Defence Reform Bill — Second Reading

Part of the debate – in the House of Lords at 4:27 pm on 10th December 2013.

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Photo of Lord West of Spithead Lord West of Spithead Labour 4:27 pm, 10th December 2013

My Lords, 72 years ago today in the South China Sea, HMSPrince of Wales” and HMS “Repulse” were sunk by the Japanese. They were the first British capital ships to be sunk by aircraft and the last battleship and battle cruiser lost in action by our nation. I mention this because our debate today does not take place in a vacuum. In the final analysis, procurement is of importance to future UK strategy and the lives of our people.

On the Defence Reform Bill, I have considerable sympathy with what has been said by previous speakers, although the noble Lord, Lord Palmer, was wrong about the previous Government not trying to solve procurement problems. They tried in many ways to do that, but, like many Governments before, were defeated. Indeed, they even went so far as to call in Bernard Gray to find a way forward.

I believe that Part 1 of the Bill is now redundant. The noble Lord, Lord King, has explained very clearly why it is a real problem. The Government should think carefully about leaving it within the Bill, not least because of the uncertainty caused to industry but there are other factors as well. I was surprised that the Secretary of State’s Statement should come less than two hours before our debate, which is a slightly strange procedure and has made it quite difficult to focus on the detail, but I am sure that Part 1 has to go.

There is no doubt that the GOCO option was very high-risk. Indeed, many of us, including the noble Lord, Lord Levene of Portsoken, whom we have just heard talk so persuasively about this issue, and the noble Lord, Lord Lee of Trafford, have been vociferous in our opposition to the proposal. It is of great interest to note that Bernard Gray, who is the champion of

GOCO, put the same proposal to the previous Government in 2006, who after considerable deliberation dismissed the idea as risky and potentially damaging to the national interest.

What is beyond doubt is that we have to do something about our procurement organisation—all of us have said that and all of us are aware of that—not least because, since SDR 2010, the procurement organisation failure to let contracts has resulted in about £1 billion of underspend each year that is lost to the department, even allowing for some rollover.

In its 2011 report, Ideas for Future UK Defence Procurement, Labour highlighted the problematic issues of defence procurement which had existed for decades and which, despite attempts such as the defence industrial strategy, smart procurement and calling in Bernard Gray, had not really been resolved. The summary of the recommendations of that review would be worth the Government’s scrutiny—indeed, they seem to have copied some of the ideas because DE&S-plus is very similar in many ways as it is being put forward. In naval parlance, I say, “Bravo Zulu”—the flag hoist for “well done”—to them for having taken some of those ideas on board.

Indeed, I would be pleased if the Secretary of State really had made a U-turn on GOCO. I know how embarrassing U-turns can be. When I was a Minister, I was in the back of a cab and the cabbie said, “I am going to do an Admiral West”. It was at the time of the 42 days debacle, if I can call it that. I said, “What?” and he said, “I am doing a U-turn”. I know how embarrassing it can be: you can get known for these sorts of things.

We must ensure that the DE&S-plus option has that small number of really special people at the top who have that commercial knowledge touched on by the noble Lord, Lord Levene. I second what the noble Lord, Lord King, said. In the Statement by the Secretary of State, I love where it mentions that,

“crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office, around how it recruits, rewards, retains and manages staff along more commercial lines”.

That is really important, as the noble Lord, Lord King, touched on. However, it is not appropriate that Bernard Gray should be the chief executive of this, particularly if we leave Part 1 in the Bill. For 10 years or so, he has consistently pushed to have this and he will sit there while a Government will have the ability just to slot into the new system with no further real debate in this House. I do not think that that is appropriate. I find it quite surprising that Gray has been pushed forward for that.

On Part 2 of the Bill, relating to single-source contracts, I have concerns about the independence of the SSRO. That will need to be looked at very carefully in the debates over the next few weeks. There are some commercial sensibilities and difficulties here, as was touched on by the noble Lord, Lord Palmer. However, I am generally supportive of this and think it is going in the right direction.

On Part 3, I and many others have had concerns about recruiting reservists but it is important to put that in context. The reduction in the size of the Regular

Army stemming from SDSR 2010 is on track. I have been very impressed by the effort that the Army has put into doing that, the way it has thought of things laterally and what has been done. That reduction calls for an Army in 2020 of 82,500 regulars. It is quite clear that the money to pay for more than those numbers will not be there post-2016 so things have to be done. It is quite right that the Army has done them.

Any talk of reversing this reduction and restructuring the Army is extremely foolhardy. For example, with the 8,500 men made redundant over the past 15 months, it would take about 15 years to grow those numbers again. Once you change the course of something like the Army, you cannot change it back again quickly. We must proceed with the next tranche of redundancies—I think it is about 1,500 but do not know—because we have to keep the course and momentum going. Recruiting of reservists is, strangely, a different issue. The Army apparently always knew that it would take five to six years to recruit up to the numbers required, so there is not a direct link to regular numbers by time. We need to be aware of that.

What is clear is that the removal of the serving soldiers from the recruiting service—about 800 of them—has had a devastating effect on recruitment, and Capita has not covered itself in glory. Shortfalls in IT have once again raised their ugly head and caused real problems. There are real problems in recruiting, to which I am sure the Government and the Secretary of State will apply themselves. We need to get this right, even allowing for the time-lag to do it. There are also problems with SMEs, for example, in allowing people to join. That has been touched on by a number of noble Lords, not least the noble Lords, Lord Palmer and Lord King. That will need to be resolved as well.

Lastly, we need to put down a marker that we cannot allow SDSR 2015 to be the disaster that SDSR 2010 was. Defence needs a budget that is a flat line plus 2%. We must not allow the SDSR, which will come two weeks after the general election, to knock off track such complex plans as, for example, Army 2020—just to pick on the Army one. It could do that if we get it wrong. The SDSR must be underpinned by an updated national security strategy, finished in plenty of time to allow SDSR 2015 to be conducted in a timely and not a rushed manner, as was done for SDSR 2010. We owe our people nothing less than that.