Defence Procurement

Part of the debate – in the House of Commons at 12:58 pm on 2 February 2006.

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

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.