Defence Reform Bill — Second Reading

Part of the debate – in the House of Lords at 4:53 pm on 10th December 2013.

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Photo of Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde Labour 4:53 pm, 10th December 2013

My Lords, in preparing for this debate, I was reminded that it was the first substantial defence debate that we will be having since the passing of the late Lord Gilbert. I have sure that had he been here today, he would have had some pretty direct remarks to make about the Defence Reform Bill.

The Bill received substantial cross-party support in the other place, certainly from the party of which I am a member, which substantially helped its process through Parliament. Yet we had today, just minutes before we started our debate, the Statement from the Secretary of State on what many regard as the key part of this Bill, the switch of our acquisitions to GOCO. In January 2011, Bernard Gray was appointed Chief of Defence Matériel. The following year, in July, the Secretary of State said in a Written Statement:

“I have decided that MoD should focus its effort on developing and testing the GOCO option further”.—[Hansard, Commons, 12/7/12; col. 124WS.]

A year later, in June this year, the White Paper, Better Defence Acquisition, said:

“The MoD intends to contract for the GOCO to act as its agent”— with very little reference to the Defence Equipment and Support agency.

Therefore, it would appear from that time that GOCO was really the only show in town; there was no equal addressing of the alternative by the Government. Yet the impact assessment for Part 1 of the Bill says that there remains,

“substantial uncertainties over the level of costs and benefits”.

So, lots of questions are still to be answered.

The Acquisition Focus Group of the Royal United Services Institute questioned the GOCO, too, and concluded that it,

“suffers from an inherent weakness”.

As late as 28 November this year, in evidence to the House of Commons Defence Select Committee, Bernard Gray himself said:

“Initial estimates suggest a GOCO could deliver a net benefit of several hundred million pounds over 10 years”.

The House of Commons Defence Select Committee also raised issues on which it had concerns. The right honourable Member for North East Hampshire, the chairman of the committee, criticised the lack of detail on the DE&S-plus option. The letter of the noble Lord, Lord Levene, dated 13 November this year, on his second annual review, in section 5, referring to GOCO and DE&S-plus, said that this,

“needs to be brought quickly to a conclusion”.

I do not believe that we are at a conclusion, because today the Secretary of State issued a Statement saying that the Government are not proceeding at this stage with GOCO but that they wish to keep it in the Bill and see it go through the process in this House to become an Act, thereby creating a lot of confusion and insecurity as regards the alternative.

In another place, the shadow Defence Secretary at the time called for a “genuine comparison” between GOCO and DE&S-plus. I do not believe that that genuine comparison took place. Yet the Government seem to have suffered in the past three years from myopia in their full concentration on GOCO as the answer. Even when the number of bidders dropped from three to two and then to one, the Government did not change their mind. Yet in the Statement today the Secretary of State announced that they will change the DE&S to a new,

“bespoke central government trading entity”,

with effect from April next year. So there are lots of questions to be asked on that. I strongly question why the Bill has come to this place with Part 1 intact and with noble Lords being asked to agree, probably with amendments, that it should remain part of the Bill when the Government have announced that they are taking a different route at this stage.

I also question what the Statement in the other place claims—this has already been raised—about the transparency of governance of this new organisation. The Government announced, on the day when it was set up, the CEO who had been appointed. Where is the transparency there?

In the Statement, the Government also stated that,

“crucially, we will permit the new organisation significant freedoms and flexibilities, agreed with the Treasury and Cabinet Office”.

This may seem a facile question, but is that agreement in place, is it as broad as the Government could wish, or is it yet to be agreed? It does not say that it has been agreed; it could imply that it has yet to be agreed.

I move on to Part 2. It is generally agreed that the single-source contracts are a good and right way to go. Anyone who has been involved in a public procurement process, as I have, can regard it as a nightmare, and this certainly will improve matters. It establishes the Single Source Regulations Office as a non-departmental public body with effect from October 2014. Schedule 4 provides for the appointment of the membership of the SSRO by the Secretary of State. Some would question whether that guarantees the underlying independence. Will the Minister confirm that the process will be an open one, that we will not have another press release saying that the CEO has been appointed, and that the process of recruitment will be open and fair, and in accordance with public appointment requirements?

The schedule refers to the,

“‘non-executive members’ of the SSRO”.

However, it then goes on to say that the arrangements for those non-executive members can cover such things as pension and gratuity provision. My interpretation of practice in a normal plc is that non-executive directors do not get either of those benefits; they get a fee as a non-executive director and that is it. Therefore, the measure is most unusual and we will need to probe it in Committee.

Part 3 of the Bill concerns the Reserve Forces, and this issue has been covered substantially in discussion. However, will the Minister say how the recruitment drive is going? I am aware that the Government have twice promised dates on which they would report on the numbers recruited, but have now said that they will do so during 2014. What proportion of the personnel already recruited are recent members of the Armed Forces—perhaps some of those who are being made redundant? Who is carrying out the recruitment drive now that half the recruitment offices have been closed? Have the necessary resources been made available?

For the Government to say that they are satisfied is insufficient; we need to be confident that the switch from using full-time personnel to creating an expanded role for the reserves, which I think we are all generally in favour of, is not only going well but will fulfil the function that we intend it to fulfil, given that the redundancies among the full-time personnel in the Armed Forces will take place. Will the next set of redundancies that I believe the Army faces be held over until the Government are assured that the recruitment drive for the Reserve Forces is working well and will meet the targets that have been set for it?

The Bill raises many questions, and I hope that between now and Committee the Government will review their wish to retain Part 1 of the Bill. I think that it is defunct and no longer needed, and that the other parts of the Bill could become an effective Act without it.