghanistan, but is specifically about procurement and it would be helpful to the whole House if he confined his remarks from now on to procurement.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

Of course I will, Mr. Deputy Speaker. At all times I try to keep within the rules of the House. Mr. Wallace is wholly wrong, however. The figures have been made available; indeed, I understand that parliamentary questions have been answered today. I suggest that he read the Order Paper to keep abreast of current developments. The information I gave was given previously, but I thought it important that we also recorded it here—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I am sure that the Minister's response is a genuine response to the point of order, but it simply exhibits the problem that arises if we widen the debate too much. Again, I remind the Minister and the whole House that today's debate is about procurement.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I accept all that, Mr. Deputy Speaker. I was of course coming to the conclusion of the context in which our people operate and I then intended to talk about the need to ensure that we have battle-winning equipment to ensure their success.

I was explaining that the environment into which our troops are going in the south of Afghanistan is less benign and more complex, where insurgents, the drugs trade and corruption pose a greater threat to security. That is why we have committed to move to the south. By deploying there, we hope to create an environment where the Afghan Government can operate freely and securely to bring about the progress we have already seen elsewhere. The international conference held this week in London resulted in a renewed international commitment to Afghanistan and will make a major contribution to its rebuilding.

Our forces' proven ability to act as a force for good in the world—in Iraq, Afghanistan or elsewhere—is testament to them and the equipment they use. Contrary to some opinions, the armed forces are provided with world-class equipment to support them in their tasks. As a result of the Government's sustained investment, about £5 billion a year is spent on new equipment, with £6 billion being spent across the entire equipment plan, and that will continue to be the case. In doing so, we are supported by a strong and innovative national defence industrial base. We need to ensure that our armed forces continue to have such support so that they have the equipment they require, on time and at best value for money for the taxpayer.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I want to make some progress. I have hardly started to talk about procurement yet and I am sure that the hon. Gentleman has some points to make about that. I have not yet mentioned any particular procurement streams, but if he is intervening on the general context in which our people operate I am prepared to give way.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am grateful to the Minister. From a reply to a written question on a general point, a Member can establish the cost of a piece of equipment, but I cannot get from the Minister the estimated costs of the Eurofighter, for example. How does that general point tie in with what he was saying?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

We would need to look at the particular question. We constantly answer a range of questions. If I remember correctly, we said that some of the issues are held in commercial confidence, for very good reasons—we could enter the next phase of negotiations for tranche 3. I do not know how sophisticated the hon. Gentleman's understanding of procurement processes is, but he must know that we have to try to retain matters that are important to us as we negotiate to get best value for the taxpayer. Perhaps he would write to me if he thinks that we are not giving him best information—I do not know for what purpose, although I hope it is not to undermine what we are trying to do to get best value for the taxpayer—and I shall see what additional information I can give him.

Photo of Michael Jack Michael Jack Conservative, Fylde

In reply to my hon. Friend Mr. Bone, the Minister used the word "could" in the context of the negotiations on tranche 3 of Eurofighter Typhoon. Is it still "could" or is it "will" enter? Will he clarify his language on that point?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

The right hon. Gentleman probably means would I tell him rather than could I tell him. As he knows, we are committed to tranche 3, and the negotiations will not proceed until 2007, or slightly before that. I used that phrase because things can change; but that is not what we are planning, and we are still intent on continuing the process.

I was saying that we need to ensure that our armed forces have the equipment that they require on time and at best value for money for the taxpayer. That is why, in December 2005, the Government published the defence industrial strategy, which had that requirement as its principal aim.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Is the Minister convinced that the privatisation agenda, which could lead to the loss of 20,000 MOD jobs, will not adversely affect the MOD's ability to be an intelligent customer and to acquire good-quality equipment at best prices in an immensely complex sector? Is he concerned that under the policy of collocation jobs will be lost in deprived areas such as south Wales, the west midlands and Cumbria, only to be transferred to prosperous areas where recruitment and retention are difficult, such as Abbey Wood, Bath and High Wycombe?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I do not recognise the premise of the question. We are seeking not to privatise but to drive through very significant efficiencies. We have said repeatedly from the Dispatch Box that we are committed to achieving £2.8 billion, or thereabouts, in efficiencies over the next three years. We must therefore consider how we deliver our services—sometimes in partnership with industry and, sometimes, in-house, but at all times trying to maximise the efficiency of operation.

My hon. Friend David Taylor mentions collocation. If he is arguing that we should keep two departments separate from each other, when we can make significant efficiencies in back-office staff by collocating, thereby releasing money for the front line, I could not disagree more.

R

Offence/Defence is inefficient. Any attempt to make it so results in death, I could point to an obvious example involving a freind of mine and a bullet proof vest but I won't. Technological achievements in the field of war are an obvious necessity but is it really sensible to invest billions in a novel way of killing each other when we have already become proficent at it.

Submitted by Richard O'shea

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

We must ensure that all those who support the front line do their jobs as efficiently and effectively as they can. By driving through that agenda, we are ensuring—this is where I shall come to the procurement aspect, Mr. Deputy Speaker—that we will be able to sustain the major procurement programme.

I hear language that is part of a major campaign, but I suggest that my hon. Friend may want to ask one or two of the unions that are organising the campaign whether they have ever passed a resolution at their conferences calling for more money for defence—I suspect not—and if they want a growing defence base, they should join those of us who think that that is essential.

Photo of David Wright David Wright PPS (Rt Hon David Miliband, Minister of State (Cabinet)), Office of the Deputy Prime Minister

My right hon. Friend will be aware that staff at Sapphire House in Telford do an excellent procurement job. They have made a constructive alternative proposal to collocation, known as the straw man paper. Will he commit himself to taking another detailed look at that proposal before he makes any decision about the future of Sapphire House?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

My hon. Friend has been very active in respect of that and other decisions that might be deemed difficult that have landed on his area of the country and his constituency in particular. He will know that I am only too willing to meet the trade unions and local representatives, as well as him, to listen to the arguments and to put what we are doing under test. One of the projects that I inherited is a very good example, although people seem to have forgotten about it. The airfield support project was an amalgamation of a new, bigger review with what was originally defined as "Fire Study 2000". We spent a long time examining our airfield support. Ultimately, when it became clear that the private finance initiative proposal would not produce results, we abandoned that approach.

I give that example to show that, at all times, we put such things under intense scrutiny. My hon. Friend the Member for North-West Leicestershire mentioned the intelligent customer in the original question. We must test all our current projects by determining whether we would create a gap or a potential problem for ourselves in the future. If we cannot satisfy that test, we should not proceed. We undertake that examination at all times.

I think that the straw man paper has been withdrawn, but I will write to my hon. Friend David Wright, who has been very assiduous in pursuing the issue.

Photo of Mark Pritchard Mark Pritchard Conservative, The Wrekin

Does the Minister agree that it is absolutely wrong, at ministerial or official level, that a lease should be signed on a building in Bristol before the end of the consultation period after which people might be moved from Telford to Bristol? Is he aware that the Comptroller and Auditor General has been asked to investigate? How can the consultation process be open and transparent for Defence Logistics Organisation workers in Telford when the deal has been signed already down in Bristol?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I ask the hon. Gentleman to calm down a bit. Knowing that a work stream is being undertaken that could result in the collocation of two major headquarters, we have considered whether we can benefit by procuring at this stage in the market. We have made the decision to take up that office space. Of course, if the collocation does not proceed, we will release that space back to the market. If we wait or do otherwise, the office space to meet our needs might not be available. The correct management and ministerial decision was taken to give us the opportunity of ensuring that we are in the best position. If that proves not to be the right decision, our judgment is that we will not suffer a loss. Indeed, we might well make a profit, but that is not what drives us. We are trying to get the best balance. We have not reached a conclusion on the consultation—far from it—and we hold rigidly to that position.

I suggest that the hon. Gentleman read the paper on which he campaigned at the last election—the James report—with all its initiatives to dispose of real estate, other assets and many of the existing working structures, without any attempt even to examine the territory. It simply said, "Let's privatise this; let's dispose of that; let's get rid of this." He campaigned on that in the last election; he is now asking me to be very careful with his constituency, saying "Do it to others, not to me." That is the principle that he applies.

I want to make some progress and to talk about the defence industrial strategy. The rationale for publishing the DIS is clear. Since the strategic defence review was undertaken, the environment has changed considerably. This nation no longer faces the dangerous but relatively predictable threat posed during the cold war. The threat now, however, is no less dangerous: those involved can strike at any time and they fight unconventionally.

The way in which our armed forces have taken on the new challenge presented by the war on global terrorism is testament to their proven adaptability and flexibility. Equally, we must ensure that the equipment capability requirements of the armed forces can be met now and in the future. We need to identify the core skills and industrial capabilities that are required onshore to sustain the armed forces' ability to operate with an appropriate level of sovereignty—indeed, we have done so with the DIS.

The DIS provides industry with the certainty to plan ahead and invest for the long term. We want to attract skilled and enthusiastic people to the industry. As a result, we intend to work with the industry on how we do that and on schemes to develop our people. The DIS involves a studied assessment of each individual industrial sector. Where our requirements have been set, they are measured against our procurement activity, and where there are mismatches they are set against the sustainment work required.

In certain sectors, industry has to move now, to ensure that the industrial base is appropriately structured for the future. Now is the right time to do that, while many of our companies are busy delivering the series of new platforms that the Government are procuring. Whatever the rate of new production, we need to ensure that the technologies that give our equipment its cutting edge, which are often provided by smaller enterprises in the supply chain, are nurtured and developed.

The discipline of systems engineering will continue to be vital in seamlessly integrating new technology to our current infrastructure. The outcome of all that will be that, for the first time, industry will have a much clearer idea of our priorities, enabling both industry and investors to plan for the future in confidence.

At present, we are in the middle of a substantial investment programme in new equipment for the armed forces: not least, with the components of carrier strike, the CVF—carrier vessel future—and the joint combat aircraft, Astute attack submarines, the A400M transport aircraft, Typhoon and complex weapons, such as Storm Shadow, and forecast spending of more than £2 billion a year over the next decade on our drive towards network enabled capability.

Yesterday, HMS Daring, the first-in-class of our Type 45 destroyer fleet, was launched. I regret that I was unable to attend, but my right hon. Friend the Secretary of State for Defence was there and it was a fantastic experience, not just for those who had helped to plan and build the ship, but for the tens of thousands of people in Glasgow who watched that unique dynamic launch. It was inspiring and it sends the right message to taxpayers about what they are getting for their money.

Daring's launch was a great advertisement for the skills and commitment of the thousands of people involved in the programme. It will be the most powerful destroyer that the UK has ever built and all those involved in the programme can be extremely proud of what has been achieved. Daring's on-board living standards, which have generated much positive press interest, also help to demonstrate the priority that we are giving to improving the quality of life of members of our armed forces. The equipment will take the armed forces into the 21st century with the kit that is needed to meet a varied and dangerous threat with certainty.

Photo of Julian Lewis Julian Lewis Shadow Minister (Defence)

I also had the great privilege of attending the launch yesterday and am grateful to BAE Systems for making that possible. I entirely endorse everything that the Minister said about the great efforts of the work force and design team, and I am sure that none of us will ever forget yesterday's experience. Bearing in mind the fact that we are now operating with a fleet with considerably fewer frigates and destroyers than the strategic defence review predicted would be necessary in 1998, even though our commitments have increased, is the Minister in a position to let the House know what the final total of Type 45 destroyers to be constructed will be?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I am sure that the hon. Gentleman had a good day in Glasgow yesterday—I just wish that I had been there to see it. He is always welcome to go back to Glasgow and I am sure that he will be well received by the people of that great city.

The original plan was for 12 vessels in the class. After the re-examination of our needs and the budget, the number was recalculated as eight. We have ordered six, but the Secretary of State has said that he would like to see eight. The hon. Gentleman will know that we will have to consider appropriately the possible benefits in the future to ensure that we can get the best price, but we are not at that stage at the moment because we do not have the sums in the defence budget. We need to address the priorities in all the other areas.

I remind the hon. Gentleman that we are spending £6 billion through the equipment plan. That considerable sum must be shared among all our needs for land, air and sea. Scrutiny and examination of the situation will continue. The chiefs themselves—the military planners—will have to consider the capabilities that each service requires and make their case, taking account of the known priorities. There must be balance across the breadth of defence. The equation is not new; it has probably been there since time immemorial and will continue for decades, if not centuries, to come.

Photo of Ed Vaizey Ed Vaizey Conservative, Wantage

I echo the comments of the Minister and my hon. Friend Dr. Lewis about the Type 45 destroyer, with which the Navy is absolutely delighted. We are also delighted, especially because it fills the Americans with a huge amount of envy. Will the Minister take his remarks further because although the Royal Navy is delighted with the destroyer, it is aware that a balance must be struck between capability and presence? For example, I understand that we have only one ship in the Atlantic, with its duties divided between the Caribbean and the Falklands, whereas we used to have two. I know that it is extremely difficult to resolve the equation, but would be interested to hear the Minister's further remarks.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

Such tasking has been in place for a considerable number of years and seems to work extremely well. I had the privilege of visiting HMS Richmond a year and a bit ago when it was on the allied patrol task (north) deployment. It did a tremendous job when it was involved in the post-hurricane relief effort and also contributed to our counter-narcotics activities in the area. HMS Cumberland has just come back from the deployment and it carried out tremendous work, too. The evidence shows that successful missions are being carried out. We must strike a balance by targeting where we can give best effect. Clearly, the Navy would like to have more boats, but the Army and Air Force would like to have more of other things, too, so the priorities must be balanced. The Conservative party had to balance priorities when it was in government. I will not make the political point about the legacy problems from which we are suffering due to overrun, costs and projects running well behind time. Those problems are still creating huge difficulties for present-day and even future procurement programmes. When the hon. Gentleman makes points of criticism—

Photo of Ed Vaizey Ed Vaizey Conservative, Wantage

It was not a critical point.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

The hon. Gentleman may not want to go there, but we must bear in mind the situation that is being imposed on the present-day Government because of the decisions—poor decisions in some cases—taken by Governments past.

The Government are overseeing a substantial modernisation of our armed forces' equipment, which is supported by the longest period of sustained real growth in defence spending for more than 20 years. I believe that there can be a tendency to put too much focus on the shortcomings of legacy programmes to the detriment of the many successes that we have achieved. For example, we had the early delivery of the strategic sealift service some 20 months ahead of its target date. The mobile artillery monitoring battlefield radar was delivered six months early. The C-17 was in service three months early and only a year after selection, and the successor identification friend or foe project is five months ahead of schedule. Those are just some examples of the successes.

With industry, we need to ensure that all our equipment continues to remain cutting-edge throughout what are likely to be very long service lives. For example, the Tornado GR4 upgrade programme that was completed in 2003 and the introduction of Harrier GR9 in September this year will ensure that the capability and combat effectiveness of both those platforms will be maintained for many years to come. Furthermore, we expect Typhoon, which is now coming into service as the bedrock of the RAF's military capability, to be in service well into the 2030s and perhaps beyond.

That demands a different approach from both the Ministry of Defence and industry. The approach must shift from the up-front procurement of new generations of platforms and equipment to the ability to support them throughout their lives, which is known as through-life capability management. We require industry to be able to upgrade our equipment with new technologies and capabilities, often rapidly, in response to either operational demand, or the emergence of potentially disruptive technology. While this will need, in some cases, industrial restructuring and rationalisation, it actually represents a significant long-term business opportunity for industry and establishes careers for the highly skilled people on whom industry relies for delivery. It will also require, where we develop long-term relationships with industry, continued innovation and the use of a range of commercial tools to secure value for money.

Photo of John Smith John Smith Labour, Vale of Glamorgan

Does my right hon. Friend share my worry that the three platforms to which he referred, which will play such an important role in our future defence capability, will all be supported by a single monopoly supplier—one company? Does that raise any concerns with him when he thinks about the future needs of British defence?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

It does not raise concerns, but shows that we need to think about what we are doing, which is the whole purpose of the defence industrial strategy. My hon. Friend has got it wrong. The company to which he refers is already the monopoly prime supplier and the design authority. It has now moved its people on to the main operating bases so that they can work alongside RAF personnel with greater synergy so that we can turn round the aircraft as effectively as possible. Importantly, we retain the key skills of the design authority company so that we ensure that we have the capacity to maintain the through-life of aircraft.

My hon. Friend and I have tussled over this time and again. I have no doubt in my mind about the validity of the decision that has been taken because it was based on evidence, whether for fast jet or helicopter support systems. We have not taken a one-size-fits-all approach. In one case we have gone on to a main operating base, but in the case of Defence Aviation Repair Agency Fleetlands, we have moved towards a civilian base on which military personnel work. We must balance the best way in which we can get value for money for the taxpayer and, more importantly, the way in which we can get the best guarantee that the greatest number of aircraft is available at any one time. The evidence already shows that that is happening.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I will move on, if the hon. Gentleman does not mind.

I want to turn to the maritime sector. We are undertaking the largest naval shipbuilding programme for two generations. Both the Astute submarine and Type 45 destroyer programmes are in their manufacturing phase and we announced details last year of the industrial alliance to take forward the future carrier programme, which will deliver a step change in the power projection capability of our forces. The two new future carriers will be the two biggest warships ever to be built in the United Kingdom, and the associated work could sustain and create some 10,000 jobs across the UK during its design and manufacture period. We also announced last week our intention to work with the French Government on the demonstration phase of that project. That makes clear sense, as it allows both countries to benefit from savings on shared procurements without slowing the tempo of the project. France, as we know, will make a financial contribution to share in the investment that we have made. We have significant investment planned to develop the Royal Fleet Auxiliary as part of the military afloat reach and sustainability—MARS—programme.

New warship platforms such as HMS Daring are important, but we must be able to support them as part of our overall capability to deploy worldwide. MARS vessels will make a significant contribution to providing sea-based support for amphibious, land and air forces. While that shipbuilding capacity gives us an opportunity to invest in important skills and capabilities, there will be reduced demand in future. We therefore need to plan now with industry to ensure that the right capabilities are invested in, developed and sustained in times of reduced capacity. The maritime industry is fragmented, with high overheads and a skills base that is spread across too many different companies. The DIS analysis has challenged our previous policy, which required all warship hulls to be built onshore, the rationale being better to manage a consistent "drum beat" of shipbuilding for industry to sustain critical capabilities.

The analysis focused on what those capabilities actually are. In that context, "hulls" is too simplistic a term. We need to sustain high-end skills to design and integrate complex warships and maintain them through-life. We need to retain, too, the ability to design, manufacture and support all aspects of submarine capability. We will develop that work with industry through a maritime industrial strategy team. Our priority is to develop a stable and healthy programme to build complex warships—the "drum beat" to which I referred. It should maintain the critical capabilities, whatever the capacity of industry.

Regarding submarines, we are working to control cost growth and to identify opportunities for rationalisation in the various onshore monopolies. Submarines are a core capability for retention, but the industry is made up of a series of monopoly suppliers. With only one customer, the need to control costs in the supply chain is paramount. We are addressing that by developing a consistent work load for the sector to help industry to sustain capability and drive down costs. We are looking at new ways of doing business for surface ship support, where a longer-term relationship with industry is more likely to safeguard capabilities at value for the taxpayer. The result of that strategy will provide workers with the security to develop their skills in long-term structured and secure employment.

Turning to land systems, the armoured fighting vehicle industry provides our land forces with significant military capability. We are currently developing our plans to deliver the complex system that will make up a new family of medium-weight vehicles known as the future rapid effect system—FRES. At the same time, we need to plan ahead for the support arrangements of our existing fleet of some 5,000 vehicles, which will remain in-service for some years. That is why we announced alongside the DIS last year our plans to partner BAE Systems, which supplies 95 per cent. of our existing AFV fleet, better to manage fleet support.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I support the progress on land systems, but is there any scope to partner the Swedish Government, who are developing SEP as their equivalent to FRES? Could we try to work with the Swedes, who are collaborating with BAE Systems, to secure a joint venture?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

The DIS is innovative, so it must look at new ways of working. However, it must also retain core capabilities in this country. BAE Systems is good at identifying market opportunities, but no doubt we will hear more about the matter that my hon. Friend has raised. We need that equipment, however, and we must look at how best we can secure it.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I should like to make some progress, and I have already given way to the hon. Gentleman.

The partnering arrangement signals our long-term commitment to industry in this sector. It envisages a different way of doing business, as BAE Systems will be contracted to provide AFV capability when and where we need it. It provides for retained access to innovative subsystems and technologies in the supply chain. That will require effort on both sides, but the benefit is mutual, as it safeguards critical capability and at the same time achieves better value for money.

It is an exciting time for the aerospace industry, with the development of two highly capable aircraft—Typhoon and the joint combat aircraft. Looking further ahead, we will develop potentially transformational uninhabited combat aerial vehicle—UCAV—technology.

Photo of Brian Jenkins Brian Jenkins Labour, Tamworth

I am listening with great interest to my right hon. Friend, who is setting out strategy for the defence industry, but I am concerned about the restructuring of the industry. Who will undertake that restructuring—the Ministry of Defence or industry itself? Will we ask firms to fall on their sword because they are longer needed? How can we guarantee that the best remain rather than undertaking different work such as offshore platforms? Who will drive the restructuring forward over the next 10 years?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

The principle of the DIS is to find out what our needs are. Industry requires that assessment if it is to plan for the future retention and growth of skills, the recruitment of new personnel, and investment in new technology and plant. It can no longer do so with hunger and burst, which has not served it to best effect or advantage. We now have a framework on which we can build. As for the question of who will restructure industry, the answer is industry itself. If it wants the opportunity for which it has been asking—and we are delivering that opportunity—it must face up to reality and restructure. If it thinks that something is no longer coming downstream, it should ask itself why it should invest in it. If it thinks that something is a major opportunity, it should invest in it, because it is certain that it will happen. There is no guarantee of success, but if restructuring does not take place we will certainly not achieve success, and we would have to continue, as we have in the past, with hunger and burst, which would mean that industries would operate under threat of closure. Restructuring for best advantage is better than the pattern of closure that we have had in past decades, and the strategy gives us the best opportunity to achieve that.

As for the platforms themselves, Typhoon is a multi-role platform that will take over roles currently filled by the Tornado F3 and Jaguar aircraft. It will be supplemented by the arrival of the joint combat aircraft to succeed the Harrier and Sea Harrier and perform a variety of multi-role operations. We want to retain and develop engineering and design capability to ensure that Typhoon and the JCA are supported, operated and upgraded throughout their service life. That means harnessing and inserting new technologies, so that the aircraft remain leading-edge while investigating the military potential of UCAVs.

The industry must adapt to meet that change in emphasis from the design and build of new aircraft to supporting them through-life. BAE Systems, Rolls-Royce and Selex, among others, will play a critical role, and there are significant business opportunities available in the long-term support of our future aircraft. We will work with industry throughout the year on the business rationalisation and transformation needed to sustain the skills and capabilities that we require in a cost-effective manner.

As for rotary wing, the helicopter sector shares many of the characteristics of the AFV industry, and we would wish to retain the abilities to maintain and upgrade our existing helicopter fleet with a large onshore supplier. To that end, we are developing a partnering arrangement with AgustaWestland, whose Future Lynx product remains our preferred solution to meet a variety of our future helicopter capability requirements. The outcome of that work will sustain the necessary systems engineering capabilities. We need to indicate the way forward on developing efficient support solutions for our existing fleet. Most importantly, that work will provide the Armed Forces with the military capabilities that they require. We expect to finalise the partnering arrangement with AgustaWestland this spring. We will, however, continue to look to the vibrant and competitive global market to satisfy our future requirements.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

The Minister has glossed over one of the most important aspects of the procurement debate, which we should discuss—the F35. Has he had any discussions with Henry Hyde, the Congressman—[Laughter.] Hon. Gentlemen may laugh, but it is a serious matter—he is the chairman in charge of organising the relationship between Britain and America. We are close to losing the deal, which means we will have two aircraft carriers without any aeroplanes on them, unless we get a deal giving us the technology to repair and maintain those aircraft.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

In a sense, that view is shared across the House. The hon. Gentleman asked whether I had met Congressman Hyde. I have not. The last time I went through Washington he was not available, but I met other key players. Meetings such as the hon. Gentleman suggests are the role of the Minister for Defence Procurement and of my right hon. Friend the Secretary of State. All hon. Members who pass through Washington should be briefed on the issue and should raise it. If they do not, they are not doing this country justice. We must make clear to our American friends and allies the importance of the issue, and we continue to do so. We are making some progress, and I will comment on it later.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My right hon. Friend rightly mentioned fast jets and heavy lift capability, but will he describe the benefit of the A400M and how many jobs that could bring to Rolls-Royce, BAE Systems and the rest of the supply chain?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

That is an important aircraft, which is taking a long time to arrive. That is the reason for the C-17s. Given that the A400M will be leading edge and will have very good technologies on board, it will be able to do a great deal of strategic airlift and strategic activity, which will make it a forerunner in its field. That is why we are excited about the project and waiting for it to be delivered. I hope to be at the Dispatch Box when that happens.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

How confident is my right hon. Friend that a stronger version of the JSF will be developed? If that version is not developed, is a carrier version of the Eurofighter being considered? [Interruption.]

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I hear that described as plan B. As I have said before, we do not plan for failure. We plan for success and put all our efforts into achieving it. What we are planning is the best aircraft of its type, for various technical reasons. The question of marinising Typhoon has been mooted. People are talking about it, but we are not planning that. There are technical issues concerning the stress on such an aircraft landing in the way that it would land. There are major technical issues involved, so hon. Members should not just read the headline and think there is a simple solution. [Interruption] I said earlier that I hope I am at the Dispatch Box when the A400M arrives. With the length of time I am taking, I may well be.

Photo of Gavin Strang Gavin Strang Labour, Edinburgh East

The House is grateful to my right hon. Friend for what he has said. The issue is hugely important, as he understands, and a decision will have to be taken. Is not this the year that it will have to be taken? Either we go down the road that I assume is still the Government's preferred option—my right hon. Friend might describe it as plan A—the JSF, using the big new carriers, or we recognise that it must be the Eurofighter tranche 3, navalised, as plan A.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I thought I had answered the question, but let me try again. We are confident that we will succeed in what we have set out to achieve. That must be the main thrust of our argument and we must impress it upon our US allies. We are the main contributor to the project—a level 1 contributor, up to $2 billion. That is a significant commitment. We think we will succeed. We are determined to succeed. Beginning to debate alternatives only allows others in the US to say that we are not really interested. The project remains our preferred option and we are confident that we can achieve it.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I have taken a substantial number of questions on that topic, and there are others that I want to address.

Within the complex weapons sector we have invested considerably over the past decade in new programmes such as StormShadow and Brimstone. These weapons provide the armed forces with the ability to deliver precise effects, which are able to achieve military advantage at a reduced level of usage. Our analysis has consequently highlighted a series of vital capabilities for retention in this field, with particular emphasis on the design of new weapons and upgrades, integrating them into the wider military network and support through life. But we need to be realistic. Our recent investment cannot continue, and on current assumptions will decrease by 40 per cent. over the next five years, creating overcapacity and a need for rationalisation.

We will work with all elements of the onshore industry, including overseas companies that have established a UK presence in the sector, on how best to tackle that. This may require us to temper international competition in the short term and to consider whether there are solutions that we might develop with our allies to maintain critical skills. We intend to work on the necessary solutions this year and to implement them in 2007. That will not be easy, but it is essential that we do so in this critical field.

We also need to ensure that our armed forces can have continued and long-term assured access to less complex munitions, while maintaining the option to go for the best in the wider global market, where security considerations permit. Currently 80 per cent. of our existing munitions requirements are met by BAE Systems via an agreement that commits us to find ways more to effectively provide munitions across the supply base. At present we are engaged with the company to enhance this agreement through a new long-term planning agreement. This will mean changes, but we are confident that we can ensure security of supply.

I make it clear that we will continue to operate the most open defence market in the world, encouraging others to follow our example. As an example of this, we have recently developed with the European Defence Agency a code of conduct regarding the procurement of warlike goods. We expect this to lead to a more open European defence equipment market, giving UK industry a greater chance to win business abroad.

The UK industry has also been successful in developing its presence in the sizeable US market and is a major contributor of equipment to the American Department of Defense. UK defence sales to the US have increased by about £500 million to a total of nearly £1.5 billion over the past five years. Over the same period, there has been a corresponding increase in the UK's share of total US defence investment spending from about 1.5 per cent. to 2 per cent.. The UK accounts for about 50 per cent. of total US defence procurement spending overseas.

Despite our close industrial, political and military ties, however, we continue to experience difficulties in securing the necessary technology transfer from the US to guarantee our sovereign operational independence. Such technology transfer is vital if we are to continue to co-operate with the US on major equipment programmes. As Mr. Ellwood suggested in his question, this is an important issue for us and one that we continue to raise at the very highest levels.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

No, I must make progress.

The defence industrial strategy also makes clear our commitment to developing research and technology, acknowledging the vital role that that plays in designing emerging concepts and technologies, and also enabling the Department to scan the horizon for new, potentially disruptive, technologies. The MOD invests around £2.5 billion annually in research and development covering the breadth of technical and innovative endeavours, and our immediate priorities are laid out in the DIS.

My right hon. Friend the Secretary of State for Defence announced earlier this month our intention to float Qinetiq on the London Stock Exchange. This is a further step in our plans to develop a public private partnership for defence research. It is also the way forward for Qinetiq to continue to supply battle-winning technology for the armed forces, as well as providing opportunities to exploit leading UK technology abroad.

The step-changes in capability that we are introducing as a result of our continued investment put the armed forces on the footing that they require for the 21st century.

The drive towards network enabled capability, greater interoperability and the use of precision effects means that we can now do more with less following the enhancements to our platforms and weapons. We must continue our efforts so that that remains the case, which means addressing the business and process of defence procurement. We have work to do in this area, but we have made considerable efforts to improve our performance. That has been reflected in the last three NAO major project reports, which noted year-on-year decreasing costs and time delays on the programmes reviewed. However, we need to do more, and must strive for continuous improvement. The DIS has introduced an ambitious package of change, led by my noble Friend Lord Drayson, and builds on our smart acquisition experience.

As I am coming to the end, I will give way to Mr. Hollobone.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I am most grateful to the Minister for giving way. He was talking about technology transfer and disruptive technologies and the threat that they pose. Does not drone technology offer a terrific opportunity for our armed forces? Will the Minister assure the House of the importance that he attaches to drone technology and say whether the necessary technology transfer is taking place, and will the necessary command and control of drones be across our armed forces, or remain with one specific arm of the services?

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I wish that I had not given way now; that is another debate in itself. It may be better if I write to the hon. Gentleman on that. The whole concept of DIS is looking forwards to the new technologies—what is coming along, what is important, what we need, how we define the need, whether there is a key capability and core skill base within this country that we want to preserve, and that also matches our need, and how we deliver all that. I will write to the hon. Gentleman on the specific questions that he raises.

Our success will be largely dependent on the changes that industry will also need to make, to plan better for the long-term, growing system engineering capability, stimulating innovation across the supply chain and developing the right behaviours. It is ultimately how industry responds to the challenge, and how we demonstrate the DIS in our future investment decisions, that will demonstrate the strategy's success.

The change programme is a top priority for the Department and the Government. The defence industry will likewise need to move quickly to put both the MOD and industry in the best possible position to achieve the aims of the DIS. We are determined to achieve this and to deliver to the armed forces the equipment that they need for the demands of today and tomorrow. Our people deserve nothing less.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence) 1:52 pm, 2nd February 2006

I associate the official Opposition with the remarks made by the Minister and the condolences that he has expressed on the deaths of the two servicemen, Lance Corporal Allan Douglas and Corporal Gordon Pritchard, the most recent casualties in Iraq, and a salutary reminder to all of us and to the nation of the proud part that is played not only by our armed forces but by their families in supporting them. I join him in paying tribute to the families who give this unstinting support, as I know, representing as I do a garrison town. The Minister is entirely right to remind the House and the nation that around the country there are many injured servicemen and women who did not lose their lives, but who every day will bear the scars of the contribution and the sacrifice that they have made on behalf of us all. The House will be grateful to the Minister for that.

The fact that so many right hon. and hon. Members on both sides of the House wish to participate in the debate is an indication of the importance of defence procurement at the present time. Furthermore, the fact that the Minister's contribution lasted for virtually an hour—although, if I may say so, it was a bit wayward at the beginning—was an indication that he too regards this as an important issue, and that there are a number of very specific factors that we need to address. I am conscious that my right hon. and hon. Friends wish to contribute, and if I miss out something, it is not because I do not regard it as important, but I wish to preserve some time for my colleagues, and no doubt my omissions will be taken up by them.

I almost begin where the Minister left off, because he referred to the various reports that have been published recently, not least the NAO's major project reports. Since we last debated defence procurement 15 months ago in November 2004, there have been a number of those reports, so the backdrop of this debate is a series of Select Committee and NAO reports highly critical of the Government's management of defence procurement. Once again, Ministers have presented a strategy designed to meet our procurement requirements for the coming decades and to make up for the deficiencies that the previous strategy failed to resolve.

The 2005 NAO major project report was greeted by the MOD as an improvement on the previous two years, which was hardly difficult given that the 2003 report was described as the worst in the history of the report. As is now customary under the Government, the report still highlighted significant cost overruns and delays, and the MOD's latest projects are now £2.7 billion above the originally approved costs. But that specifically excludes—I understand on grounds of commercial sensitivity—the Typhoon project, which in previous years had accounted for over £2.3 billion in cost overruns. The MOD's major procurement projects also continue to fall behind, with delays increasing by 45 months over the past year. But once again, that figure is affected by the exclusion of the joint combat aircraft, which has had its in-service date mysteriously dropped.

In a rather underhand attempt to pre-empt the third disappointing major project report in a row, the noble Lord Drayson held a press briefing days before the embargoed report came out, to spin the positive points in that report. The Minister claimed a £699 million improvement in the cost of the 20 largest defence projects. However, as the NAO concluded, those savings came not from efficiency, but from cuts to future capabilities and cuts in the number of platforms.

Let us not forget that the 2005 report follows hard on the 2004 MPR, which cited cost overruns of £1.9 billion and delays of 144 months. That report followed the disastrous 2003 report that I have just mentioned and its £3.1 billion cost overruns and an average delay of 18 months across the 20 largest projects.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

Of course I give way to the Minister. He has had a pretty fair share of time already, but I will of course, out of courtesy, give way to him.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I just want to get the record straight. We recognise the issues on procurement, but perhaps the hon. Gentleman would like to comment on the fact that in 1997, when the Conservative party left office, the NAO found that the Conservative Government's top 25 defence procurement projects were likely to cost over £3 billion more than they originally forecast, and would on average enter service over three years later than originally planned. In 1997, the NAO exposed the fact that only three of their top 25 projects were expected to enter service at the dates originally planned, and six of them were due to enter service at least five years later than they should have. When the hon. Gentleman makes these assertions and accusations, he should reflect on the past and tell us where they got it wrong, and why they think that we are now getting it wrong with the defence industrial strategy.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

The Minister has got a bit of a nerve referring to events of eight years ago. The Government have been in office for eight years, and first they introduced smart procurement, then smart acquisition. There has been new idea after new idea to try to deal with the problem, but the Government have failed, and the NAO reports indicate that. I am sorry to say to the Minister that I will not give way again if he simply tries to blame the last Conservative Government eight years ago. The public are fed up with that. The Government are in charge. They are responsible and accountable, and what is more, we will hold them to account until the day comes, very shortly, when we take over.

It is not just a matter of the NAO reports. The Defence Committee, chaired so ably by my right hon. Friend and neighbour Mr. Arbuthnot, Labour members of which are present, has been equally critical, charging in its 2004 report that

"Our Armed Forces have been let down by the organisation tasked with equipping them".

That is hardly a tribute to the Minister. More recently, the Committee in its report on two of the MOD's largest and most important projects, the carriers and the joint combat aircraft, concluded that it may be "falling seriously behind schedule" and thereby creating a potentially dangerous capability gap for the Royal Navy. The Committee has also warned that if costs are not brought under control, the project may become "unaffordable". The members of the cross-party Committee are knowledgeable, and they have criticised the Government's performance. After more than eight years in power, the Government have failed to deliver promised improvements on the delivery of equipment to our armed forces. The cost of major projects has continued to rise, and in-service dates have continued to slip—there is no money left in the budget, so allowing programmes to slip is the only way to manage the position. Over the past year, the MOD's unfunded commitments rose by £5 billion to almost £19.5 billion.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Labour, Portsmouth North

Does the hon. Gentleman agree with yesterday's comments by Sir Peter Spencer to the Public Accounts Committee on the MOD major projects report? He said that procurement difficulties are due in large part to the "toxic legacy" of previous Governments and that he expects such difficulties to continue for some years to come.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I have not seen Sir Peter's remarks, and I shall read them with great care. Sir Peter is in charge now; the delays are occurring now; and the in-service dates are slipping now. It is no good blaming the Government of eight years ago for something for which this Government have taken responsibility for the past eight years. Sir Peter has been in office for the past two or three years, so he should be careful when it comes to casting beams out of others' eyes.

Since the Government came to power, spending on defence has fallen both in real terms and as a share of GDP. Defence spending in 2004–05 was almost £1 billion less in real terms than in 1995–96. In 1995–96, defence expenditure was 3 per cent. of GDP, but this year it is set to fall to 2.3 per cent. of GDP. However, our military commitments are far greater today than was envisaged even in the strategic defence review, and they are expected to remain at the current high tempo.

The Minister has mentioned the defence industrial strategy, which is an attempt to identify the key military-industrial capabilities that we need to retain in the United Kingdom. The document is a move in the right direction, not least because the Government have taken on board what we have been saying for the past three years. In the procurement debate 15 months ago, I called for

"a mature partnership with industry, with both sides working together from a project's inception through to the completion of its service life."—[Hansard, 4 November 2004; Vol. 426, c. 488.]

We welcome the Government's conversion to our view.

If we are to retain certain key capabilities in the UK, it will involve placing some non-competitive contracts. However, we must be wary, because the cost-plus approach has failed to deliver value for the taxpayer in the past. When the MOD seeks a particular solution through a non-competitive contract, we propose that the MOD and its industrial partners should run an open-book accounting system policed by the National Audit Office to ensure value for money for taxpayers. I have discussed the matter with the Comptroller and Auditor General, Sir John Bourn, who confirmed that the NAO could assist in such a scheme. I have mentioned that idea in the past and offer it as a genuine and constructive suggestion to the Minister as a means by which we can retain key industrial capabilities in the UK, where we have only one supplier. I am offering the Minister a mechanism by which we could try to protect the taxpayer interest and retain that defence industrial capability.

The defence industrial strategy will be judged on how it works in practice. Mr. Jenkins, who is not in his place, described it as a "MOD wish list" in the Defence Committee on Tuesday, and he was largely right. Furthermore, some serious unanswered questions have been left hanging, and I shall raise a couple of them. On fixed-wing aircraft, the Government appear to accept our strategy of maintaining Britain's aerospace industry by involving it throughout an aircraft's service life. I have always believed that we should provide an income stream to industry to ensure the certainty of which the Minister has spoken. However, the bald statement that current plans do not envisage the UK needing to design and build a future generation of manned fast jet aircraft beyond Typhoon and the joint strike fighter effectively heralds the end of a century of capability in which the United Kingdom has been a world leader.

Given the uncertainty surrounding the joint combat aircraft programme, I question whether abandoning the ability to make combat aircraft would be foolhardy in the short term and echo the infamous Duncan Sandys 1955 White Paper, which confidently predicted the end of manned flight. I accept that the era of the unmanned air vehicle and the unmanned combat air vehicle has dawned. The United Kingdom must be fully involved in the development of that technology, and I understand that it is. However, it is not in our national interest so lightly to abandon the capability of building manned fast-jet combat aircraft.

The Minister has referred to "complex weapons"—missiles. The strategy states:

"Complex weapons provide our armed forces with battle winning precision effects".

In other words, missiles are critical to modern military operations—the soft speak is for the benefit of groups such as the Campaign Against Arms Trade, which does not like some of our manufacturing industry's products. A few lines later, however, the document states:

"There is, apart from the Meteor programme, little significant design and development work beyond the next two years. This will present a substantial challenge to the industry."

The Minister has discussed that point, but what about the challenge to Government? If missile technology is vital, we must establish the means to ensure that we have access to secure supplies. I note that the Minister has said that negotiations are under way, and I hope that he will keep the House informed, because if the DIS statement is right that those weapons are critical to modern warfare, we must retain that capability in the United Kingdom.

That brings me to the fundamental issue that underpins the DIS. As the Minister has said, the Government accept that

"to maintain our national security and keep the sovereign ability to use our armed forces in the way we choose we need to retain those key capabilities in the UK."

The force of that argument cannot be understated. Let us not forget that during the first Gulf war the Belgians refused even to sell us ammunition.

On ammunition, the DIS states:

"it is essential we retain onshore the design authority role and its underpinning capability for munitions manufacture", but the Government accepted the closure of the BAE facility at Bridgwater, which means that the source of supply will be overseas. In answer to my questions, Ministers tell the House that they are content to rely on BAE for security of supply, knowing that that supply comes from overseas. BAE cannot give that guarantee, because it will be subject to the whim of the overseas manufacturer's Government. The Minister is not entitled to accept a guarantee from BAE.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

The hon. Gentleman has mentioned Bridgwater. Is he aware that that strategic review also covers Chorley? Without Chorley, nothing goes bang, because initiator and boxer caps are produced nowhere else in the UK.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I understand the point made by the hon. Gentleman, who has repeatedly raised his constituents' concerns about explosives in this House.

Photo of Mark Pritchard Mark Pritchard Conservative, The Wrekin

Is my hon. Friend aware that those explosives relate directly to the UK's nuclear deterrent? We will no longer have the necessary explosives for that nuclear deterrent in the UK, and we will have to rely on foreign suppliers, which undermines national security.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

My hon. Friend is right to raise the matter. The Government owe it to the House to be frank and honest. I recognise that they are having to make hard decisions across a wide range of procurement issues, but the only way in which we can address the matter on behalf of the nation is by being honest and frank. If we allow the supply of critical materials to come from overseas, the inevitable consequence will be that our national sovereignty is impaired.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

If the hon. Gentleman will forgive me, I want to press on with a few other important issues, one of which is defence research.

The report says that there is

"a strong correlation between equipment capability and R&D investment in the last 5–30 years."

That means that the battle-winning capabilities that we have seen in Iraq and Afghanistan in recent years are the result of investment in defence research in previous decades—principally under Conservative Governments, I should like to remind the Minister. It is quite simple. If we want to be able to continue to play a global role and to give our armed forces the best equipment available into the future, we have to invest in research today. At the last election we called for an increase in the proportion of the MOD budget available for R and D. In the DIS, the Ministry appears to share our fears about the danger arising from a failure to make that investment, for it states that

"in the coming decades the UK could fall behind both our key allies and emerging economies in our ability to support sophisticated and competitive technology-based industries."

That strikes at the heart of the defence industrial strategy. By their own admission the Government are failing our armed forces. Government spending on defence research has fallen from £840 million in 1997 to about £450 million today. If the Government are to deliver on the DIS they need to commit proper funding for defence research.

I asked the Secretary of State what proportion of the sales receipts from the Qinetiq flotation will be made available for defence research. The answer that I received from him earlier this week said that a substantial proportion of the receipts would be retained by the MOD, but just what does "substantial" mean? Does it mean that the MOD will retain a majority of the funds? If the Minister cannot put a figure on it until after the sale, perhaps he can give us details of what percentage of the funds he estimates will go to the Treasury and what percentage will be retained by the MOD. Even more importantly, how much of this windfall will be reinvested in R and D, not just swallowed up in the overall defence budget? I hope that the Minister will be able to answer those questions when he winds up.

That brings me to the questions surrounding the sale of Qinetiq. The Government stand accused of selling off a major British national asset far too cheaply. That has been confirmed by the admission of the Minister's former colleague, who used to sit next to him—Lord Moonie, the Minister responsible for the sale of one third of Qinetiq to Carlyle—that he opposed the timing of the sale. We made our concerns clear at the time of the sale that Qinetiq had been sold off too cheaply and that the sale could have been delayed until market conditions had improved. In January 2003, in the Defence Committee, I asked, "Can you explain to us laymen why Carlyle is paying £42 million for a one third stake in a company with a value capital net of debt of £312 million?" The value of the physical assets alone suggests that it was seriously undervalued at the time. It is now clear that the sale was not motivated by a desire on the part of the MOD to enhance defence research but by the Treasury in a crude move to screw more money out of the MOD to help to plug the Chancellor's black hole.

There remain unanswered questions over the future of Qinetiq. We need to know precisely how the relationship between the company and the MOD will operate following the flotation, not least in respect of urgent operational requirements for military operations. We also need assurances that intellectual property generated in the UK will remain in the UK and not be siphoned off to the United States or elsewhere. As Qinetiq moves much of its focus to the United States, what consideration has the Ministry given to the possibility of intellectual property transfer to the US then becoming subject to the stringent US export controls mentioned by my hon. Friend Mr. Ellwood? What safeguards has the MOD put in place to prevent asset-stripping?

Are Ministers comfortable that they have engineered an incentive scheme correctly given that a few employees of the company stand to make small fortunes that make lottery winners look like village paupers? I have to confess that some of them are very good friends of mine—[Interruption.] Well, I am looking forward to a very large dinner from Sir John Chisholm, and I have already told him so. [Interruption.] I hope that it will be so good that it is required to be entered in the Register of Members' Interests, and I have made that clear to him as well. However, there is public unease. That points to Ministers' failure to have undertaken a proper assessment of the value of the state asset that they were selling.

Photo of Bob Russell Bob Russell Opposition Whip (Commons), Shadow Minister (Defence)

I am interested by the hon. Gentleman's dismay that a public asset is being flogged off at a knock-down price, as I thought that that was the whole object of all the privatisations that we have had.

On a specific point, does the hon. Gentleman's criticism of the Government about the lack of research and development include military clothing and textile?

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I know of the hon. Gentleman's interest in textile issues, which is shared by other hon. Members. Those of us who are a bit more familiar with the armed forces than others understand the importance of good-quality kit, in clothing terms, to our armed forces, particularly those out in the field. When I went up to Arbroath with the armed forces parliamentary scheme, we visited 45 Commando. I was told by one of my more subtle hon. Friends, who shall remain nameless, that if I banged on about the kit, I would get my head banged. When I arrived, 45 Commando, who are some of the toughest guys in the business, had the kit laid out on the floor. They showed us the trousers that were split and the boots that did not work. Clothing is important.

Returning to Qinetiq, it is now clear that that privatisation has been carried out on a timetable designed to suit the Treasury rather than to enhance Britain's defence research base. The DIS is clearly good news for the prime contractors, not least BAE Systems, which has its headquarters in my constituency, but unfortunately it gives little consideration to small and medium-sized enterprises, whose concerns will need to be addressed. The key is implementation; we will need to see how it is going to work in practice. The strategic defence review was an impressive document, but its implementation has been hindered through lack of proper funding. We will therefore wait to see whether the DIS is to be funded properly.

Let me turn briefly to some individual projects. On carriers, Lord Drayson's admission to the Defence Committee last year that the MOD was no longer able to commit to bringing the first new carrier into service in 2012 has come as a bitter blow to the Royal Navy. In November 2004, when he appeared before the Defence Committee, the First Sea Lord stated in no uncertain terms:

"I am still adamant that I want it in 2012".

That was just 15 months ago. This project has been needlessly delayed. We need assurances that the new assessment phase, which was announced just before Christmas, will be completed within the year. HMS Invincible, already in mothballs, will be withdrawn from the fleet in 2010; HMS Illustrious is to be decommissioned in 2012; and HMS Ark Royal is to be decommissioned in 2015. We need to know what progress is being made on the extension of service of the ships referred to in the statement that the Secretary of State made before Christmas. Have any costings yet emerged from that process?

The House and the Royal Navy need to be kept closely informed regarding the exact nature of French involvement in this programme. We know that they are going to buy into the design. It is imperative that their involvement should not be allowed to delay construction of the UK's two carriers. Has agreement been reached with France over the charge for the design plans—we understand that it has now been confirmed at £100 million—and is their involvement in the direction of the project more extensive than simply buying the plans?

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

Is the hon. Gentleman willing to tell the House whether his party is in favour of collaboration with the French on this project?

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

We collaborated with the French on several projects throughout our time in government. There is certainly no reason why we should not share our design experience with the French. However, I know from talking to very senior people in the Royal Navy that they are absolutely petrified that the involvement of the French may delay this programme. [Hon. Members: "Who?"] Very senior people; I am happy to share their names with the Minister privately. We have to ensure that the programme is not delayed. If we have spent all this time and money on it, and we can make it available to the French at the right price, that is good news, but I do not want them telling us how to adjust our programme in order to be able to accommodate theirs.

I turn to the joint strike fighter, or the joint combat aircraft, as it has come to be known. The carrier strike capability would not be complete without this second element, yet, like the carriers, the project gives Members cause for concern. That was most recently articulated by the Defence Committee when it reported:

"We would consider it unacceptable for the UK to get substantially into the JSF programme and then find out that it was not going to get all the technology and information transfer it required to ensure 'sovereign capability'. This needs to be sorted out before further contracts are signed and we expect MoD to set a deadline by which the assurances need to be obtained".

We understand that talks are now under way with the United States to secure access to the technology over the lifetime of the project. What time scales has the Ministry of Defence set itself? If the United States says no, are we prepared to withdraw from the programme and consider plan B?

I do not know whether the Minister has read "DefenseNews.com", which refers to talks that are under way between officials, presumably from the Ministry, and officials from the State Department. I would be interested to know whether the report is correct and whether the Minister can update us. The report states that some in the United States Government

"fear that Britain wants to use its alliance with the United States to get its hands on critical technologies underwritten by billions of U.S. tax dollars, without charge, to prop up its increasingly uncompetitive industry that is starved of domestic technology investment."

We can agree that there is a problem with defence research investment. We can also all agree that the idea that we put £1 billion into the joint strike fighter programme—

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I was converting the sum at a rough exchange rate. If, after investing that amount of money, we do not get access to the source codes, that is a betrayal of the alliance. It is not a matter of United States taxpayers' being cheated but of our being cheated as strong alliance partners of the United States. There is common ground between the Government and us on the matter and we stand ready to assist the Government with representations in Washington.

Photo of James Arbuthnot James Arbuthnot Chair, Defence Committee, Chair, Defence Committee

Does my hon. Friend agree that the point of having a plan B is that it should not be kept secret? It is a little like "Dr. Strangelove"—there is no point in having a deterrent if one does not tell people that one has it. Will he please encourage the Minister to tell us that there is a plan B and what it is?

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

My right hon. Friend perceptively pre-empted my next point. He is right. I was about to quote Lord Drayson, who told the Financial Times on 12 January:

"I have no sense we need an alternative plan today, and I am not saying that we need to pull any levers on plan B today, absolutely not. But we need to make sure we have done the work necessary to ensure we have an option."

My right hon. Friend has posed the question, which the Minister has heard. I believe that all hon. Members would like an answer. We would like to know what plan B is. As my right hon. Friend says, if plan B is not public, there is no point in having it.

As the Minister said, there has been some tangible progress on Type 45s this week, with the launch of the first ship yesterday in Glasgow, which was attended by my hon. Friend Dr. Lewis—I am delighted that he was able to be there. However, as we discussed earlier, all is not well with the programme. The strategic defence review was predicated on 12 vessels, yet, as the Minister confirmed, that number is down to six, with only the possibility of a further two. That is a serious matter.

As my hon. Friend Mr. Vaizey said, HMS Southampton is currently patrolling 2 million square miles of water in the Atlantic ocean. We do not subscribe to the Government's doctrine that platform numbers no longer matter; we believe that they are important. As the First Sea Lord said, one ship cannot be in two places at the same time. Numbers count. We know why the Government have reduced the number to six and are unable to give a commitment for eight, let alone 12. Once again, the Treasury is the reason. The Royal Navy will have its capability reduced because the defence budget has not been properly funded.

Vic Emery, managing director of BAE Naval Systems told The Sunday Telegraph on 29 January 2002:

"I believe it's really an affordability issue. There is no doubt the end-user wants eight."

Reducing the number of Type 45s has implications for our maritime industrial strategy, as set out in the defence industrial strategy. The Type 45 is supposed to provide work for our shipyards until work on the carriers begins. However, Paul Lester, managing director of Vosper Thorneycroft, was quoted in the same article. He said that

"it is vitally important that ships seven and eight are ordered so that we do not suffer any break in production through to the aircraft carriers and therefore avoid the risk of losing those skills".

I do not argue that on simply an industrial ground but on the ground that we need the ships. However, I stress that there is an industrial aspect, too.

One of the Government's most scandalous programmes, which the Minister signally failed to mention, is the landing ships dock auxiliary programme. Although it is by no means the most significant procurement project, it is now, pound for pound, the Ministry of Defence's worst managed project, with 100 per cent. cost overrun. Unbelievably, Swan Hunter—the culprit—has indicated that it expects yet more increases. We have learned that the ships will put to sea incomplete and be promptly sent to repair yards to be finished off under potentially expensive so-called "get well" packages, the cost of which will not appear in the accounts relating to the ships' construction.

The contract is a public scandal and evidence that Ministers have failed in their attempts to get to grips with the procurement process. Those ships were ordered by the Minister, not a Conservative Government. In view of its performance on the contract, it is earnestly to be hoped that Swan Hunter is not allowed anywhere near the carrier programme.

Let us consider the future rapid effect system—FRES. Again, the Chief of the General Staff, General Sir Mike Jackson, made it crystal clear that FRES is the most important project for the Army, yet its original in-service date of 2009 has been abandoned.

Photo of Ed Vaizey Ed Vaizey Conservative, Wantage

Does my hon. Friend agree that the Army has been starved of the necessary equipment because so many capital projects are under way with the Air Force and the Navy, and that FRES is the highlight of that starvation? The Army is crying out for the project, which is a decade overdue when we consider the service life of current armoured vehicles.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

My hon. Friend makes a good point, but we are considering three services, all of which have a crucial role to play. I am not here to pit one service against another. Clearly, there is competition in the three services for the limited budget. It is always limited, whoever happens to be in power. However, if one wants to play the sort of role in the world that the Government wish to play—I do not disagree with the view that the United Kingdom has a significant contribution to make—one has to divvy up the subscription in order to fulfil the role. My hon. Friend is right that some of the armoured vehicles are 30 years old and, as the Minister knows, they are knackered. I am happy to help try to persuade his fellow Scot that he needs to do much more to help the armed forces.

I intended to refer to Trident, but I shall leave that to my hon. Friend Mr. Harper in his winding-up speech. I simply want to put it on record that I have not forgotten ballistic missile defence. The House should turn its attention to that at some point because the United States is developing ballistic missile defence and is convinced that that is critical for the defence of the United States and its allies. The United States is willing to make its facilities and technology available to its allies, yet the Government appear to have no interest in discussing those matters with the United States. As all of us have benefited from the umbrella of the American nuclear deterrent and the American presence on the continent of Europe during the past half century, we ought to look carefully at the offer that the United States is making to help us in that regard.

Photo of Robert Walter Robert Walter Conservative, North Dorset

Does my hon. Friend agree that the French appear to be developing their replacement nuclear deterrent, and that it would be unacceptable for France to be the only nuclear power on the continent of Europe?

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

I strongly agree with my hon. Friend. I could not have expressed that point better. Indeed, the only person who might have done so is my hon. Friend the Member for New Forest, East, who is the master in these matters.

The defence industrial strategy states:

"We welcome the progress made in establishing understandings on security of supply and the decision to introduce an EU Code of Conduct on Defence Procurement which aims to create an effective European Defence Equipment Market."

Indeed, the Minister referred to that. The fact is, however, that our European partners have been far less welcoming than the United Kingdom. Spain has already rejected the code of conduct outright, and France appears to be doing little more than paying lip service to opening up her markets. Perhaps the Minister could ask the French whether, instead of buying the plans, they might like to commission an aircraft carrier from a British shipyard. We could build three: one for them and two for us. Somehow, I do not think that that suggestion would go down too well on the Quai d'Orsay, but it might be worth a try.

For two decades, Britain has led the way in opening up our defence markets, but the time has come for us to let our partners catch up with us before we proceed any further. The European Defence Agency and initiatives such as the code of conduct will have the effect of opening up European defence markets, giving UK companies the kind of access to European markets that European companies have to our markets. If that will also increase European capabilities so that the Europeans can pull their weight more effectively in NATO, well and good. However, if the intention of the EDA is to act as a vehicle for the advancement of the EU defence project, doing little to open up markets or increase capabilities, we will oppose it. It is for similar reasons that we have opposed a military application for Galileo, which, despite protestations from UK Ministers, is clearly under consideration on the continent.

While we support the Government's reconfiguration of our armed forces along expeditionary lines, and realise that we have neither the funds nor the resources necessary to plan for every eventuality, some thought must be given to tomorrow's threats, at least on a conceptual level. I will not be the first to point to China's growing military and economic prowess. China is already increasing its military spending, with a double-digit increase over the past 15 years, and will undoubtedly want to increase the reach of its military forces. I understand that it is even planning to build its own indigenous aircraft carrier; it will probably not look to us to supply it.

On the principle that we prepare against capabilities, not intentions, Ministers must recognise the need to consider a conventional threat developing at some point. That is another reason why we need to maintain the industrial capability to respond to any such threat.

Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre

Given that China is assisting the Iranian Government with missile guidance technology, is my hon. Friend concerned that the Government might at some stage allow the European Union to lift the arms embargo that prevents industries—in France, for example—from selling arms to China? If the embargo were to be lifted, there would be serious consequences for Anglo-American industry relations.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

As ever, my hon. Friend is absolutely right. Indeed, I had a meeting with John Bolton last year, and he explicitly stated that the United States would view the lifting of the EU arms embargo on China as little short of a declaration of war—[Interruption.] That was a metaphor, Minister. The fact is, the Americans have attached great importance to this issue. I would say to our American friends that I hope they stick to that policy. I hope that there will be no question of their wanting to lift the embargo on China before the EU does. I am sure that that will not be the case, however. As I have said, we need to be very wary about China, and to be cognisant of the need to preserve our capabilities. Intentions can change overnight; capabilities cannot.

While we acknowledge that some excellent new military capabilities are coming through, the fact remains that smart procurement has failed to deliver the promised improvements in the process, and the Government are failing to provide our armed forces with the quantity of equipment commensurate with the military obligations that they have entered into. Without a flourishing defence industrial base that continues to deliver state-of-the-art equipment for our armed forces, we shall surrender our own national sovereignty. As some of my hon. Friends have argued, it may be cheaper in the short term to buy off the shelf from the United States, but such a policy would soon change the relationship from one of partners to one of customer and supplier. Nor do I believe that we should simply throw in our lot with our EU partners, some of whom have proved extremely unreliable.

I believe that we have no alternative but to continue to muddle through, while accepting that there is a price to pay for sovereign command of our armed forces. Much of that is implicit in the defence industrial strategy. I hope that we will all be prepared to pay the price to enable us to prove to the people of Britain that we regard the defence of these islands and the freedom of our peoples as the first duty of Government.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I remind all right hon. and hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.

Photo of Gavin Strang Gavin Strang Labour, Edinburgh East 2:34 pm, 2nd February 2006

I am grateful for the opportunity to speak in this debate.

As an Edinburgh Member of Parliament, I want to put on record the fact that it is a matter of great regret on both sides of the House that the Member of Parliament for Dunfermline and West Fife is no longer with us. I am grateful for the nodding from the Opposition Front Bench. As we know, she developed a great interest in defence matters as a result of the constituency she represented, not least because of the Rosyth dockyard. She specialised in the subject, took part in the graduate, postgraduate and later stages of the armed forces parliamentary scheme and eventually got on to the Select Committee on Defence, although I know that she would have liked to get on to it earlier. Members of that Committee on both sides of the House will confirm that she was a real specialist on defence and made a tremendous contribution on behalf of the British people.

I want to move straight on to the procurement issue, which is hugely important. I congratulate the Government on their defence industrial strategy. It was important that they published it last December, and I also congratulate the Secretary of State on his statement. The strategy was a step forward in many important respects. Perhaps it did not establish a framework—that is too strong a word—but it was a statement to use for the future. Certain issues are not addressed in the document, while others are perhaps addressed in a way that we would not like. It is important, however, that we have such a substantial document on the defence industrial strategy, which points up some of the key issues that have been discussed, not least that of the United States, on which, given the current situation, Mr. Howarth rightly spent some time.

It is vital that we protect and nourish our defence industrial base. We cannot produce everything, which I think is what the hon. Member for Aldershot meant when he referred to muddling through, although I do not like the word "muddle". We must recognise that we cannot develop expertise in every aspect, particularly of the forward and expensive technologies. We do, however, have something remarkable in this country. In the context of our manufacturing industry, the British aerospace industry is still tremendously successful, but it is at a potential turning-point. If we do not sustain and support that industry, an important part of which is military, we will probably look back in 10 years' time and regret that we did not make the key decisions to help to maintain it and all the jobs that depend on it.

Time is limited, and I want to move on quickly to the Eurofighter, to which Members on both sides of the House have no doubt heard me refer in the past. I have been concerned about the issue, and I accept fully that my interest is partly due to the importance of the jewel in Britain's industrial crown, as Arnold Weinstock called it—the skills that we have in relation to radar, lasers and so on, predominantly but not just in Edinburgh, in part of what is now called SELEX.

It is tremendous that the Eurofighter is performing so well. Air force people in America and the other three countries involved, Germany, Spain and Italy, speak highly of the plane. Those of our pilots who have been up in it cannot speak too highly of it. We have got tranche 1 and 2, and we are grateful to the Government for sustaining that programme. Perhaps we would have liked the tranche 2 announcement a bit earlier, but we will not make an issue of that today—it is behind us. The issue, of course is, tranche 3.

I do not want to inject a partisan note, but Mr. Moore will be aware of concern, to put it mildly, about his party's policy. I am not sure if it has changed its policy, but it emerged before the last general election that the Liberals were committing themselves to no tranche 3 for Eurofighter. If there has since been a change in that policy, I should be pleased to be informed about it. No doubt the hon. Gentleman will say something on the subject. I hope he will say that a tranche 3 may well be needed, because there may well be a need for a Eurofighter that is different from the tranche 2 version, which has ground attack capability but could be improved. We have to think about the future position of the Eurofighter, and also that of the joint strike fighter. I do not know what plan B is, but it will almost certainly have to involve a role for a Eurofighter. A Typhoon could operate from the big new aircraft carriers, but it would need to have short take-off and vertical landing capability.

If the Government can achieve what we want from the JSF, that is fine. We can make progress. A waiver in respect of the US international traffic in arms regulations will be necessary, and it is not in the gift of the United States Administration or the President. We must get Congress to recognise that we need it, and give us it. There has already been a huge setback, in that we were promised it five years ago and have not been given it so far. We must face up to the position, and I think that we should think in terms of a decision this year.

SELEX has made a huge contribution to development of the Typhoon, and with its lasers and sensors Edinburgh has won the head-to-head competition for the JSF contract in the United States. That was a tremendous achievement and we welcome it, but we need the technology transfer. We want to ensure that SELEX in Edinburgh can generate the profits that will pay for research and development. We need Government help if we are to maintain our cutting edge in technology. We cannot possibly sustain it if we have to enter into an arrangement whereby, in future, all the traffic is one way. The United States can go it alone, because its R and D expenditure is so colossal and its market is so large. We need that waiver. The position is complex, but it was promised to the United Kingdom and, I believe, to Australia five years ago.

In a sense, I have no problem with the strategy. It recognises that BAE Systems is a British champion, although most of the equity is now owned in the United States. It sold a number of its Edinburgh assets to Finmeccanica, and it called the new company SELEX. We have Finmeccanica and we have Thales: two very big players in the British defence market. We must bear in mind what we do not want to happen to Finmeccanica, or to SELEX in Edinburgh, in the long term. The Minister rightly spoke of the importance of the upgrading, servicing and maintaining of the planes, which have huge long-term prospects. We should consider how long the Tornado has been operating, and the amount of money that has been generated by its maintenance and upgrading. The same applies to the Eurofighter. The SELEX people in Edinburgh have the expertise and equipment, and if they are the best at making the avionics for such planes they will obviously be the best for maintenance, development and upgrade purposes. We do not want BAE Systems—the British champion—to think that in the long term, it can come back in or squeeze us out. The reality is that Finmeccanica, along with other companies, is there, and the British Government took a very important strategic decision in allowing it to buy those assets.

We have reached a very important stage in the future of our industry. There is no doubt that we have great strength in avionics and in aerospace generally. I hope that we will not allow the situation to drift. Crucial decisions have to be taken, and if plan B has to become plan A—as it may well have to do—we will probably need to take them within the next 12 months. Reference has been made to a memorandum of understanding being agreed between the two countries' officials. A memorandum of understanding does not sound that strong to me. We will need to examine the situation as it develops, but it is not looking good at the moment. I hope that we can make progress in our talks with the US and find a way to achieve effective and meaningful collaboration and a transfer of technology, so that my constituents can keep their jobs, continue to provide superb equipment—such technology is the best in the world—supply the US market, and help to build the JSF in this country on terms that are mutually acceptable to the US and the UK.

Photo of Michael Moore Michael Moore Shadow Secretary of State for Defence 2:47 pm, 2nd February 2006

I begin by echoing the tribute that Dr. Strang paid to the late Rachel Squire, who is sadly missed in all parts of the House not simply because she was an acknowledged defence expert and someone whom the House listened to on the subject, but because she worked unfailingly on a range of activities on her constituents' behalf for many years. She is sadly missed indeed.

I echo the tributes that both Front-Bench spokesmen paid to the bravery of our armed forces, and I repeat the condolences expressed to the families of those who recently lost their lives. I endorse the observations made about the care of, and needs of, those who have fought on this country's behalf and been seriously injured. We owe them a great duty of care.

This is an extremely important debate for many different reasons. Defence procurement remains one of the largest areas of Government spending, and we are at a crucial moment in the development of some major projects. Tributes have already been paid to the fact that the Typhoon is now in service, and I hope to deal with that issue and with some of the observations made by the right hon. Member for Edinburgh, East. Yesterday saw the launch of HMS Daring at Glasgow's Scotstoun shipyard. Unlike some other Members, I was unable to be present. The closest I got was a very impressive website broadcast, which showed much of what was going on. But whether one was there or one saw it in virtual reality, it is a fantastic achievement and a great sign of the manner in which we are gearing up our capability.

As others have said, we have entered a very important phase in the development of the next generation of armoured fighting vehicles. We hope that some indication of the decisions taken on carriers, and on the replacement of the nuclear deterrent, will be given sooner rather than later, but the most important issue in the context of this debate is the defence industrial strategy, which was published just before Christmas. It has been introduced at an extremely challenging time for our armed forces and the industries that support them. In every debate on these matters, the House acknowledges the new world security environment and the huge demands placed on our armed forces, to whom we consistently and properly pay tribute. The changes and challenges facing the country and our service personnel have a major impact on the defence industry, which also faces its own challenges as globalisation and financial pressures keep shareholders and management teams focused.

Certain key principles need to be remembered in the debate. The requirements of national security are paramount, and we must ensure that our armed forces have the most appropriate equipment and support so that they can do all that we ask of them. In addition, that equipment and support must be supplied on time and at best value for money for the taxpayer. Recent experience in Iraq showed the perils of mistakes in the latter respect, and Mr. Howarth has already gone into detail about how NAO reports have regularly documented longer-term failings in procurement.

The defence industrial strategy is ambitious, and is clearly an attempt to tackle some of the legacies of certain projects and the process of defence procurement. Symbolically, it has got off to a good start, being delivered on time and to a demanding time scale, and it has been well received by industry and many commentators. We support the principle of identifying the key industrial capabilities necessary to underpin national security, and recognise that the transformation of the industrial base is a consequence of that approach. However, we also acknowledge that serious issues will be thrown up as a result. Some questions remain unresolved in the strategy paper, and we hope that we can return to the subject as more detail is fleshed out in the course of the year.

I shall focus on some of the key themes in the strategy document, and national sovereignty may be one of the most fundamental principles at stake. There is already significant use of non-British suppliers, and there will be more in the future. Even nominally British suppliers are increasingly global and answer to shareholders and stakeholders beyond these shores.

The UK is at the heart of the north Atlantic and European industries. That is an ideal position that should be exploited, and we therefore join others in welcoming the recent EU code of conduct on defence procurement. We hope that it will help in many of the ways already identified by the hon. Member for Aldershot.

National sovereignty will arise as an issue on many occasions but, as has already been noted in the debate, the most pressing context at the moment is the joint combat aircraft. Quite properly, the Government have made robust public statements about the need for access to the intellectual property underpinning the JAC, and that approach has been repeated today.

Britain is a senior partner in the project, so we must have the capability to service and upgrade the planes throughout their lifetimes. Budgetary pressures in the US, and that country's quadrennial defence review, may be squeezing the options just now, but they cannot override that fundamental principle. The Government's determination and the apparent intransigence of the Americans mean that it is important that all parties in this House unite in support of Government efforts to sort out the problem. However, we need assurances that credible alternatives are being planned, as Mr. Arbuthnot, the Chairman of the Defence Committee, suggested in an intervention. Moreover, the Americans must appreciate that those alternatives will be implemented if we cannot resolve the present difficulties satisfactorily.

The Defence Committee has already highlighted the dangers of a capability gap if the JCA were not available to us on the right terms. That would be a massive blow to the defence strategy, and to this country's ability to deliver its defence objectives.

Cost and value for money are also real issues on this programme and across all other procurement projects. The new strategy is a serious attempt to tackle the well-documented problems. It seems more focused on key capabilities, and transformation of the industrial base is welcome and substantially changes the equation on value for money considerations. Sustaining capability in key sectors will mean consolidation and a reduction in competition, as set out in the defence industrial strategy. In BAE Systems we have clearly created what used to be known, not always flatteringly, as a national champion. It has welcomed the strategy and the clarity that it brings. Coupled with the series of recent announcements about carriers and armoured fighting vehicles it can begin to see how the strategy makes sense for the company. As a world class company of vital importance in both industrial and defence terms, that is a welcome reaction.

Surely, though, the key to these new arrangements, specifically the partnering arrangements, will be their transparency and openness. There has not always been the easiest of relationships between the Ministry of Defence and BAE, so no doubt both sides will welcome the intent to achieve greater transparency and openness in their dealings. For taxpayers it is vital that the MOD has the access it needs to BAE to ensure value for money. Parliament, too, must have confidence that at the very least our key Committees, whether on defence or public accounts, backed up by the National Audit Office will share in that new openness and transparency. Of course, somewhere in the background the Treasury will have something to say.

In all these dealings we have to take account of commercial confidentiality. That will become an increasingly important issue where competition is not a driver in the market, so who determines what is commercially confident will be crucial. We must make sure that we have some independent mechanism for scrutinising projects when they go under that heading. We have already seen, in relation to Typhoon, the cloak of confidentiality coming down over the latest cost performance on the project and the arrangement to sell aircraft to the Saudis. We all understand the realities, but we must have confidence that people independent of the main parties involved in the contracts can scrutinise and pass judgment on what is now a fundamental starting point for the new strategy. There is talk of demanding partnered relationships in the document, and we must hope that that will prove to be true.

The transformation of industry's relationship with Government is only one aspect of the new strategy. A key driver is to shift from a focus on the creation of platforms to one on systems. The complexity of network-enabled capability was demonstrated by the launch of HMS Daring yesterday, which was a helpful illustration. If the carriers go ahead, they will take this to a whole new level. For the next decade there will be good times on the Clyde, the Forth and in many other places. The principle of creating one national shipbuilder may be the inevitable outcome of procurement demands, but as yet there is not much detail to go on. Like others, we want to see that fleshed out. What scale of consolidation is envisaged in creating the new ShipCo and what diversification is anticipated for areas where the next decade may be a feast, but beyond which may be a famine, is not yet clear and we would appreciate understanding how the Government's thinking is developing on that.

The switch to greater emphasis on systems and their integration offers great challenges and opportunities to British industry, as does the welcome shift to looking at through-life costs, rather than the initial substantial outlay on ships and aircraft. Similarly, stressing the importance of lifetime capability management—a phrase the Minister used earlier—through ongoing support and upgrades is absolutely crucial if many of the mistakes and cost overruns of the past are to be avoided. In that respect, the comments made by the right hon. Member for Edinburgh, East about the skills in Edinburgh are very important for Typhoon.

We must hope that, whatever industrial structure emerges, it will give plenty of scope for ongoing innovation, much of which comes, in this country, from small and medium-sized enterprises, which need to be encouraged and not put off by the consolidation that goes on around them. SMEs have an important role to play in strategy, which is one of the areas where the biggest concerns have been expressed. Further work is promised on the technology priorities, but as the flotation of Qinetiq is under way, it is a strange omission from the strategy. We must hope that the further work that is spelt out will be completed quickly and we will have a further opportunity to consider it.

When we debated defence in the UK back in November, I raised with the Minister the flotation of Qinetiq. I stressed that we supported it as an excellent company with world class achievements and that we did not oppose the privatisation. However, it is fair to say that the manner of the privatisation has raised some serious issues. I appreciate that the Minister wrote to me after that debate, although much of what he could say was constrained by the inevitable secrecy ahead of the flotation.

We still do not have very many answers on the original part sell-off to Carlyle, not least regarding the tax arrangements and the controls on asset-stripping. We also need further details about the relationship with the most important customer—the Ministry of Defence—and about who may be allowed to own the company in future.

We welcome the decision of the National Audit Office to investigate the sale. The website makes it clear that it will be a wide-ranging investigation, covering everything from the choice of privatisation strategy to whether the deal is likely to meet its requirements. The flotation goes to the heart of the debate on the key principles of national security and value for money for the taxpayer, and we will examine the NAO's report very carefully when it is published.

Other hon. Members have pointed out that the NAO has its work cut out keeping track of the current procurement programme. Many of the main problems have already been aired and I will not repeat them, but I echo the dismay about past performance and lack of progress on key developments such as the carriers. I hope that at some point we will get some clarification about Typhoon and some more insight into the arrangements that have been made to sell some to the Saudis.

The right hon. Member for Edinburgh, East said that during the election we made it clear that we did not support the development of the project to tranche 3. We took that decision at the time, based on the information that was available to us and the uncertainty about the future development of other options. That seemed sensible to us, given the way in which the joint combat aircraft was developing. The Minister said today that doubt remains about the next tranche and about the joint combat aircraft. We want to watch those developments carefully and it is incumbent on all of us to reconsider our position if the realities change around us.

Photo of Gavin Strang Gavin Strang Labour, Edinburgh East

I am glad to hear that the Liberals are likely to reconsider their position, especially if we need a short take-off and vertical landing plane and we cannot get the joint strike fighter for the future carriers.

Photo of Michael Moore Michael Moore Shadow Secretary of State for Defence

I agree. If the JSF is not available to us and we need a massive rethink of what will happen on the carriers, options with Typhoon will have to be considered very seriously.

Photo of Michael Jack Michael Jack Conservative, Fylde

The Government claim that they are committed to 232 Eurofighter Typhoons. The hon. Gentleman, in defining his party's position, says in effect that the project should be kept on the boil just in case there is a problem with the joint strike fighter. Is it correct that he does not believe that 232 would be the operational capability for Eurofighter Typhoon?

Photo of Michael Moore Michael Moore Shadow Secretary of State for Defence

My understanding is that there would be 232 under tranches 1 and 2.

Photo of Michael Moore Michael Moore Shadow Secretary of State for Defence

I apologise if I gave the wrong figure earlier, but, as I said to the right hon. Member for Edinburgh, East, we must keep a close eye on phase 3, especially as the joint strike fighter programme seems to be in difficulty. Clearly, if the JSF were ruled out, Typhoon is the most obvious alternative, notwithstanding the serious technical issues that would need to be overcome.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Is the hon. Gentleman aware that the Government invested a lot of money, including in computer designs, to ensure the capability to build a variant that can operate from carriers? The money has already been spent.

Photo of Michael Moore Michael Moore Shadow Secretary of State for Defence

I appreciate the hon. Gentleman's insight, but there is wide debate of the issue and doubts have been expressed publicly and privately. None the less, if the JSF is not possible we shall have to look seriously at what Typhoon can offer us.

As the hon. Member for Aldershot said, the test of the Government's bold new strategy will be its implementation. Beyond the bare bones of the document much detail has still to be provided, but if the ambitions of the strategy are achieved the defence sector and the armed forces will be transformed. The country needs that, and our armed forces deserve it. There is much to do.

Photo of David Crausby David Crausby Labour, Bolton North East 3:06 pm, 2nd February 2006

I add my congratulations to all those concerned with the launch of the Type 45 destroyer on the Clyde yesterday. It marked an important milestone on the march to a new type of warfare involving the introduction of a series of complicated weapons that will integrate land, sea and air in a way previously not envisaged. The vessel will be a credit to the defence manufacturers, engineers, those who serve in her and the Government for having the foresight and the courage to fund such excellent warships. Once again, it gives the lie to those who say that Labour Governments are not committed to Britain's defence.

This is an exciting beginning to an era of procurement that will completely modernise the British armed forces. Coupled with the publication of the defence industrial strategy, we are presented with an opportunity to deliver an impressive and profitable future for our defence industrial base. There is of course much to do to ensure the effective implementation of the defence industrial strategy, especially further down the supply chain, because small and medium enterprises will guarantee our future. We must ensure that the policy does not merely protect our major contractors.

The document should be welcomed as a helpful start, although I am disappointed that the decision to close the Royal Ordnance factories at Bridgwater and Chorley was made before the White Paper. Being wholly dependent on foreign suppliers for the manufacture of our military explosives appears inadvisable, to say the least, but I am sure that my hon. Friend Mr. Hoyle will have more to say about that if he has an opportunity to contribute to the debate.

Research and technology are critical to the future of our defence industrial base. I very much look forward to the development of the MOD's future research and technology strategy, because we are undoubtedly in danger of failing significantly behind the Americans if we are not prepared to make greater efforts in that field of expertise. It is vital that we retain the technology independence that has served us so well through the generations.

With many of our European partners keen to retain a state interest in their defence industrial bases and the Americans increasingly obsessed with the buy American campaign, we should watch our backs. The decision taken by the Americans to deny the UK the international traffic in arms regulations waiver is, quite frankly, an absolute disgrace. It is an indication of how protective and, indeed, selfish our Atlantic allies are when defending their own living standards.

The US House of Representatives Committee on International Relations warned in 2004 that exempting Britain from the international traffic in arms regulations would increase the risk of sophisticated weapons, perhaps indirectly, being passed to terrorists or unfriendly nations. We are entitled to be offended by those remarks, because this country, with the support of the Government and the major Opposition party, has stuck its neck out in support of American foreign policy further than many of us believe that we should have done.

ITAR is obviously dead. It may well be that it is not all that important—that is what we are now told, although it was important not too long ago—but we should be appalled by the Americans' decision to distrust us in such a way when dealing with technology transfer. If all that we receive in return for our efforts in supporting George Bush and his regime is condemnation from the rest of the world, topped up with distrust from the Americans, we will simply be driven to think very carefully about our commitments in the future.

Of course the acid test will be the joint strike fighter, because even though I completely accept that the purchase of the JSF from the Americans represents extremely good value for money, it will be of little use if we are unable to utilise it effectively and to upgrade it, as and when we choose, without having to call on American industry every time that we want to develop something—not to mention the interference of American politicians. We must have access to the software and systems used on the JSF if we are to operate in a network-centric way, if we choose to defend ourselves without the Americans.

The United States must understand that, if Britain is able to utilise only the weapons that we pay for to their full potential with American permission and agreement, we may as well just leave them to do it themselves, thus saving money and the lives of British soldiers on the way.

I strongly suspect—I am optimistic—that we will persevere with the JSF, largely because we are so committed to the project, not least given the design of our new aircraft carriers, but we have been betrayed by the denial of ITAR, and we must learn some lessons from the behaviour of Congress. Of course questions about the availability of the short take-off and vertical landing version must be asked and answered urgently, because the impact on the design and cost of our future aircraft carriers, which are the cornerstone of our plans, will be crucial. Most importantly, we must apply the lessons learned from that sorry episode to the transfer of technology and independence when we decide to replace our nuclear deterrent. I urge the Government to ensure that we have a full and extensive debate on the replacement of our Vanguard submarines and Trident missiles.

I have no doubt that in a world on the edge of major nuclear weapons proliferation, we have no alternative but to retain a British independent nuclear deterrent. While India and Pakistan have a deterrent, with Israel and North Korea almost certainly in possession of one, Iran desperately wanting one, and Taiwan, Saudi Arabia, South Korea, Egypt and other countries waiting in the wings, we have little choice but to retain our nuclear defensive position. We find ourselves within 15 years of the end of the 25-year hull life of the first submarine, HMS Vanguard, although I understand and accept that its service life has been extended to 2024–25. The detail of its replacement clearly must be up for debate. We must decide not only whether to replace it, but the purpose and shape of our future delivery system.

Given the limited size of Britain's nuclear stockpile, it makes obvious sense to use submarine delivery because air or ground-launched missiles cannot possibly offer us the same security as a submarine. I am encouraged by the determination expressed in the defence industrial strategy to maintain key capabilities in the UK, but I urge an early published resolution to what we intend to replace the Vanguard class with, alongside firm decisions on the acquisition of the proposed Astute class nuclear-powered submarines so that we can ensure, most importantly, that we retain necessary skills and design capabilities onshore.

The defence industrial strategy is a fine start to what will be an exciting period in our defence history. However, we must ensure that we miss no opportunities to pass the benefits right down the food chain and defend our ability to protect independently our own security.

Photo of James Arbuthnot James Arbuthnot Chair, Defence Committee, Chair, Defence Committee 3:17 pm, 2nd February 2006

That was a real cracker of a speech, if I may put it like that, from the Vice-Chairman of the Defence Committee, Mr. Crausby, who is extremely assiduous and effective in that role. I hope that his powerful speech will be listened to in the United States, where it deserves to be heard.

Last year, we spent £5.5 billion on defence procurement in this country, which is really quite a lot of money. The overall defence procurement programme going forward is some £75 billion, which is all to provide good and effective equipment for men and women who risk their lives on our behalf. We must do that in a way that gets best value for money, but we must give them that good and effective equipment.

The Defence Committee, of which I feel increasingly lucky to be the Chairman, has produced several reports on such matters. We produced a report in December on the carriers and the joint strike fighter, which hon. Members have mentioned. The Committee raised the risk that the two carriers would not enter into service in 2012 and 2015 as originally planned. We also discussed our concerns about the joint strike fighter, and we expect the Government's response to the report later this month.

We also produced the report "Delivering Front Line Capability to the RAF", which came out last month. It reflected our interest in whether equipment in service is supported and maintained in a through-life way, as the Ministry of Defence has suggested that it needs to be. We will produce a report on the major projects later this year that will draw on the most recent major projects report, and we may look at smaller procurement issues just to be different. We are in the middle of an inquiry into the Afghanistan deployment to discover exactly how the Government's procurement decisions work on the ground, and how the Government support the men and women who risk their lives for us on a daily basis.

Last Thursday, the Committee visited the Defence Procurement Agency. In 2004, the previous Defence Committee said in its procurement report:

"Six years ago, the Ministry of Defence introduced smart acquisition."

I hesitate to disagree with my extremely illustrious predecessor as Chairman of the Defence Committee, but that is not quite right. Smart procurement began in the 1990s, when I was Minister for procurement. What began six years ago was clever branding. The aim of smart procurement is to procure equipment faster, cheaper and better. In 2004, the Defence Committee said:

"On almost all counts it has failed to deliver".

Why on earth, therefore, do I claim the credit for smart procurement? One reason is that it is beginning to deliver. When the new chief of defence procurement took up his post he commissioned a stock-take of smart acquisition which found that most of its principles had not been implemented fully. When we went to the DPA last week, we were pleased to see many signs that performance has improved. In 2004–05, the agency met five of its six key targets. In its major projects report last year, the National Audit Office reported

"a net overall decrease in costs of £699 million".

It said that that decrease was

"primarily due to reductions in the numbers or capability of the equipment driven by changed budgetary priorities and changed customer requirements".

It said that some projects

"compare favourably with our gold standard".

We were impressed in a number of ways when we visited the DPA last week. It has made a realistic appraisal of performance, which has tended to take precedence in a trade-off with the cost of equipment. Should equipment do 100 per cent. of the work that is needed, or is 80 per cent. satisfactory if performance can be improved later?

Turning to the structure of the defence industry, I am convinced that a thriving defence industry is vital to our economy. More importantly, it is vital to the defence of this country. On Tuesday, Lord Levene appeared before the Committee, and he said that there is genuine value in competition. He was talking about British industry's relationship with the Ministry of Defence, and he pointed out that there is a danger of countries giving work to their own indigenous industry and failing to receive good value for money. I found that very convincing. The UK is better at avoiding that danger than most countries. My hope for many years has been that, for the best way to get round this, we should have transnational companies that could be regarded as resident in the UK, and in the United States, and in France, and in Germany. If we had two such companies competing with each other inside the UK, we could avoid the skewing of procurement decisions for national political purposes. That means that we would get much better value for money.

On a critical note, the Government had the chance to consider that possibility when British Aerospace wanted to merge with GEC. The Government should have said no to that merger and told both companies to find other, overseas companies with which to merge. If they had done that, there would have been UK competition, which would have been in the interests of the Ministry of Defence and in the interests of the armed forces, who depend on us to make good decisions. It would also have been good for UK industry.

So why did the Government not do it? I believe that at the time they were frightened of the markets and of what the markets would say about the Government preventing a merger that two companies wanted. That was a serious failure of courage, from which the UK will suffer. Is there any chance of retrieving the situation? I do not know, but we now see the defence industrial strategy and some of the consequences. Competition is lower down the agenda, partnership is higher up the agenda. There is nothing wrong with partnering. The trouble is that the Government's failure to act in relation to that merger has left us with no alternative.

The defence industrial strategy has the huge advantage that it was promised for December last year and, for the first time ever in any procurement project that I can remember, it was produced on time—in December last year. As a Committee we are still taking evidence on the DIS, so I shall not say too much. We have some concerns that have come out during questions, particularly about the treatment of small and medium enterprises. We might end up being worried that scant attention is being paid to the key area of research, as there appears to have been a long-term decline in defence research. The essential question, as my hon. Friend Mr. Howarth said, in relation to the defence industrial strategy relates to its implementation. If that is done well, we can be pretty optimistic.

In ending, I shall say a few words about Lord Drayson, the new Minister for Defence Procurement. I wish, if I may, to ruin his career by saying that he has made a favourable impression. Not only did he produce the defence industrial strategy when he said he would, but he has given a strong impression of knowing industry, being prepared to listen to industry and being prepared to buck the political wisdom that too many of his predecessors, probably including me, were not prepared to buck. He has been among industry and has listened to it in relation to drawing up the defence industrial strategy. It is important that he and it should succeed, and we wish him well in that process.

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney 3:28 pm, 2nd February 2006

I shall keep my remarks short, as those on the Front Benches have again taken up over half the time available for the debate.

On efficiency, with the amount available for defence expenditure, the problem is how we spend it. As I told the Minister last night, I envisage him going to the Treasury and saying to the Chancellor, "Gordon, I'd like some more money", and Gordon saying, "Well, when you can spend what I give you properly, come back and ask for some more." That has been the problem right through the term not only of the present Government, but of all Governments. It is a huge problem. In that sense, a defence industrial strategy to develop and deploy the industrial policy that the Government have had for some time is a good idea, and I welcome it because it helps to address exactly that problem and has made strides in doing so. However, the role of Government agencies is important, and the Select Committee Chairman referred to the Defence Procurement Agency. That has been a dysfunctional organisation in many respects for some time; it has not had the necessary emphasis in terms of process. The strategy places pressure on that organisation to reform itself so that it becomes an appropriate vehicle within the overall strategy. That is long overdue, but if it happens it will be a good thing. I will welcome it and we will try to help the process work.

My right hon. Friend the Minister talked about support for fast jets and the Committee's recent report on the matter. He said that the reason for doing what was done was to retain design skills within BAE Systems, but that was not the only reason. That was not the argument that was made at the time for that change taking place. There was also talk of the need for skills to be retained within the RAF being a reason for the change. I am sceptical about that, but we will doubtless address the matter at another time and in another place.

The question of the C-17s is important. I visited 16th Air Assault Brigade last week, and it is going to Afghanistan. It will test in anger—I hope not too much in anger, but certainly test in practice—the Apache helicopters. It will also test air manoeuvre and support ground manoeuvre. To do all those things, it needs lift, and that is a constant problem. The C-17s have been supremely helpful in dealing with that over a period of time. They did not go through the classic acquisition processes of the time, but they have proved to have been very necessary and very successful, and we could do with a couple more because they are plugging gaps in the process.

In order to carry out manoeuvre capability, support is necessary. There has been a lot of talk about big toys, fast jets and carriers, but to give that manoeuvre capability to people on the ground requires a strategy. To do all this we will have to collaborate in different ways and there will be different types of collaborators, both industrial and political. The strategy looks at particular types of equipment that are needed in relation to particular sectors of industry. There is an imbalance in the provision within the UK. Wales does not really get sufficient defence expenditure. Hon. Members may disagree, but that is the truth. At the moment south Wales is experiencing difficulties with fast jets. However, we also see opportunities, such as those in the defence training review.

I want to use this opportunity, not to plead that everything should end up in south Wales—although that would probably be a good idea—but to make a point that goes to the heart of something that was said earlier, and that concerns transparency in process. When deciding where that project should go, transparency is the key, as it is to a number of other matters.

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

I shall not take interventions because I want to give others the time to speak.

The other collaborators are political collaborators. I do not have time to support some of the remarks of my hon. Friends about the situation between the UK and the United States. Sometimes I ask myself why we are having this aeroplane anyway. Perhaps we should say that we do not want it. Let us have a plan B, C or D. Frankly, the situation is unacceptable. I really resent people who are involved in pork barrel politics in America who pretend to be the great free traders lecturing us on this issue.

BAE Systems has huge interests in the United States. However, its interests in the USA try to pretend that they are not British and that they are magically part of the USA. The reality is that American companies are the largest investors in the Welsh economy, which has been the situation for years. The interrelationships are not as the prejudiced describe them, and it is about time that those in the USA who peddle such prejudice woke up, conducted an accurate analysis and reached a proper understanding of technology transfer and the relationship between the two countries.

In conclusion—

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

I am glad that Mr. Vaizey is enjoying it.

The Minister has mentioned the key word, "sustainability", and the policy and strategy must together result in correct, sustainable decisions, which is the key to the whole process. Sustainability requires money, so perhaps the question is not who replaces Tony Blair, but who replaces Gordon Brown.

Photo of Michael Jack Michael Jack Conservative, Fylde 3:36 pm, 2nd February 2006

We have heard some interesting and robust speeches, but I want to pick up a point raised by my right hon. Friend Mr. Arbuthnot, the Chairman of the Defence Committee, about Lord Drayson. I want to express my appreciation for the time that Lord Drayson spent with me explaining the thinking behind the defence industrial strategy, and I also pay tribute to his predecessor, Lord Bach, who worked on the issue as a precursor to this exercise.

I welcome the DIS from the standpoint of a constituency where employment is dominated by BAE Systems, which has argued for so long for a recognition by the MOD of the economic and industrial problems that it faces in meeting the exacting requirements of its principal customer. If, for example, the recognition in the DIS that companies need to make a proper rate of return translates into reality, I hope that it will finally remove the element of suspicion that seems to have dominated the MOD's dealings with business. The MOD has acted as though business might not tell it the truth or that BAE systems might have been overly favoured because of the size and strength of its position in the defence industry. If that openness means genuine partnership and the removal of suspicion, then I, for one, welcome the strategy.

There is an element of sadness to the strategy, because, as has been said, it signals the end of the UK's ability to build complete military aircraft, something at which we have been singularly good for a long period of time. My concern is that if we need to buy a whole aircraft at some point in the next 30 years, we have signalled that we are not capable of providing an alternative. If those who seek to gain our business are not in partnership with us, they will therefore know, in the nicest sense, that they have got us over a barrel. I would not like to see Lockheed Martin become the Microsoft of military aviation supply, so that whatever is done has to be done with it.

Photo of John Smith John Smith Labour, Vale of Glamorgan

We will not necessarily lose that capacity. The skills retained by upgrading and improving existing platforms will allow us to retain the capacity to build, because of the level of systems integration.

Photo of Michael Jack Michael Jack Conservative, Fylde

As I shall say about the joint combat aircraft, the hon. Gentleman's observation is true, if we retain the ability to alter the basic structure. In fairness, the DIS states that the unmanned air vehicle scenario is another way of keeping those technologies alive. At the moment, we have an advantage, because we have some of the most modern equipment in the pipeline, but what will happen if the technical advantage degrades over time? There is an awful lot of money in this world, and we have heard that a lot of states could afford to acquire nuclear weapons. Furthermore, Russia has the ability to build advanced fighter aircraft, which it could supply to others.

I do not know what will happen in the next 30 years. I just want to make certain that my concept of technological deterrence is maintained at a high level to put off other people, and that if we do have to return to building a fast jet, we truly have the capability to do so.

I want to explore a little further the present situation as regards the Eurofighter Typhoon. The defence industrial strategy is silent as regards the third tranche of that aircraft. I guess that a discussion must be going on in the Ministry of Defence about how many of these aircraft we will want to have an operational capability at any one time, because that will determine the number of aircraft that we buy. If we wanted, say, 40 aircraft, we could do away with tranche 3; if we wanted 80, we would have to keep it. Can the Minister enlighten us on how the thinking is going on that?

I congratulate all those involved in winning the order from Saudi Arabia for up to 72 Eurofighter Typhoons; that is welcome. However, this is a Government-to-Government arrangement, and at a certain moment in time the aircraft that are going from the second tranche to fulfil the order for the first 24 will be technically owned by the UK Government. Can the Minister therefore assure me that we are not about to be subjected to an example of smoke and mirrors whereby the Government magically acquire 72 of these aircraft, which is more or less tranche 3, sell them to Saudi Arabia, and then put their hands up and say, "Right, we've bought 232 of these, we've done what we said", when in fact they have not answered the question of the RAF's actual requirement. We need clarity on that.

The defence industrial strategy is also silent on the successor to Hawk. The Government are buying the advanced jet trainer, and I am glad about that. However, at some stage in the next decade there may be a world demand for a successor, and the DIS says nothing on that subject.

Mr. Crausby said everything that needs to be said on the joint combat aircraft. He said it with passion and elegance and I agree with him. However, I draw the House's attention to paragraph A2.12 of the strategy, which says:

"We welcome the progress made in establishing understandings on Security of Supply (the US/UK Declaration of Principles and the Letter of Intent Framework Agreement)."

We all welcome it, but the Minister did not give us a clear and detailed explanation of exactly where he thinks Ministers stand in a Government-to-Government sense. I hope that he will be able to comment on that in more detail. Paragraph B4.42 of the strategy says, in reference to the joint combat aircraft,

"As part of this performance based arrangement, the UK also intends to establish sovereign support capabilities which would provide, inter alia, in-country facilities to maintain, repair and upgrade the UK fleet and an integrated Pilot and Maintenance Training Centre."

None of that will happen unless the points made by the hon. Member for Bolton, North-East are fully addressed.

Another part of the latter paragraph deals with the question of whether it is necessary for the United Kingdom, in addition to maintaining and upgrading the aircraft—which is essential for the reasons given by John Smith—to have a final assembly and checkout unit. I think that it is necessary in order to maintain our skills base. More importantly, as the Minister will know, the success of Case White, the method by which the Eurofighter Typhoons were initially inducted into RAF service, with the RAF squadron based at BAE Warton, demonstrates that a final assembly and checkout unit is a prerequisite of the good introduction into service of this vital aircraft.

On a slightly discordant note, it is disappointing that while we are arguing about BAE's further involvement in this project, we have seen the silent exit, apart from parts of the STOVL—short take-off and vertical landing—version of the aircraft, of Rolls-Royce as a second engine supplier. If there was any communication—I gather that there was—between our Prime Minister and President Bush, it seems to have been one way. Again, I agree with the hon. Member for Bolton, North-East. It is vital that we say to our American counterparts, "If you really think that partnership means something, you have to come to the party and trust your closest ally with these technologies." There is no point in having the aircraft in service if one cannot look after it, and the best way to understand it is to make it.

I want to consider some of the inconsistencies in the strategy that appear under the heading, "Sustainment strategy". Although I appreciate that the strategy is designed to sustain and maintain our capabilities, one or two paragraphs require further explanation. Paragraph B4.39 states:

"Our need to retain a minimum level of onshore capability does not necessarily mean that we will need to support all aspects of our aircraft in the UK."

What do the Government mean by that? On the one hand, they want to sustain companies such as BAE Systems, but on the other, they appear to suggest that, if they get a good offer for doing some of the sustaining, maintenance and upgrade work from somewhere else, they might accept it. One cannot have one's cake and eat it if one wants an up-to-date military aircraft industry in this country that maintains its capabilities.

Paragraph B4.40 states:

"For any particular aircraft type there may also be a middle ground where, to secure value for money for example, we may rely on off-shore suppliers for major upgrade".

Does that mean that the Eurofighter could go to Italy for upgrading? I should be grateful if the Minister enlightened us further.

Paragraph B4.41 states:

"However, major changes must be made in the management and operation of the supply chain to incentivise continued improvements in the support arrangements for this aircraft, ensuring that we retain onshore our ability".

On the one hand, the document specifies "offshore", and on the other, "onshore". The Government must be clearer, especially given their comments on the joint combat aircraft.

Paragraph A1.21 states:

"We must maintain the appropriate degree of sovereignty over industrial skills, capacities, capabilities and technology to ensure operational independence against the range of operations that we wish to be able to conduct."

That is vital, especially in the light of the Minister's comments at the beginning of the debate that operations occur in which we need to act quickly. Unless we have 100 per cent. capability, we cannot fulfil that requirement.

There are further inconsistencies. Paragraph B4.23, which covers aerospace systems and enabling skills and technologies, states:

"Whilst the UK will have an enduring need for access to world leading technology across the range of aerospace systems, it is neither practical nor affordable to retain all the relevant skills and technologies onshore."

It continues by referring to the underpinning skills and what the Government want to achieve.

When considering key ingredients in the systems that we currently operate—described as "mission systems"—the strategy states:

"There is a strong UK based capability in the Mission Systems area, which has enabled the UK to deploy world-class capability without undue dependence on other nations".

The paragraph concludes:

"However, this capability is now threatened by an intermittent flow of new programmes."

Again, one cannot have one's cake and eat it. The capabilities must be maintained.

I am worried that the time scale of up to 10 or 15 years for further developments of unmanned air vehicles is too long. The use of autonomous air vehicles will be a vital part of future strategy and I hope that the Under-Secretary can tell hon. Members that the time scale will be shortened. I congratulate BAE Systems on its investment in the prototypes and on its achievements.

When will the decision on Nimrod be made? Is it likely that 12 aircraft will be organised? I welcome the strategy but I hope that the Under-Secretary will acknowledge that we cannot simply pick and choose or have our cake and eat it. We must invest in the best of British technology.

Photo of John Smith John Smith Labour, Vale of Glamorgan 3:49 pm, 2nd February 2006

I welcome this opportunity to speak in this very important debate. I should like to start by congratulating the Government on the publication of the defence industrial strategy. It was published on time, and due credit has already been paid to the noble Lord Drayson for the role that he played in that. We have had an excellent debate so far on the implications of the strategy, and I want to focus on one important area.

I believe that the strategy represents a welcome dose of realism. The British defence market is one of the most open markets in the world. We have had a policy of opening our markets for more than a decade, and that is quite right. Unfortunately, our major competitor countries have not reciprocated. The French Government control their key assets and dominate their market through state-owned, nationalised companies, or through national companies in which the Government have a golden share and a direct state interest. They also retain the traditional arsenals, and control all the armaments and ammunitions through Government Departments; they are not even companies. France has a traditional, state-regulated system.

The United States, on the other hand, claims to have an open and competitive system—indeed, it has federal laws that demand competition. The problem is that that competition is limited to taking place between domestic suppliers. As we know from bitter experience, it is incredibly difficult to break into that market other than through acquisition, as BAE Systems succeeded in doing.

The defence industrial strategy seems to offer an alternative route. However, I am not convinced that the strategy will deliver what we need. Gaps have already been referred to, and I shall not repeat those points other than to lay down the marker that there is no coverage in the document of the role of small and medium-sized companies. There is also very little coverage of second-tier competition in the supply chain. It is clear that we are going to move further and further towards longer-term partnering agreements, but what role will the smaller companies play in the line of supply to the prime contractors? The danger is that they will move out of the industry as there is nothing in it for them, and they will take their innovation and enterprise with them. I do not think that that problem has been addressed. We wait with interest to see what the Government's position is on research and development, because that subject is also missing from the defence industrial strategy.

My concern is to compare the strategy, for which we have waited for more than three years, with the original remit of the defence industrial policy. There has been a clear shift in Government thinking in that regard. We have met the challenge in regard to recognising strategic capabilities and defending them, just as the French and the Americans and just about everyone else have done. That is important because we need those capabilities for economic reasons and for defence reasons.

More importantly, through this document we have told the industry what our expectations are to be over the next 20 to 30 years, which gives it the opportunity to restructure. In answer to the question, "Who will do the restructuring?", the industry will have to do it to meet the challenges presented by the change in the market that is clearly declared in the document. Those are good things.

My concern is that, in the original document, emphasis was placed on obtaining long-term value for money, encouraging competition wherever possible, and avoiding the creation of monopolies. Those objectives are in the policy—read it. I am not sure that this strategy will achieve those objectives. The policy states that we will require

"More transparency and inclusiveness within the procurement decision making process", and that we demand

"open and fair competition".

Some of the partnership arrangements will last up to 25 years with a single company, and there is a danger that we will not be able to meet those criteria.

Clearly, the strategy contains a shift away from encouraging competition wherever possible, but I happen to think that such competition is good for our defence industries, rather than dependence on a small number of prime companies. I know that this might be unpopular in the Chamber, but I feel that I should relay my fear to the rest of the House about the danger of encouraging one sole monopoly supplier. That is the inherent risk in the strategy. It could be argued that the defence industrial strategy was written by BAE Systems for BAE Systems.

I am not here to knock BAE Systems. I think that it is a great country—[Interruption] That was a natural Freudian slip. It is a great company, and we should do everything to encourage its success. Removing the pressures of commercial competition, however, will not protect it. We should consider recent history and past defence procurement policies, which did not do BAE Systems any favours. My fear is that this defence industrial policy will not do it any favour either.

Members might be surprised to hear that it is estimated that more than 50 per cent. of the MOD's large projects last year, measured by value of the contracts, went to one company—BAE Systems. It now has a sole monopoly on support for our main aircraft platforms, as I mentioned earlier in an intervention. What I mean by that is not that we have one supplier, which is not unusual in a contracted industry—it cannot be avoided—but that we have no alternative capability, which is dangerous.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

Is it not the case that BAE Systems is, as it describes itself, a systems integrator, and that work goes to thousands of companies, even though BAE Systems gets the contract? Is my hon. Friend suggesting that there should be another national champion, or that the work should go to a foreign company?

Photo of John Smith John Smith Labour, Vale of Glamorgan

I think that the Chairman of the Defence Committee addressed one of the possible solutions—to encourage more transnational competition within the domestic market. I do not think that we should replace BAE Systems as a national champion, but we have a duty to ensure that it is an efficient, effective company that can deliver what we want to time and to price. My worry is that over a long period, we might not be able to achieve that.

I have a little experience of running a partnership, which was very interesting and an important learning curve. We learned three main lessons. There was a lot of discussion about working together, trust and shared objectives. In our organisation, however, we drew three conclusions. First, it is virtually impossible to incentivise a sole monopoly supplier. A contractual system must be developed that keeps that supplier on its feet—competitive, hungry and able to deliver. Secondly, there is only one thing worse than a large, bureaucratic, inefficient, public monopoly—a large, bureaucratic, inefficient, private monopoly. The Government should be wary of that lesson. Thirdly, if one wants a partnership really to succeed, one must find a formula that allows the private sector to do what it does best—to compete, innovate and be efficient, without interference—and the public partners to do what they can do best, equally without interference. I feel that the proposals are too much of a fudge.

The Conservative and Liberal Democrat Front-Bench spokesmen both referred to some of the recommendations on addressing that matter. We need more transparency—there is no doubt of that—and we need more supervision of long-term partnering contracts. BAE Systems has air support and land support—indeed, an almost complete monopoly on land systems. It is now moving into other areas. We want to stimulate competition, and if we cannot do that we want to monitor the position very carefully. We must have more transparency, and more public scrutiny.

A major defence procurement project is on the stocks now, probably the largest defence project of all in terms of value. Someone once said to me that it was the biggest public-sector project since the pharaohs build the pyramids. We shall wait and see. I am talking about the bid for the defence training rationalisation programme. The Government must ensure that the evaluation process for the 25-year partnership is conducted robustly, fairly, openly and on a level playing field.

We should not be asking for special favours. This is a huge project, and we want the right team to implement it. The way to ensure that we get the right bid is to ensure that there is proper scrutiny of the evaluation process now. There should be only one consideration in the choice of bidder: which will provide the best product for the future training needs of our military, which is the best price for the future training of our military, and which provides the best location?

The Ministry of Defence wants a training facility that is second to none in the world and, for the first time ever, offers tri-service training—training for Army, Navy and Air Force—in an environment that can offer modern training techniques, a modern, adaptive training culture, and the flexibility to be able to change the training requirements of the three services over the next 25 years. I believe that the bid by Metrix Ltd. at St. Athan meets those requirements, but I am not making a special plea. I am asking the Government, when considering contracts that are so important for the future needs of our military for the best possible training, to do so robustly, fairly, openly and on a level playing field.

Photo of Robert Walter Robert Walter Conservative, North Dorset 4:02 pm, 2nd February 2006

I welcome the opportunity to speak. I shall be unashamedly parochial, because the defence industrial strategy is key to the future employment of many hundreds, if not thousands, of my constituents. The parliamentary guidebooks describe my constituency as rolling hills, market towns, agriculture and so on, but it also contains the headquarters of two large, or medium-sized, defence and aerospace contractors, Meggitt and Cobham. Blandford contains the headquarters of the Royal Corps of Signals, and for many years has been the home of the Royal School of Signals. It has been intimately involved in the development of the Bowman project, and is now the home of the Defence College of Communications and Information Systems, to which I shall return shortly.

Across the western border of my constituency is Thales Underwater Systems in Templecombe. I was very pleased to be there a few months ago when the First Sea Lord opened its new factory extension, which can produce in a single operation the 1 km trails that go behind warships for sonar reconnaissance. It is developing a number of unmanned underwater vehicles as well. A few miles down the road, in Yeovil, is AgustaWestland. All those companies employ a number of people who live in my constituency.

I want to discuss two big defence procurement projects, both of which are vital to my constituency. The first—the defence training contract, to which John Smith just referred—is worth £19 billion, and the second is worth £13 billion. Both bring the private sector into defence provision in a way that we have not previously seen, and both raise key questions, a number of which have yet to be resolved. I hope that the Minister can provide answers to them when he winds up.

The privatisation of the six defence colleges involves a public-private partnership and the spending of £19 billion over 25 years. The Defence College of Communications and Information Systems, at Blandford, is very much a key part of that. Such a partnership is an example of the Government procuring their training needs for the military from private companies. It is very easy to say that it is simply technical training, but much of it is essential military training. The DCCIS provides training in battlefield communications, electronic warfare and a number of other such activities. The Royal School of Signals, which has been at Blandford for many years, is a military establishment, but it has a tradition of employing civilian contractors—individuals and companies—and employees, many of whom are ex-servicemen with the skills needed to train the soldiers of tomorrow. However, they have always been under military control, and there is certainly scepticism among the senior officers involved in the DCCIS about the future under this public-private partnership.

Such scepticism is based on financial grounds, if no other. A training day at the DCCIS costs about a quarter of the equivalent private-sector training in communications or information technology. So one of my questions to the Minister is, will this contract be viable in the long run? As one senior officer put it to me, what will happen if such training fails? If we are in the midst of a battle and we discover that our soldiers have not had the right training, we cannot send them back for re-training. We have a battle to win and we have to get on and make do. Military commanders are part of a chain, and they feel that if they were in charge, they would have greater control over such matters.

I have four questions for the Minister about this contract, the first of which concerns its military integrity. Can this essential military training be provided effectively by a private organisation that is detached from the military commanders in the field? I almost intervened earlier on the hon. Member for Vale of Glamorgan in respect of my second question, which is about the financial transparency of this deal. My constituents are very worried that the Welsh Development Agency will dangle sums of money in front of contractors in an effort to move the defence college from my constituency across the Bristol channel to St. Athan. Reference has been made to giving the successful contractor a sweetener of up to £100 million.

Photo of Robert Walter Robert Walter Conservative, North Dorset

I will happily give way to the hon. Gentleman for some reassurance.

Photo of John Smith John Smith Labour, Vale of Glamorgan

I can see why the hon. Gentleman did not intervene on me. There is no question whatsoever of the Welsh Development Agency dangling financial carrots to make such deals, because doing so would be unlawful.

Photo of Robert Walter Robert Walter Conservative, North Dorset

I am not necessarily reassured by that, and would prefer to hear it from the Minister. I am not sure that it is unlawful for a development agency to be involved in bringing jobs to its area, but I know that the RDA in the south-west does not have the money to be able to match the offer.

My real question to the Minister is: can he guarantee the future of a military presence at Blandford camp, and especially of the defence college? The college is a very important part of the local infrastructure and directly or indirectly employs some 5,000 people in my constituency.

My second key constituency point about defence procurement has to do with the future strategic tanker aircraft. The selection by AirTanker of the new Airbus A330 200 provides the best value for money and will maximise the UK's industrial potential in the project. It is a truly British solution. The Ministry of Defence has estimated the programme to be worth £13 billion, possibly over 27 rather than 25 years. It would involve the manufacture and supply of a fleet of new Airbus aircraft and their conversion to tanker configuration, the fitting and certification of military avionics, the development of Brize Norton with extensive construction work for ground and air support equipment, and the provision of long-term operational support, including crewing, training and maintenance.

The A330 tanker has significant export potential, and its launch will have the added benefit of increasing the opportunity for UK suppliers to meet that demand. There is already talk of the French, who have a similar requirement, buying into the same configuration.

Another question involves what the US will do, given that Boeing was knocked out in the first round of bidding for that country's requirement. I understand that the US could need as many as 300 or 400 tanker aircraft, and there is a real possibility that AirTanker could participate in that. In any event, the project will bring the maximum amount of high-value work to this country, and generate new investment and employment throughout the UK aerospace industry.

I am particularly concerned about the "probe and drogue" aerial refuelling system that was developed and built at Wimborne in my constituency. It has been used by the RAF for a number of years, and is based on an invention by Sir Alan Cobham, who in the 1930s founded a subsidiary company called Flight Refuelling at Tarrant Rushton airfield in the heart of my constituency. He developed a system that allowed the pilot of a receiving aircraft to catch the fuel hose—the drogue—as it trailed from the refuelling aircraft. The receiving pilot could then draw the drogue in, using a type of harpoon.

The apparatus may seem somewhat complicated by today's standards, but it was bought by the Americans after world war two. The US air force converted 100 B29 bombers to carry the system, and the planes were redesignated as KB29 tankers. Flight Refuelling has continued to develop the technology.

Cobham's other subsidiary, FR Aviation, was formed in 1985. It operates out of Bournemouth airport, in the constituency of my neighbour and colleague, my hon. Friend Mr. Chope. The company is a world leader in the provision of turnkey special mission flight operations, engineering and aviation services. Between 1991 and 1996, it converted the RAF's VC10 aircraft to incorporate the air-to-air tanker refuelling role.

I want to remind the House of the basics of the matter. Commercial-standard aircraft have been built and tested by Airbus at Toulouse, but the UK will account for half the total value of the basic aircraft. AirTanker will create a centre of excellence for the technology, build new facilities at Brize Norton and run the new systems and support operations. About 75,000 jobs in the United Kingdom are tied up with this. When will the Government finally seal the deal? We have been at this now for six years. AirTanker is the preferred bidder. One of the problems is technology transfer with the United States, but without it there can be no deal because the project is not viable. Unless the United States agrees to the contract specifications that the MOD has laid down, the aircraft is not a viable proposition. Can the Minister please tell me tonight when he will get his pen out and sign the deal with AirTanker?

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 4:15 pm, 2nd February 2006

The document on the defence industrial strategy, is important to everybody. The Secretaries of State for Defence and for Trade and Industry are joint signatories because this is not just about defence; it is also about UK jobs. As the only member of the Trade and Industry Select Committee represented here today, I must make sure that that voice is heard. It is important not to neglect trade and industry.

Rightly, much has been said about the joint strike fighter, the ITAR waiver and UK jobs. Those jobs are important to Lancashire and the aerospace technology and defence systems there. Tens of thousands of jobs rely on the contract. It seems odd to me that the Americans are happy for our troops to go shoulder to shoulder in a trench and to fight side by side, but on technology transfer they ain't playing fair, they ain't playing the game. It is unacceptable for the Americans to behave in that way and we must tell them so if they are to expect our support. We are supposed to have a special relationship. We hear a lot of words about that, but we have yet to see the proof of it. We may see the President with his jacket on walking with the Prime Minister and having a good chat at Camp David, but we want to get beyond the words of Camp David and to secure jobs in the United Kingdom.

This is not just about having a manufacturing capability; it is about manufacturing the parts and the final assembly of the joint strike fighter. If we are placing an order for 150 aircraft, the least we can expect of the contract is to be allowed to build them here. If others, with agreement, can sell them on to a European nation, why do we not have the same ability? There are questions over maintenance, too. We may be allowed to undertake basic maintenance but there may be a technology bar preventing us from undertaking deep maintenance. We have to put right many issues as soon as possible. It is time that the Americans paid that special dividend.

Some £2 billion of investment has already been made. What are we going to do? Do we look to the Typhoon as a variant of the carriers? That is the second part: we must not make the mistake of the 1960s when the carriers were not the right size. Carriers must provide a platform capable of taking different aircraft. We must ensure that different aircraft can operate from them. Typhoon may be the answer for the future. We cannot say yet, but we must put pressure back on the Americans.

The future of fast jets is important for Lancashire. We must have fast jets continuing beyond the joint strike fighter and Typhoon. We must set out our technology needs for the future. We know that unmanned air vehicles will be part of that future, but I do not believe that we have given up on pilots and aircraft. Therefore, there must be investment now. We want to see the Government working with BAE Systems, ensuring that we build on the technology and skills in Lancashire and secure that advantage for the future—way beyond the 30 years that we are talking about now.

The other procurement issue that we must not forget is NAAFI. I have told my hon. Friend the Under-Secretary before that we must not let NAAFI close. I know that we are pulling back from Germany and there is a question mark over NAAFI there, and in Cyprus and Gibraltar. The profits that NAAFI makes do not end up in shareholders' pockets, but are ploughed back into recreation for the troops. Who else would be working in Afghanistan and Iraq, ensuring that our troops have somewhere for recreation? I make a special appeal on that point.

The other big issue is Royal Ordnance at Chorley and Bridgwater. Bridgwater produces high explosives and Chorley produces initiators and boxer caps. Nothing goes bang without Chorley. Chorley ensures that explosives work. The French, Germans and Americans would not cease production in their own countries of that vital security need, because they recognise that boxer caps and initiators have to be home-grown. BAE Systems tells us that as a favoured friend of the Government, and to ensure security and sustainability, it should retain missile technology, aerospace and shipping. However, somehow, it fails to mention explosives and the need to enter into a partnership. BAE Systems is five years into a 10-year deal—only halfway through the contract—but it wants to close Bridgwater and Chorley. It is unacceptable for us not to have a capability in the UK and it will have to reconsider its position.

When BAE Systems bought Royal Ordnance—an unfortunate deal—it was about asset stripping. We know that the sale of the Enfield site recouped every penny that BAE Systems paid the Government for Royal Ordnance. In Chorley, it was like the wild west—it was a land grab. BAE Systems could not wait to sell off acres and acres of land—it has received the money for 600 acres. It now operates on some 180 acres of the site, producing initiators and boxer caps. It wants to close the facility, but it should not be allowed to do so. The Government will say that it is a private company, but it has a contract with the Government, so we should not allow it to close Chorley. In fact, it should be building a new facility for producing boxer caps and initiators. It should sit down and do a deal with the Government and the local authority to release a little more land—the capacity is there—the proceeds from which go to a new production facility to ensure that we have a long-term capability to fight wars.

BAE Systems has tried short-cuts before. It supplied 21 million rounds of ammunition to the Government that has been dumped at sea because it did not work. We do not learn from the mistakes of the past, but we should learn from the Gulf war, when Belgium refused to supply us with artillery shells. This is a wake-up call for the Government: we need Chorley and we need Bridgwater. We cannot have nuclear weapons without high explosive. A charge—made by Chorley—is packed into the missile that supercharges the high explosive that generates the nuclear explosion. The charge has to be repacked regularly, so we would have no independent weapon if Chorley closed. We would be dependent on the French or the Americans and that would be absurd. We have to tell BAE Systems that it cannot close Chorley or Bridgwater and that a contract should be worked out that keeps both facilities open. The proposal to close is about selling the assets and ensuring as much money as possible for the shareholders, but that is not good for the future of the UK's defence.

I know that other hon. Members wish to speak, so I shall conclude in a moment. Before I do, I want to remind the House of the bad mistake we made in giving the contract for army uniforms to China. In Chorley and Blackburn, we were producing superb uniforms, of exceptional quality, for the British Army, and then the contract was given to China.

Let us ask some questions about China. It is important to find out why things went wrong. For some unknown reason, the Chinese made the battledress waterproof, yet everybody knows that uniforms must have breathability. What on earth are we doing? There have been major mistakes. Three garments were tested and there were faults in all of them. Our troops have to operate in the heat and the cold, yet somebody decided to make their uniforms waterproof. What is going on? This is the madhouse of failed economics.

I ask the Minister: please bring the contract back from China, keep UK jobs, make sure that RO survives at Bridgwater and Chorley and let us ensure that aerospace has a long-term future.

Photo of Bob Russell Bob Russell Opposition Whip (Commons), Shadow Minister (Defence) 4:25 pm, 2nd February 2006

First, I express my appreciation for the troops from the Colchester garrison who are in Iraq and for those who will shortly go to Afghanistan.

I shall follow Mr. Hoyle by talking about clothing and textiles. We might be debating what will happen in the future, but we need to learn the lessons of the past.

I want to concentrate on the four opening aspects of the smart acquisition life-cycle suggested by the National Audit Office: concept, project initiation, assessment and project approval. In 1997, the Government inherited the relocation of the defence and clothing research establishment from Colchester to Caversfield. At the time, there were 147 staff in Colchester and the number was likely to increase to 156, but the number to be transferred to Caversfield was reduced to 84. The relocation was announced on 1 April 1999—an appropriate date, one might think—although it was more than two years before it happened. There was a year's delay while a private finance initiative was considered and a further year for a value for money investigation by McKinsey.

Last month, I was advised in written answers that 24 members of staff from Colchester were made redundant at the time of the transfer to Caversfield and only 46 were transferred, so there was a huge reduction. Of those who transferred from Colchester in March 2001 only six remain from what was arguably the world's best clothing and textile research work force.

I asked the Secretary of State for Defence for an independent review of the operation of the research and development facility following its transfer from Colchester to Caversfield. The Minister of State answered:

"The future of the Clothing Research and Development facility has been under constant review . . . Independent advisors have already been involved in the review process."

I then asked about the future of the Caversfield facility and the Minister replied:

"The current proposal, subject to Trades Union consultation, is to close the Clothing Research and Development facility."

He said that in future the work

"would be competed for by industry and academia."—[Hansard, 19 January 2006; Vol. 441, c. 1531W.]

That bears out the point made by the hon. Member for Chorley: we have lost the capacity in the UK to develop and research vital equipment for our armed forces in the field.

When the transfer to Caversfield was proposed, I accompanied a delegation from the Colchester work force to meet the Minister to suggest a staff buy-out, but the Government rejected it.

The Government also refused the concept of privatisation, because they said that the best way forward was to collocate everything at Caversfield. What is necessary is for the Public Accounts Committee, the Select Committee on Defence or, indeed, the NAO to look back on the proposals and compare them with the reality of events as they have unfolded.

In 1967—some decades ahead of today's concept of tri-service proposals—the three services combined to form a purpose-built clothing and textile research establishment at Colchester. It was the most modern and best-equipped textile laboratory in Europe. The Hohenstein—I hope that I pronounced that correctly—skin model, which used to measure the passage of heat and moisture through all textiles, was the only one of its kind in the United Kingdom. That has been destroyed now. The flammability manikin used in simulations of burning clothing was one of only two in the country. That has been destroyed.

The development of smart weapons used for camouflage, concealment and deception demands continuous effort to ensure that our service equipment remains fully capable when deployed against increasingly sophisticated technology. A fully equipped laboratory was available for that purpose. The camouflage of tanks, trucks and thermal imaging were majors areas of work—all destroyed. To develop footwear and handwear, there were environmental chambers equipped with heated hand and heated foot devices to enable the accurate measurement of the thermal efficiency of glove and boot designs. Respiratory protection equipment was available to test the quality and fit of respirators. All that has been destroyed.

The design and development of body armour and helmet and visor materials was undertaken to protect personnel from ballistic and non-ballistic impacts. High-speed photography was used to study bullets hitting body armour. Impact testing was carried out on military helmets. All that has been destroyed.

We know that lives were saved in Northern Ireland by the research work that was undertaken, because the flak jackets smothered the bullets. Vital research into garment design and clothing and textile development was undertaken. There was a fully equipped garment production workshop, capable of making a wide range of clothing items, with body measurement scanning booths and modern computer pattern grading equipment, but it has all been destroyed. Heavy textiles were designed for use in modern rucksacks, shelters and sleeping systems. Again, all that research has been destroyed.

Dedicated, loyal staff, who had given years of service, were uprooted, made redundant and their jobs were lost. At least an assurance was given that the work would continue at Caversfield, but the written answers that I received last month show that it will all go. The Government had arguably the world's best textile and clothing research laboratories, but all that has gone—it is all lost—and that is a tragedy. As the hon. Member for Chorley said, it is not right to get cheap replacements from China.

This is just a flavour of what our armed services have lost. The world's leading research facilities, originally based in Colchester, have now gone. There is no other organisation with the skilled staff available to carry out that vital and often life-saving work. I therefore hope that the PAC, the Defence Committee and the NAO will look back at what was said would happen and consider the reality of what has happened.

Photo of Linda Gilroy Linda Gilroy Labour, Plymouth, Sutton 4:33 pm, 2nd February 2006

I begin, as a number of other colleagues did, by paying tribute to our former colleague, Rachel Squire. She will be particularly missed on the Select Committee on Defence. She had great personal courage. Even after traumatic surgery, she returned to the House. I remember walking to Victoria with her one very pleasant summer evening, when she was looking very positively towards the future. She would have greatly enjoyed the partnership shown in the defence industrial strategy, which, among other things, we are discussing today. I know that she was looking forward greatly to being joined by other women Members representing marine constituencies, such as my hon. Friend Sarah McCarthy-Fry and my neighbouring MP, my hon. Friend Alison Seabeck. By this time next week, I hope that we will be joined by Catherine Stihler as the new Member for Dunfermline and West Fife.

Defence procurement is characterised by many as being pretty dry and expensive, but to those of us with constituencies with defence interests it is important and, indeed, interesting. That is not only because many of our constituents work in the defence industry, but because, as in Plymouth, there is often a larger than average number of constituents in the armed services in areas associated with that industry. As other hon. Members have said, there is never enough money to ensure that we have sufficient personnel and equipment, and there is no other aspect of Government expenditure where value for money is more important. For those reasons, there are few cities and regions in the United Kingdom to which defence procurement is more important than it is to Plymouth and the south-west.

That was why, as a new MP, I asked for a placement with BAE Systems during an Industry and Parliament Trust fellowship. That was one of the first portfolio fellowships, so I also spent some time with GKN, Shorts and EDS. One of the 25 days that I spent on the fellowship entailed a visit to Abbey Wood in 1999. Smart procurement was fairly new at that time. A great deal was expected of it and everyone was excited by its prospects. Five years on, there is some disappointment—to put it mildly—that we continued to experience cost and time overruns, especially in 2002–03 and 2003–04, although recent National Audit Office reports suggest that we are now travelling in the right direction. Some have queried how much of that has arisen due to cutting the quantity of programmes, including whole programmes, and the Defence Committee, the Public Accounts Committee and the National Audit Office have been critical of the situation.

The Defence Committee, of which I am a new member, visited Abbey Wood just last week. As the Chairman of the Committee, Mr. Arbuthnot, said, our experience suggested that newer projects might be showing real benefits. When I asked several of the staff who had been involved in a number of integrated project teams what was changing, they talked about the "toxic legacy" that had been left—my hon. Friend the Member for Portsmouth, North used that very phrase earlier. It might well be that the right direction of travel will be continued. The Chair of the Committee also said that the Defence Procurement Agency now has a better focus on recognising, as it puts it, that sometimes the best can be the enemy of the very good.

The Committee examined Sonar 2087 and Skynet 5, both of which are among the projects that have begun to be delivered that involved the newer stages of procurement and the main gate. Skynet 5 is providing the next generation of flexible and survivable communications services for military service, while Sonar 2087 gives us more capable anti-submarine warfare sensors for Type 23 combat systems. Sonar 2087 was first fitted to HMS Westminster in November 2004. It completed its initial assessment in 2000, went through the main gate in 2001 and was delivered before time. There was considerable environmental engagement and care throughout the project. Such projects and the much more robust and focused Government framework that the agency now has give us hope that more recent positive trends can continue. As a member of the Defence Committee, I will take a keen interest in probing to discover the bits of the programme that are working and the way in which improvements can be made.

The challenges of making the most of the defence industrial strategy are considerable. When the Defence Committee took evidence from my noble Friend Lord Drayson, the Minister with responsibility for defence procurement, it was fair to say, as hon. Members on both sides of the House have noted, that we were impressed by his clarity and determination. We were sceptical that the defence industrial strategy would be published before Christmas and that it would be sufficiently robust and include adequate detail. A glance at the individual chapters and the overall document is enough to discover that it includes the detail and clarity that we wanted. It has been welcomed by industry, not least in Plymouth. Paragraphs B2.26 to 28 on maritime industry provide the required clarity, and recognise the fragility of the design base and the implications of the blurring of the line between initial build, important through-life support and upgrades of systems. The Subco proposal would tackle those issues and secure value for money while retaining capability, enabling us safely to deliver, operate and maintain those platforms and supporting technologies under UK control and ownership.

My hon. Friends can be assured that DML and its workers, and those who support them in the naval base and the MOD, know the importance of delivering on those value-for-money issues and have a good local track record. May I point out to Ministers that in recent years the company has diversified significantly? Paragraph 2.42 says:

"Ownership of UK warship yards has consolidated to two main companies . . . BAE Systems . . . and VT Shipbuilding; with further capacity at Swan Hunter. DML and Babcock Engineering Services have design capability and fabrication skills but, together with FSL, essentially deliver surface ship and submarine support (including upkeep)."

DML designs and builds complex and highly sophisticated super-yachts, which are equal in size and complexity to a military corvette, and it has won contracts in competition with overseas yards.

The integration tasks in the final stages of a refit and upgrade of a major surface ship or nuclear-powered submarine are just as complex as the equivalent tasks on a new build and sometimes, indeed, are even more complex. When commissioning and setting to work naval platforms such as the future aircraft carrier, the skills base at Devonport can be used to achieve the timely and successful delivery of the imminent new-build programme. In future, there will be a significant increase in the shipbuilding programme, so capacity is a consideration. At the same time, however, a significant proportion of the skills base at Devonport will become available as a result of the downturn in the refit programme. As we develop our marine industrial strategy, I hope that we will look at the way in which we will tackle shortage in capacity. We should bear in mind the competitiveness that the Devonport work force has developed by diversifying into private sector work. I welcome what my hon. Friend Mr. Crausby and others said about the future of the nuclear deterrent and the importance of retaining skills and capability.

Having raised those local issues, may I conclude with a couple of concerns about the White Paper? The Minister and others have mentioned small and medium-sized enterprises. Devonport has 4,700 employees, but the huge supply chain increases the number of workers to more than 10,000 in 420 local companies. In the south-west region, 60,000 people are employed in defence work. Aerospace employs 43,000 full-time equivalent employees, and the supply chain another 100,000. I share the concerns that have been expressed about whether small and medium-sized enterprises have been fully involved in the evolution of the White Paper. There is still time to do that. I would welcome reassurances from my hon. Friend the Under-Secretary about how that can be achieved—in the case of maritime enterprises, through the industrial strategy. In relation to aerospace skills there needs to be careful involvement of those representing the industries—the trade associations, the regional development agencies and so on.

A debate is being held in Westminster Hall on employer engagement in further and higher education, in which I would have liked to highlight the importance of the higher education innovation fund research stream in sustaining and developing knowledge partnerships. That, too, is important to some industries, particularly the small and medium-sized enterprises that we are discussing.

Finally, I acknowledge what my right hon. Friend the Minister said about partnership and partnering being seen as the way to achieve value for money—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Lady has had her time allocation.

Photo of Douglas Carswell Douglas Carswell Conservative, Harwich 4:45 pm, 2nd February 2006

Others wish to speak, so I shall be as brief as I can.

There is something profoundly wrong with Britain's system of defence procurement. That is not my assertion, but that of Lewis Page, author of the recently published book on defence procurement, "Lions, Donkeys and Dinosaurs". Mr. Page's highly readable account of the monumental incompetence of our defence procurement regime is, I hope, on the Minister's reading list. If not, I would be delighted to lend him my copy for him to read afterwards.

According to Mr. Page, the UK spends about £30 billion each year on defence. His book shows what extraordinarily bad value for money we get—or, should I say, our soldiers get. It is a damning tale that does far more than condemn the actions of any single here today, gone tomorrow politician. Rather, it raises serious questions about the future of our defence industry and the MOD—an institution that Mr. Page compellingly portrays not so much as the Ministry of Defence, but as the Ministry stuffed with dinosaurs.

In reminding the House of one or two instances of particularly gross MOD incompetence, I am not seeking to make partisan political points. The MOD's failings have been manifest under Governments of both parties. I am also not especially interested in which side of the House hon. Members happened to be sitting on at the time of the MOD's bungling. Rather, I seek to make the point that the incompetence of our defence procurement regime is so profound that it is time to contemplate a bold and radical alternative.

Do hon. Members remember the SA80 rifle? They might not, but our soldiers still have to cope with it. It began life in 1985 with several glaring design flaws. The decision was taken after 1997 to spend £92 million to sort out each of the 200,000 flawed rifles. That works out as an additional £460 to make each gun function properly, after its development and production costs. The MOD asserted that that was cost effective. Had it the wherewithal, however, the MOD could have spent that £92 million on, for example, the American M16, at a mere £400 each. Instead, for reasons that are unclear to me, the MOD spent that money upgrading a rifle that no soldier, when asked to select their own weapon, would choose.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

I am sorry for interrupting, but I went through that entire process. I put the rifle under intensive test by soldiers and I have a vivid memory of a Royal Marine sergeant saying that it was the best rifle he had ever handled, and a paratrooper sergeant saying the same. One of them had been a sceptic and said that he did not anticipate that when he went into the tests. The hon. Gentleman should speak to members of our armed forces about the quality of the rifle that we now have. I agree about the past. That is why we had to fix it. It was one of those legacies that we had to address.

Photo of Douglas Carswell Douglas Carswell Conservative, Harwich

I note that those parts of our armed forces allowed to choose their own weapons, such as the special forces, do not choose the SA80.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

I was one of those soldiers who had to use the SA80. It is not a great weapon. What makes that weapon great is the SUSSAT sight that is placed on it. Anyone who has been to the Royal Ordnance factory will know that that bullpup design came around in the 1940s, not after the Fabrique Nationale's SLR was made. It is not a great weapon. It is its sight that has made it. The Army or the Marines do their best with the equipment that they get. That is the situation.

Photo of Douglas Carswell Douglas Carswell Conservative, Harwich

To press on, do hon. Members remember all the Apache helicopters that we bought? It was sensible, was it not, to buy all that tried and tested American kit, yet the MOD managed to bungle even that. Israel managed to buy Apaches at £12 million a piece. Somehow the chaps at the MOD managed to spend £40 million on each one of them.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. Mr. Vaizey has only just walked back into the Chamber. He ought to exercise some restraint because we are running out of time. If he hopes to catch my eye later, it would be a good idea not to extend speeches; otherwise insufficient time will be left.

Photo of Douglas Carswell Douglas Carswell Conservative, Harwich

Apparently, it was something to do with wanting to assemble the Apaches in Britain to maintain jobs—a good idea, one might think, until one realises that we could have bought the helicopters directly from the Americans, given each one of the 755 employees working on the assembly line £1 million to retire on, and still have saved ourselves £1 billion in the process. Many of the procurement problems surrounding the Apache, like the SA80, have carried on regardless of which party has held office.

Why is our system of defence procurement quite so hopeless? There are three key reasons. A large part of the reason is that those people in charge of it—I mean really in charge of it; the senior civil servants at the MOD—simply deny that it is hopeless. Those 300-odd senior MOD civil servants who rate themselves of equal rank to admirals, generals and air marshals are not part of the problem—they are the problem. There will be no serious progress in our defence procurement strategy without root and branch reform at the MOD. In any other sphere of life—in business or in the charity sector—a senior director responsible for such bungling would face real consequences, but not at the MOD. This remote and unaccountable elite makes monstrously poor decisions and British soldiers face the rap. No one is accountable. No one is sacked. This is how our defence procurement is run.

Many are the discussions to be had over Britain's strategic priorities. Many are the debates to be had over the best weapon systems, over the SA80, over the Type 45 frigates, over the Chinook HC3s and over UAVs. But what we really need to deploy if we are ever to have value for money in our defence procurement is the P45.

To ward off accusations of gross incompetence, the MOD has now adopted a smart acquisitions policy. I was against the dumb acquisitions policy that it had before, but I note that the projects continue to overrun in terms of time and money. I would venture that, as long as the MOD continues to be a monopoly purchaser and BAE Systems continues to be a virtual monopoly provider, there is something inevitable about that, and the Government's defence industrial strategy does little to change it. Buying British is not always best. It is more important to ensure that our armed forces have the best kit that we can afford than to prop up UK defence plc.

A further reason why I believe our defence procurement is hallmarked by incompetence has been its creeping Europeanisation. Even the most diehard protectionists recognise that the costs and complexities of weapon systems are such that it is unrealistic to buy entirely British, yet many of the so-called defence strategic arguments, once advocated by those committed to defence-industrial autarky, are now regurgitated by those who argue that we must buy European. There are many better alternatives for this country to pursue than further Europeanisation. The MOD has implemented by stealth an EU-facing defence procurement policy. It is yet one more reason why it is time to give serious consideration to the future shape of this Whitehall Department and the many thousands of paper pushers she employs.

To conclude, I hope that the Minister and many others in the House will read Mr. Lewis Page's excellent book. I hope that the Minister will go back to his Department, that he will stop regurgitating the departmental orthodoxies of the defunct MOD, and that he will implement and create an effective defence procurement policy inspired by much of what Mr. Page has to say.

Photo of David Wright David Wright PPS (Rt Hon David Miliband, Minister of State (Cabinet)), Office of the Deputy Prime Minister 4:54 pm, 2nd February 2006

It is an interesting experience to follow Mr. Carswell. I will pass on his comments about pen pushers to hundreds of my constituents who procure products for the MOD. I am sure that they will be delighted to hear what he had to say.

This afternoon, we have heard about a series of procurement issues, including aircraft, naval products and textiles. It is important to remember that large teams of people work for the MOD procuring those items, because we have not discussed the civil servants who work in supply and purchase. More than 400 people in my constituency work in the Defence Logistics Organisation at Sapphire House. I am concerned about their future, because the MOD has proposed the collocation of a number of staff from Sapphire House to an acquisition hub in the Bath-Bristol area. I know that Ministers have not made a final decision on that matter, but rumours about the collocation proposal and the acquisition hub have been circulating. I hope that the Minister will reassure my constituents about their future in his winding-up speech.

In July 2005, the MOD announced its plans for the acquisition hub. From August to November 2005, a combination of rumour and comments from senior management indicated that the plans were more advanced than staff realised and than the MOD would admit publicly. As has been said, the MOD purchased a building in the Bath-Bristol area to which it might move staff from Telford to work on DLO acquisition activity. On 21 December last year, the Minister wrote to me to confirm the purchase of that property, which was not a nice Christmas present for staff in Telford.

I want to discuss what makes Sapphire House in Telford unique. The procurement and provisioning support for all in-service Army equipment is undertaken at Sapphire House. That work is supported by bespoke IT infrastructure, the PUMAS and PWB systems, and it has been performed in the Telford and Shropshire area for more than 60 years. That business output to the DLO is not replicated anywhere else in the UK.

Additional evidence of the unique role of Sapphire House is found in a key measure of the field Army's ability to deliver its military capability. That measure is called underlying availability, which defines the spares support available in the supply chain and is critical to force sustainability during both peacetime and operational periods.

The DLO procurement reform team, DLO category managers and a small contingent administering the MOD's purchase to payment strategy are also based at Sapphire House. Those teams tap into the bespoke Sapphire House IT systems and, more importantly, utilise the Sapphire House community to interpret and capture commercial and procurement data. Sapphire House is also contributing significantly to the much-heralded—this afternoon—industrial strategy recently launched by the MOD.

Sapphire House is also unique because it houses a number of non-DLO integrated project teams, the Defence Communication Services Agency and the integrated project teams working under the Defence Procurement Agency. That profile demonstrates integrated working and provides a snapshot of what the MOD is trying to achieve in the Bath-Bristol area. The MOD wants to collocate activity to the Bath-Bristol area, but it has already done that in Telford, so I hope that it does not move staff again.

The DLO gets a good deal out of Telford, which is evidenced by the excellent recruitment and retention record of staff in that locality. Indeed, 67 per cent. of the work force at Sapphire House is based on administrative grades and is therefore paid a relatively small amount. The MOD gets incredible value for money from those staff. If we move their activities to the Bath-Bristol area, we will not get the same output from the same grading of staff in that locality. That value-for-money aspect cannot be replicated.

One of the issues that local trade unions have raised with me is that although MOD proposals suggest collocation in the Bath-Bristol area, most staff in Telford will not want to move. Surveys carried out by the unions of those 400-plus staff find very few people who want to relocate their activities to that area. People do not want to move their families down there or to break their links with the local community. In many cases, whole families have worked for the MOD in Telford, whether at the old Donnington depot or at the ESPPA—Equipment, Support, Provision and Procurement Agency—facility at Sapphire House. My concern is that if we collocate activity in the Bath-Bristol area, we will lose essential skills that we have built up through the DLO Telford teams from the ashes of the change that occurred in 1995 when the Chilwell and Donnington sites were amalgamated.

I hope that Ministers will take a step back for a moment in relation to Sapphire House, and think about the skills and quality of the staff there in procurement terms and about what they will lose if people do not move down south in the event that activity is collocated in the Bath-Bristol area. Sapphire House is home to two bespoke IT systems and, uniquely, houses more than 330 highly skilled, fully trained provision and procurement operatives. It has a critical role in running a further 10 IT systems essential to effective inventory management and supply chain operation. This is a quality facility with staff who are very committed to the MOD.

The staff and the trade unions have produced a so-called straw man paper that looks at alternative options. The unions are not particularly opposed in general terms to collocation, but they still see an ongoing role for MOD presence in the Telford area. The paper discusses the retention of skills and staff at Sapphire House. The proposal has been withdrawn, as the Minister confirmed, but I hope that we can breathe some new life into it and that Ministers will be willing to meet trade union representatives again to talk through the future of the paper and to see whether there are any opportunities to retain those skills and staff in Telford.

I want to refer in closing to the comments made by my hon. Friend John Smith, who mentioned the defence training review. It is important that we have a clear, transparent and open competition on defence training. I hope that the Department will pursue that line effectively. Under one option St. Athan would be the prime location; under the other option, which I clearly support as a Shropshire MP, those activities would go to Cosford. It is probably fair to say that both sites have great advantages. Both could be seen as high-quality training facilities for defence. I just want us to have a fair competition and a fair decision based on the facts. We can then move forward with quality training environments for all our people working in the MOD.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs) 5:03 pm, 2nd February 2006

May I associate the Scottish National party and Plaid Cymru with remarks that were made earlier and extend our sympathies to the families of the bereaved and those who have lost their lives? May I also mention the injured and the wounded, who must not be forgotten by Government of whatever shade, or by this Parliament, for the rest of their lives?

I intend to keep my remarks short. Many issues have already been mentioned, and I hope that as a result of my brevity the Minister will respond to the specific points that I raise.

There are many aspects of defence procurement, but I want to concentrate on one specific issue. I am, of course, honoured to take part in this debate as the elected representative for Na h-Eileanan an Iar. An aspect of chief concern to my constituents is Qinetiq and the possible impact of its privatisation on the future livelihoods of 240 at the Hebrides base between North Uist, South Uist and Benbecula. It has been reported that Qinetiq in general has about 5,000 patents granted and outstanding. A great deal of intellectual property is clearly being sold, the value of which would be very hard to quantify.

As some hon. Members know, the Qinetiq range in Uist is large and stretches far to the west beyond St. Kilda. There is no land beyond that except Rockall on the way to Newfoundland and Canada. It is an ideal place for missile testing.

Missiles are critical to modern military activity, as Mr. Howarth asserted earlier. Given that they are critical, we need to retain the capability for testing and training.

I was recently fortunate enough to visit the Qinetiq range and see some of the highly skilled and specialised work that the operatives undertake. The Hebrides base is a tremendous facility. Its size gives an almost unique controlled environment for the conduct of test and evaluation firing of land, sea and air weapons, and the firing of in-service missile systems.

The base also accommodates the operation of unmanned air vehicles—UAVs—which are used for missile training, especially for the Rapier missile. It is encouraging that use of the base is not confined to UK armed forces. Recently, the Swiss and Swedes, among others, have used the resource and expertise at the base. I have travelled with ferry-loads of American soldiers, stationed in various parts of Europe, who find it far more convenient to go to Uist to train with missiles than to return to the United States.

I would like an assurance—if possible, a cast-iron guarantee—that the privatisation of Qinetiq will not put the range at Uist at any risk. Does the Minister view the Hebrides range as a key capability in the context of the defence industrial strategy? How can the Minister guarantee that, some day, under pressure from shareholders—some as far away as America—a private company will not close such a strategic facility in some sort of rationalisation of Qinetiq?

Indeed, the same could be said of other Qinetiq sites in Scotland such as Rosyth, Wester Ross and many others. Can the Minister guarantee the continuation of those bases when a key part of the defence industry is privatised? Viability might no longer be determined by strategic importance but by shareholder considerations and the bottom line.

It could be argued that defence procurement budget spending in Scotland is, in terms of per capita spent, approximately £500 million lower than it should be. However, tempting as it is to trade such statistics with the Minister, I should like him to concentrate on the position of Qinetiq and how it affects Scotland.

I currently question how we can be certain that a private company in a monopoly situation cannot hold a Government to ransom when we have no other provider. Could it not add to the problem of cost overruns?

To achieve my aim of brevity, I shall make only two further points. The public cannot buy shares in Qinetiq. Only those who are described in common parlance as fat cats can do that. Why will the Qinetiq working man or woman in Uist or Rosyth be allowed to purchase only £500 in shares when the top brass walk away with £40 million? Is that not a slap in the face for the hard-working employees at Qinetiq? Is it not a slap in the face for every hard-working man or woman who, like my father, once believed in Labour values and traditions?

More than a year ago, 10 RAF personnel tragically lost their lives in an air crash in Iraq when a right wing fuel tank exploded. An RAF pilot, Nigel Gilbert, has been reported as saying that the consequences might not have been so serious if the aircraft had been fitted with fire retardant protective foam, without which the Americans and Australians would apparently not fly. I am no expert but I and, I am sure, many others would be grateful if the Minister shed some light on that.

Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Labour, Portsmouth North 5:08 pm, 2nd February 2006

The city of which my constituency forms part has been at the forefront of defending our shores for more than 800 years. Portsmouth naval base is the home port of the Royal Navy and the defence industry is inextricably linked with the city's economy. It is therefore no small wonder that the companies that operate in my constituency have eagerly awaited the defence industrial strategy.

Times have moved on. When I first started working in the defence industry it was in the days of cost plus. A contractor would submit its costs, the Ministry of Defence technology cost team would audit the submission, we would argue about the overheads, reach an agreement, add on 10 per cent. or so for profit and that was the price that the Ministry paid. It was cosy but unsustainable and it did not give the taxpayer value for money. So we moved to competitive tender and fixed price, which required not only defence contractors but the MOD's own work force to take a long, hard look at their cost structures, and some painful decisions had to be taken in the interests of value for money for the taxpayer.

Only a few months ago, the Minister of State, Ministry of Defence, my right hon. Friend Mr. Ingram, had to announce the closure of the engine maintenance business at DARA Fleetlands, as it was unable to compete with other contractors. I expressed the hope at the time that, as we had a strong and stable economy, those skilled workers could be retrained and would find new jobs. I was therefore delighted to read in the press last week that that is exactly what has happened. The helicopter repair side of the business at Fleetlands is booming so much that an additional 200 engineers are required, and the directors at the site are keen to retrain those engine support workers to fill those roles.

Nevertheless, the competitive tender and fixed price arrangement is not a panacea. It gives the MOD short-term value for money, but not necessarily best value in the long term, because it risks contractors underbidding to win the work, then being unable to sustain long-term production, or ratcheting up the price for product support, leading to higher costs over the life of the product. The defence industrial strategy seeks to remedy that by promoting a partnership and alliance approach. I welcome this approach, and I am sure that companies in my constituency will also do so, especially those operating in ship support, such as FSL.

I welcome the recognition that the lowest bidder is not paramount, and that national security, national skills and the UK manufacturing economy are also important in defence procurement. However, this requires flexibility on the part both of the MOD and of industry. Certainty is the key to long-term strategic planning in business, and true partnership means true risk sharing. It means being able to offer a degree of certainty through the life of a project. Whole-life support is probably worth more to a supplier than the initial production, but the MOD needs to be sure that suppliers can sustain that whole-life support, and there needs to be a degree of trust on both sides. The flip side of that stability and certainty must be a commitment on the part of industry to implement continuous improvement, to continue to engineer cost-downs without the incentive of re-bidding at every stage in a project's life, and to share the benefit of those cost-downs with the British taxpayer.

I welcome the statement in the defence industrial strategy that value for money is the bedrock and that competition is a major element in value for money, but also the recognition that when a better outcome can be delivered or when national sovereignty or security is under threat, long-term partnering agreements will overcome competition. I do, however, share the concerns of many hon. Members who have spoken today about small and medium enterprises. While the larger contractors in my constituency will, I hope, be major beneficiaries of these long-term partnering agreements, to what extent will SMEs benefit?

Many SMEs operate in my constituency, and I want to ensure that the skills base that we have there is maintained and that it grows. There is a concern about offshoring, not only in defence manufacturing, but in all manufacturing. I believe that the answer is to concentrate on the things that we are good at, at the high-skill, high-tech end of the market. We need to foster those skills, and ensure that we keep them in this country. As warfare changes from using brute force heavy equipment to faster, cleverer, flexible and electronically networked equipment, we will need those high-tech skills to manufacture and support it.

Many SMEs in my constituency are bidding for work in the defence sector, and that is why I am concerned that long-term partnering agreements, important though they are to the major defence companies, might push out the SMEs. It has already been pointed out that the success of this strategy will be in the implantation. I would like to see some contractual commitment in these partnering arrangements to pass work down to smaller companies.

We need SMEs; they are often the seedcorn for innovation. A smaller organisation often has a different attitude to risk, and encourages entrepreneurship and innovative thought. If we are moving towards longer life platforms, we will need innovative upgrades if we are going to keep at the forefront of fast-moving technology. We will need the ability to respond rapidly to new ideas. We need to ensure that our procurement processes encourage innovation and entrepreneurship as well as the basics of cost, quality and on-time delivery. And we need to keep the door open to new entrants in the market.

We need to ensure that our troops get the best possible equipment, ready for action, when and where needed, at a cost that the taxpayer can afford. I commend the defence industrial strategy, as it seems the way forward to deliver that. I hope that the Minister will take on board my concerns about SMEs, and I hope that workers in my constituency will continue to play their part in delivering high-quality defence equipment for the next 800 years, as they have contributed to this country's defence for the past 800 years.

Photo of Maria Miller Maria Miller Shadow Minister (Education) 5:15 pm, 2nd February 2006

I am grateful for the opportunity to speak in today's debate, which is important not just because we are discussing the future defence of our country and £6 billion of Government expenditure on procurement each year, but, as Mr. Hoyle said earlier, because defence is at the heart of much of Britain's manufacturing industry. Much of the expertise and many of the jobs in the sector are inextricably tied to the future of defence in this country. In my constituency, Basingstoke, in north Hampshire, we have a great deal of expertise in the sector, which provides a tremendous skilled work force. Importantly, it is also a catalyst for many other businesses in the area, which rely on our defence industry for their livelihood. It is therefore vital that we hold the Government to account in this important sector.

Despite the smart procurement initiative introduced in 1998—I recall, however, that my right hon. Friend Mr. Arbuthnot said that its roots might lie deeper in time—important defence projects are still regularly coming in over budget and late, which in any other sector of industry would be unimaginable. I reflect on the fact that the most recent National Audit Office report on major projects in 2005 found that the largest projects are almost £3 billion over budget, that financial savings are coming solely from cuts in future capability and not necessarily from efficiencies, and that delays in delivering projects have increased by 45 months. The MOD identified that many of those time and cost overruns were driven primarily by its actions, such as changes in specifications and budget constraints.

It is therefore little wonder that, for the Government, defence procurement is an ongoing process of attempting to reduce waste and ineffective management control. There have been no fewer than four iterations of defence procurement rules since 1997, creating a great deal of change in the sector. The Government's strategy over that time, as I try to piece it together, seems to be to achieve a better balance between best value and protecting domestic research and manufacturing capability. Of course, the Government's push for an increase in competition in the sector should be applauded, although the NAO report suggests that there is some way to go until we see the full fruits of that labour.

Unlike many other sectors of manufacturing industry, however, the defence industry does not operate in a perfect market, and there is a need to balance the protectionist drivers—sovereignty and the need for national security—with the best-value drivers, such as the need for open competition, innovation, control of costs and avoidance of the unseemly delays that we note in many of these projects. As has been pointed out, we have one of the most openly competitive defence industries in the world. For several years, however, procurement rules have recognised the need to balance the protectionist and best-value approaches so as to take into account the importance of retaining domestic capability in the market. In my constituency in particular, we want to retain skills as well to deliver value for money.

I was pleased that the 2005 defence industrial strategy identified yet again the need to retain strategic capability. I welcome the list of key strategic capabilities that we need to keep domestically. One of my local employers, Thales Missile Electronics in Basingstoke, has been identified as having an important strategic capability and an important role, particularly in fusing, in the complex weapons sector.

Let us consider what has been asked of companies that have been identified as needing to provide important strategic capability. The defence industrial strategy is somewhat contradictory. It talks of best value and the need to maintain national security, but also talks explicitly of the need to retain the ability to source from abroad, as well as the ability to design, assemble and support domestically. My right hon. Friend Mr. Jack said that it was almost as if the report was trying to have its cake and eat it, or the Government were.

The strategy readily acknowledges that open international competition could put the sustaining of key industrial capabilities at risk. The Minister said that it clarified priorities. That may be his objective, but he has some way to go. He must make absolutely clear what we are asking of our local defence manufacturers. There is rather more than a contradiction here. We need to know what message we are sending to our domestic defence industry. I believe that the Government are reviewing the way in which the strategy is to be implemented; perhaps they could think about that message during the process.

We must ask ourselves whether we are retaining our key strategic capability if manufacturers are forced by cost pressures to outsource large parts of their production to lower-cost countries in order to compete in terms of price. Eventually, local production, and indeed capacity and skills, will become increasingly diluted, and our ability to be flexible and respond to the needs of the military—especially at times of pressure—will become more problematic. There must be more formal recognition of the trade-off between price and strategic capability.

As I said at the outset, we are discussing the future defence of our country. We are discussing a vast area of Government expenditure. However, we are also discussing the future of an important sector of industry and manufacturing. After four iterations of defence strategy in the Government's lifetime, we must work hard to ensure that we get it right this time.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons) 5:22 pm, 2nd February 2006

It is a pleasure to follow my hon. Friend Mrs. Miller, who spoke with such passion about the industries in her constituency. Thales is and, I hope, will continue to be an important component of our defence industry.

The Chairman of the Select Committee, my right hon. Friend Mr. Arbuthnot, drew a distinction between our procurement needs for defence and the country's needs. They are separate but also together: separate in that we can have a defence industry that can have exports, but together in that our defence—Army, Navy and Air Force—will be one of the biggest markets for our products and equipment. We have not talked much about the former, but I want to say something about the latter.

I understand that there is an annual debate on procurement. I hoped that this debate would include an audit, or analysis, of our requirements. We have heard a good deal of talk about where pieces of equipment are in the procurement process, but what are our needs? Why do we require that equipment to meet the challenges of the future? The Minister mentioned our needs in Afghanistan and the threat posed by the growth of terrorism, but I should have liked him to spell out exactly what our mission is and how it relates to our NATO obligations. We are part of NATO; we also work closely with the United States and the Commonwealth. Why must we provide all the equipment and all the manpower all the time? As the costs are limited, we should be sharing the financial burden with our allies, in Afghanistan, in Iraq or anywhere else. In future procurement debates, it would be useful to hear how we fit into this bigger picture, given that we are constricted by the total amount that we can spend.

The Minister said that spending has in fact increased in overall terms, but the reality is that we have fewer soldiers, sailors and pilots, and fewer regiments, ships and squadrons. However, the obligations that we place on our military personnel have increased substantially. Our armed forces are therefore greatly overstretched, woefully undermanned and dangerously ill-equipped. As someone who served in the armed forces, it is quite upsetting to hear that £4.8 billion has somehow gone missing, according to the National Audit Office. That is a phenomenal sum, particularly given the basic equipment that we provide for our front-line soldiers.

There was something of a spat earlier—swords at dawn, as it were—about the red lines and who is actually to blame. I am very new to the House and in fact, I do not care where the blame lies for past events; I want a solution for a future. So whether past Governments or today's Government are to blame, let us learn from experience and ensure that such mistakes are not made in future.

A litany of examples of the various problems has been given. My hon. Friend Mr. Carswell spelled out the problems associated with the SA80. The Apache was purchased—can you believe it, Mr. Deputy Speaker?—without the training manual. Chinooks, which can fly only in good weather, were also purchased. Hercules that were purchased in 1999 have still not been cleared for use by paratroopers. These are schoolboy errors and they need to be corrected. There is also the example of the Clansman radio. When I was in the Army, we dreamt of the Bowman radio system, which was to be the panacea to all our communication problems. I was well aware that, when we were in Bosnia, we were using an insecure radio system. Giorgi, the local radio ham who worked in Sanksi Most, could hear us, but so could the enemy. We were using 30-year old kit. That should never happen in a sophisticated Army such as today's. There are other examples, such as the Astute class submarine, which was £1 billion over budget.

I want to discuss the F-35, the joint strike fighter, but before doing so I want to deal with Galileo, which has yet to be mentioned today. No one has explained why we are purchasing a new global positioning system when we already have one that works and is free. Galileo, which consists of 30 satellites and mimics GPS, will cost £2.2 billion and has a running cost of £5 billion. It is backed by the EU but it is being pushed by France and Italy. Given that military equipment can run off GPS, and that we already have a free GPS system, it would be useful to hear from the Minister why we are purchasing a comparative system.

The JSF is designed as a replacement for the Sea Harrier, but if matters proceed in the way suggested today, the new aircraft carriers due in 2012—HMS Queen Elizabeth and HMS Prince of Wales—are likely to be launched with no aircraft on them. I understand that this year—perhaps the Minister can clarify this point—we are to lose all our Sea Harriers, which means that there will be no radar platform to support and protect our carriers. The T45 has been launched, which has a radar facility that could be used to assist our carriers, but its range is limited to the horizon. The great advantage of the Sea Harrier and the F-35 is that they have a radar range of some 300 miles. For six years, our carriers will lack security at sea.

Other problems have been referred to today, such as the budget cuts in America. Such cuts have come not only from Donald Rumsfeld, but from Capitol hill itself. There is also the question of technology transfer and the Americans' reluctance to hand over the technology necessary to repair and maintain the F-35.

Another problem has to do with the date of implementation. I hope that we will have two wonderful aircraft carriers in 2012 but, even if everything goes to plan, it is likely that we will have no aircraft to put on them for another two years.

Some hon. Members have said that, because we joined the Americans in the Iraq war, they should show their gratitude by giving us back this technology. I take issue with that. I made it clear that I opposed the Iraq war, and do not think that it should have anything to do with this matter. Our very strong relationship with the Americans is based on the fact that we share technology and intelligence: in the absence of the waiver, that is a factor that must be taken into consideration.

The American House Committee on International Relations is at the core of the problem, not the Americans in general, and we should focus on the ITAR. It is important that Ministers and Tony Blair take every opportunity—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Gentleman should know that he must not refer by name to another hon. Member. He should refer either to the relevant office—in this case, Prime Minister—or constituency.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

I stand corrected, Mr. Deputy Speaker, and apologise to the House. The Prime Minister should take every opportunity to raise this matter, which is standing in the way of progress with the joint strike fighter aircraft.

Circumstances changed after 9/11, and the Americans now have a different perception of how technology is to be shared. We need to lean on our strong relationship with them to make sure that we remain within their circle of trust so that we can share technology and allow the joint strike fighter project to go ahead.

I was surprised to hear Labour Members say that we should walk away from the project and revert to plan B represented by the Typhoon. We have already spent £2 billion on the joint strike fighter project, and this debate has illustrated the huge amount of money that has been wasted on other projects. To walk away from the project now would be completely wrong. We need to make it work as soon as possible.

The House is rightly keen to praise the armed forces, but we are not so keen to finance them. We are keen to send them into battle, but not so keen to equip them. We expect so much more from our armed forces but we give them less and less. That problem is evident in the number of battalions that are being cut, and in the quality of the equipment that we give them.

Mistakes have been made by both Conservative and Labour Governments, but we must learn from them and move forward. I hope that the Minister will take heed of the message from today's debate, and make sure that the joint strike fighter aircraft goes ahead. We need to develop a stronger relationship with the US, so that that very important project can be completed.

Photo of Ed Vaizey Ed Vaizey Conservative, Wantage 5:32 pm, 2nd February 2006

I am grateful, Mr. Deputy Speaker, for your indulgence in allowing me to speak, and I apologise for my absence during some of the debate. However, I assure the House that I kept abreast of developments on television, and that hon. Members look even better through that medium than they do in the flesh.

I am also pleased to follow my hon. Friend Mr. Ellwood, who made an eloquent speech. His points about America were reflected widely in the debate, but defence procurement is an incredibly important subject. The systems involved both protect our soldiers and put them at risk, so procurement mistakes can cost lives. By definition, those systems cost millions and millions of pounds, so the scope for waste is easy to imagine. Given that procurement involves politicians, officials and public money—and the fact that the armed forces change their requirements every year—it is almost essential to build in natural waste.

Several hon. Members have welcomed the defence industrial strategy, and I am happy to do the same. The work done by Lord Drayson has been widely welcomed and is regarded as a good thing. I agree, and I hope that my praise does not undermine his career. However, despite the consensus with respect to the early stages of the strategy, I hope that the Government will take very seriously the report that will eventually emerge from the Defence Committee on how the strategy is working. That report should be studied carefully.

I have read, as my hon. Friend Mr. Carswell has, Lewis Page's book, "Lions, Donkeys and Dinosaurs". It is a quick, enjoyable and highly polemical read. I imagine that it has caused no end of irritation in the corridors of power. I suspect that it makes many valuable points and I am also sure that it misses its target on many occasions. It led me to think about the principles that we should adopt in defence procurement.

One principle that has emerged from the debate is that we are all anxious to keep some home-grown capability. It is not simply about jobs; it is also about the wider spin offs of technology transfer and negotiating muscle—of being able to bring something unique to the table. As a layman who is new to the defence debate, it is slightly tragic that we can no longer produce on our own an aircraft, like the Hawker Harrier, which has given us such useful service and was so innovative.

It is worth hon. Members remembering that our special relationship with the United States is between the people and, often, a Prime Minister and a President, but is rarely between Parliament and Congress. As my hon. Friend the Member for Bournemouth, East pointed out, it is Congress that is causing the difficulties. We as a nation should look further afield for other partners. I was lucky enough to go to India earlier in the year where I met the Indian Defence Minister and Chief of Defence Staff. They are hoping to be 95 per cent. self-sufficient in providing their defence capability. I ask the Minister in a genuine spirit of inquiry what we are doing to build relationships with emerging nations such as India. India will soon be the largest country in the world. By 2030 it will be the third richest nation in the world. Surely we should now work on our special relationship with India in terms of our defence capability. I would be fascinated to hear from the Minister what we are doing on that basis. [Interruption.] Absolutely, we are selling Hawks to India, but what are we doing about developing home-grown defence technology with that country?

The other point about defence procurement is that it does not stop when we hand over the cheque and get the kit sent over. Errors can continue long after the kit has been purchased. I am aware, for example, that the Apache helicopter, which we have purchased, is hugely short of spares. The maintenance lines that were meant to be set up at Watersham are still not set up. We have a shortage of flying instructors and have had to reduce the number of pilots on each course from 24 to 18. Parts are being cannibalised. When the Apache Squadron goes to Afghanistan, the training fleet here will have to be effectively mothballed. It was amusing to be told by my source, who of course will remain nameless, that when the Minister saw a display of two Apache helicopters last week, there were four in reserve just in case one of them broke down.

Finally, please do not forget the Army. It is the poor relation in this debate. The Air Force is getting its new fighters. The Navy is getting its new ships. The Army is still waiting for the future rapid effect system. It is incredibly important that our troops have rifles, boots and clothing made here, not in China, and a new generation of armoured vehicles.

Photo of Mark Harper Mark Harper Shadow Minister (Defence) 5:38 pm, 2nd February 2006

Several hon. Members have rightly paid tribute to our two soldiers killed in the line of duty this week. I add my personal tribute and condolences to their families.

Photo of Adam Ingram Adam Ingram Minister of State (Armed Forces), Ministry of Defence

In my opening statement, I said that 100 British personnel in Iraq had now lost their lives, 77 as a direct result of hostile action. To be more accurate, the position is that 77 have been killed in action, including as a direct result of hostile action. I am grateful to the hon. Gentleman for giving way and letting me set the record straight on that.

Photo of Mark Harper Mark Harper Shadow Minister (Defence)

I am grateful to the Minister for putting that on the record.

Before I start properly, I must comment on something else that the Minister of State did today. The occupant of the Chair had cause to guide him earlier in his remarks about keeping to the terms of the debate. Yet, as the Minister ranged widely across a number of defence matters, he did not find time to refer to his written statement issued today, which announces a significant number of job losses relating to the Defence Aviation Repair Agency. It is typical of this Government that they made that announcement under cover of a written statement at the same time as this debate on that very subject. The Minister announced the beginning of the review in an oral statement. Why did he not use an oral statement to announce his final decision, especially given the large number of jobs at stake? Could he not face the comments from Labour Back Benchers, or did he not want to remind them of the £104 million wasted on the Red Dragon facility? Perhaps the Under-Secretary will comment on that when he winds up.

Defence is the first duty of Government and it is critical to fund our commitments properly. The strategic defence review in 1998 stated that

"all three services have been over stretched because of the demanding pattern of our operations".

The then Secretary of State, Lord Robertson, said that he was determined to put that right. However, since then, spending has declined from 2.7 per cent. of GDP to 2.3 per cent., and that is at a time when our commitments and operations have increased, and the challenges that we face are more unpredictable.

It has been said:

"Too often in the past our new equipment has been too expensive and delivered too late."

Those are not my words, but the Government's in the SDR. If the Government recognised the problem correctly, they failed to fix it. In his opening remarks, my hon. Friend Mr. Howarth laid out the record of overruns, highlighted by the National Audit Office, and the failure to deliver, with major procurement projects falling behind and delays increasing by 45 months over the past year. At that rate, we will never get the equipment.

Because of the failure properly to fund our commitments, the cost overruns and delays have forced the Ministry of Defence to seek savings. But rather than improving efficiency, the NAO has concluded that the Government have cut future capabilities and the number of platforms instead, leaving us less able to deal with the security challenges of the future.

On the subject of submarines, the Minister spoke of keeping a skills base in the long term and retaining the industrial capability of our submarine industry. Will he comment on the future of that capability after the construction of the Astute class has been completed in 2010? How will we maintain our skills base and what capability will be retained if there is a significant production gap between the completion of the Astute class and the potential replacement of Trident?

The nuclear deterrent has not been mentioned much, apart from in the excellent contribution by Mr. Crausby. Our position on the nuclear deterrent is unequivocal: we are committed not only to retaining the current nuclear deterrent, but replacing it when necessary. We welcome the Defence Committee's inquiry into the strategic context and timetable for decision making for the replacement of Trident. I am sure that the Minister will also welcome the start of the debate on that issue.

The increasing use of the private finance initiative to fund procurement projects raises the concern that we may be tying ourselves into very long-term contracts that may reduce our flexibility to react to developments in this fast changing world. That is a matter that we will no doubt revisit in the future.

As my hon. Friend said, Government spending on defence research is critical to producing the battle-winning capabilities that we have seen to great effect in recent operations. However, research and development is being marginalised—spending on research and development fell between 2002–03 and 2003–04. The foundation of a solid defence industry remains research and development. Therefore, it is particularly worrying to read in "Defence Industrial Strategy" that there is a danger that

"we could become increasingly dependent on defence technology solutions generated by other countries".

Unless sufficient attention is given to defence research in the near future, the long-term sustainability of our future capabilities is called into question.

The Government have an opportunity to demonstrate their commitment to fund defence research properly when they sell their stake in Qinetiq. Will the Minister confirm how much will be retained by the Ministry of Defence for investment in our future defence, and how much will be taken by the Chancellor to plug the gap in his finances?

The Minister referred to the joint combat aircraft. It really is no good for him to say that there is no plan B. That sends a signal of weakness to our US partners, who will have us over a barrel. I hope that he will urgently develop a plan B and, as my right hon. Friend Mr. Arbuthnot, the Chairman of the Defence Committee, urges, publish it to the House to strengthen our negotiating position with our US partners.

The debate was wide-ranging, with many contributions, and I shall touch briefly on some of them. My right hon. Friend the Member for North-East Hampshire demonstrated the link between procurement and its impact on our service personnel deployed on operations, which is valuable and sometimes overlooked in these debates. My hon. Friend Mr. Walter reflected the scepticism of defence training organisation personnel about the proposed public-private partnerships.

My right hon. Friend Mr. Jack spoke about the importance of fast jet manufacture in the UK and was one of several Members who emphasised the significance of technology transfer from our US allies. My hon. Friend Mr. Carswell, in forthright style, challenged conventional wisdom on defence procurement and I am sure that we shall hear more from him on the subject.

My hon. Friend Mrs. Miller spoke about a number of important issues for her constituency and about the balance between sovereignty and cost control. My hon. and gallant Friend Mr. Ellwood focused on the requirements for defence procurement, which had not been widely touched on during the debate. He also spoke about burden-sharing with our allies and the overstretch of our forces. My hon. Friend Mr. Vaizey rightly reminded us of how high the stakes are in terms of money and, more important, lives.

There were excellent contributions from other Members. I endorse the remarks of Dr. Strang about the late Rachel Squire's commitment to all matters defence. The hon. Member for Bolton, North-East, vice-chairman of the Defence Committee, spoke of the value of our relationship with the United States. His robust support for the replacement of our nuclear deterrent is welcome, at least on the Conservative Benches.

Mr. Havard spoke about the importance of value for money and highlighted the significance of lift capability. John Smith referred to the importance of open defence markets and the bracing effects of competition.

I am sorry that I missed the barnstorming speech of Mr. Hoyle. He agreed with my hon. Friend the Member for Aldershot that we must not write off the future of manned combat aircraft, and rightly condemned the proposed loss of a national capability to manufacture explosives, which is very important in his constituency. Bob Russell made a detailed critique of the loss of specialist military textile research facilities.

Linda Gilroy reviewed some of the work of the Defence Committee and spoke about the importance of the naval aspects of the DIS. David Wright noted the significance of the defence logistics facility in his constituency.

Mr. MacNeil—the name of whose constituency is a speech for someone from England such as me—referred to the importance of Qinetiq and other sites in Scotland. Sarah McCarthy-Fry spoke of the experience she brought to bear on how to achieve value for money. She referred to risk-sharing and drew attention not just to the large players in defence, but also to small and medium-sized enterprises.

As we prepare to send a large number of our brave and dedicated forces to Afghanistan, it is essential to ensure that we give them the proper tools to do the job. The key test for the DIS will be whether the Chancellor funds it properly. His past performance is not encouraging. The nation will be watching and will judge him harshly if he lets us down.

Photo of Don Touhig Don Touhig Parliamentary Under-Secretary (Veterans), Ministry of Defence, Parliamentary Under-Secretary (Ministry of Defence) (Veterans) 5:49 pm, 2nd February 2006

I welcome Mr. Harper and congratulate him on his first Front-Bench performance. He mentioned at the start of his remarks that my right hon. Friend the Minister of State made a statement today. Yes, he made a written statement on the conclusion of the consultations on the Defence Aviation Repair Agency. As all hon. Members will know, he came to the House, faced hon. Members and answered questions when he announced the changes a while ago.

This has been a valuable debate. The House has dealt with the complex issues of defence procurement in a very different context from previous years. My right hon. Friend the Minister of State opened the debate by describing how the nation no longer faces the dangerous but relatively predictable threat that we faced in the cold war. The new threats facing our armed forces are no less dangerous. We are justifiably proud of our armed forces and the work that they do throughout the world. We ask them to take on major new challenges, including fighting international terrorism, and in doing so many of them, as we have seen in the past few days, pay the ultimate price for the service that they give to our forces and our country. I am sure that every hon. Member joins me in paying tribute to them.

The defence industrial strategy outlines a range of measures to safeguard the critical capabilities of the armed forces, now and in the future, thus ensuring that we deliver lasting improvements to the defence procurement programme in conjunction with industry. I have mentioned the context in which we are doing so, and I shall look at the record that we inherited in 1997, to which my right hon. Friend referred in opening the debate.

In 1997, the year when the Conservative party was last in government—it will be a long time before the Conservatives are in government again—the NAO found that their top 25 defence procurement projects were likely to cost over £3 billion more than originally forecast. We take no lessons from the Opposition on the problems of defence procurement. That is the shocking legacy of incompetence that they left us. This week, we launched the most powerful destroyer in the history of the United Kingdom—the most powerful destroyer that we have ever built. All they launched when they were in government was a raft of cuts.

The defence industrial strategy will deliver reform across the entire defence procurement system, building on smart acquisition principles. We want to ensure that we can respond to the rapidly changing strategic and operational environment by exploiting the opportunities offered by technology and innovation.

Photo of Don Touhig Don Touhig Parliamentary Under-Secretary (Veterans), Ministry of Defence, Parliamentary Under-Secretary (Ministry of Defence) (Veterans)

I will not give way. I hope that the right hon. Gentleman will forgive me. I would normally do so, but I have very little time to respond.

A number of important contributions have been made, and I will try to respond to as many as I can. Mr. Howarth, who led for the Opposition, was rather tetchy—which is unusual for him—when he got to his feet at the opening of the debate. We need no lecture on procurement, when our record is compared with that of the Conservative Government. I thought he was a little thin-skinned today. Perhaps we could adjust the defence industrial strategy procurement policy to buy him a thicker skin; he might then be happier to come here in future.

The hon. Gentleman went on to say that the Conservative party wanted to spend more on defence research. I am very glad about that. He stood at the last election with a manifesto commitment to cut £2.6 billion from the defence budget. What would that have done for defence research?

Photo of Don Touhig Don Touhig Parliamentary Under-Secretary (Veterans), Ministry of Defence, Parliamentary Under-Secretary (Ministry of Defence) (Veterans)

Will the hon. Gentleman please forgive me? I am trying to respond to all the hon. Members who have contributed to the debate.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

All I would say is that we gave a specific undertaking that we would have spent at least an extra £50 million on defence research.

Photo of Don Touhig Don Touhig Parliamentary Under-Secretary (Veterans), Ministry of Defence, Parliamentary Under-Secretary (Ministry of Defence) (Veterans)

As the Good Book says, by their deeds "ye shall know them." We know the Conservatives' record when in government.

The hon. Gentleman referred to Qinetiq and said that there may be a problem in not getting a good deal for the taxpayer. Taxpayers are benefiting from our decision to dispose of part of Qinetiq. We will get the same stake as Carlyle. The MOD owns almost twice as much as it does, so our income will be twice as large as a result.

My right hon. Friend Dr. Strang spoke for the whole House when he paid tribute to Rachel Squire. She was well thought of and well respected. There was a great deal of affection for her on both sides of the House, and we certainly mourn her passing.

My right hon. Friend spoke about the Eurofighter. He was particularly concerned about Typhoon tranche 3. The UK has entered into international arrangements to order 232 Typhoons in three tranches. That undertaking remains unchanged. A decision on the third tranche is not required before June 2007, and will be the subject of the MOD's main gate approval process.

My right hon. Friend also spoke about the problems of information and technology transfer. We are working with the US Government to improve the flow of technology transfer in equipment and research programmes. The Administration certainly support that approach, although someone has recently commented that the same is perhaps not true of Congress.

Mr. Moore, who spoke on behalf of the Liberal Democrats, welcomed the defence industrial strategy and recognised its importance and the contribution it will make. He said that some issues remained unresolved, although I am sure that we will return to them. He mentioned transparency issues, especially those relating to Typhoon. The estimated cost of the Eurofighter Typhoon programme has been classified as commercially sensitive to protect our ability to negotiate on subsequent purchases of the aircraft.

My hon. Friend Mr. Crausby welcomed the launch of HMS Darling, which he described as an exciting beginning—

Photo of Don Touhig Don Touhig Parliamentary Under-Secretary (Veterans), Ministry of Defence, Parliamentary Under-Secretary (Ministry of Defence) (Veterans)

I thank the hon. Gentleman very much. I said "Darling," but will go for Daring. My hon. Friend the Member for Bolton, North-East thought that the launch of HMS Daring represented a great start for the defence industrial strategy. He spoke about a wide range of defence procurement matters, which showed what a valuable contribution he makes to the Defence Committee. The Chairman of the Committee, Mr. Arbuthnot, endorsed that view when he said that my hon. Friend made a cracker of a speech.

The Chairman of the Committee made the important point that defence is important to our economy and our country—I absolutely agree, and defence procurement is the core of that. I welcomed his comments about my noble Friend Lord Drayson, the Minister with responsibility for defence procurement. I know that the Committee is doing further work on the defence industrial strategy and I am sure that its report will help to inform the Government about any future changes that we need to introduce.

My hon. Friend Mr. Havard does not sit on fence, does he? He left no one in any doubt about his views, and I am sure that they will be taken into account by others who read comments made in the House. Mr. Jack raised several detailed questions that deserve a detailed reply, so he will get a letter from me in the post.

My hon. Friends the Members for Vale of Glamorgan (John Smith), for Portsmouth, North (Sarah McCarthy-Fry) and for Plymouth, Sutton (Linda Gilroy) mentioned small and medium-sized enterprises. When my noble Friend Lord Drayson launched the defence industrial strategy, he stressed that it was for everyone in industry. He also pointed out at the time that just over half the Ministry of Defence contracts in 2004–05 were let to SMEs at a cost of £7.5 billion.

Mr. Walter wanted to tempt me down the route of the defence training review. Two bids are being assessed and my decision will be based on the delivery of optimum training and the most effective technical and military solution for our forces. It will not be based on any regional considerations whatsoever, and the military ethos will be maintained at the heart of our defence training review.

My hon. Friend Mr. Hoyle made several powerful points. I do not doubt that those in the United States who monitor proceedings in the House will have heard his views across the Atlantic. I also have no doubt that his views are shared by a great many hon. Members, so it was right that they were expressed.

Bob Russell made several important points about clothing research, so I will consider them and write to him. Mr. Carswell did a good job of book promotion—perhaps he will show us the book at the end of the debate. He recognised that there have been procurement problems when both parties have been in government, so the problem is not exclusive to this Government.

My hon. Friend David Wright made an excellent case on behalf of the civil servants employed at Sapphire House. No decision will be taken until the spring. My right hon. Friend the Minister of State listened to his points and is quite happy to meet him and the trade unions as a result.

Mr. MacNeil spoke on behalf of the two nationalist parties. I welcome the fact that their Members have recognised the importance of UK defence to their local economies. I have no doubt that we will take on board several of his points as the debate continues in the future.

Mrs. Miller demonstrated an understanding of the problems of defence procurement that is shared by hon. Members on both sides of the House. I must tell Mr. Ellwood that the Government are changing our armed forces to make them more usable and adaptable and ready to face the challenges in the world today. I hope he accepts that that aspiration is shared by Members on both sides of the House.

My right hon. Friend the Minister of State made it clear that we are engaged in a significant modernisation programme that is delivering world-class procurement for Britain's world-class armed forces. In stark contrast to the shameful legacy of the previous Government, we are delivering. Our innovative programme, which is based on the emerging defence industrial strategy, will continue that delivery. As the challenges with which our brave servicemen and women deal grow and multiply in the 21st century, we will ensure that they have the technology, equipment and support that they need to counter the threats that they face. The Government give that commitment to our armed forces and the country.

Photo of Alan Campbell Alan Campbell Assistant Whip (HM Treasury)

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.