Defence Procurement

The Minister of State, Ministry of Defence (Mr. Adam Ingram)

Last week we had an informative and useful debate on defence policy, recognising at the time that today's debate on defence procurement would deal in detail with the equipment issues essential to the delivery of our strategic policy aims. I shall, therefore, deal primarily with those issues in today's debate.

This is the second procurement debate that I have opened, and I note the poor attendance on the Opposition Benches. I can only guess—[Interruption.] I hear a sedentary comment from the Opposition Benches that the attendance there is the same as on the Government Benches, but as I said the last time the matter was raised, Government Members are comfortable with our policies. As we are constantly reminded, it is the role of the Opposition to oppose the Government. I can only guess that the reason for the sparse attendance is that Opposition Members are all scheming and plotting somewhere, hoping to procure a new leader for their party. If so, I suggest that they use smart acquisition as a means forward. The way they tried to do it last time did not produce a very good result, and they may have to live on with the legacy systems.

It is important to set procurement policy in context. It would be helpful to define the key purpose of our defence procurement. It is people who are at the heart of our procurement and equipment policies. In the simplest terms, our job is to provide the best equipment and support that we can for the men and women of our armed forces, in order that they can best do what we ask of them. Alongside that, we must always remember our responsibility to the taxpayer, which means striving for the best value that we can achieve when procuring the systems and items that we need.

We are no different from any other Department in that we need to manage our funds carefully. As my right hon. Friend the Secretary of State pointed out in last week's debate, we face fluctuating pressures on our budget. Recently these have included recruiting well above our expectations—which is good news but costs money—the changing exchange rate, and managing the—impact of operating full resource accounting and budgeting for the first time. All this means that we must spend our money as wisely as possible.

David Wright (Telford)

With regard to spending our money efficiently, can my right hon. Friend assure the House that he factors into that process the issue of buying British, and that he uses a qualitative analysis on that basis to make decisions?

Mr. Ingram

I know that my hon. Friend takes a close interest in these matters because of the industrial footprint in his constituency. The defence industrial policy, which I shall mention later, shows that we are 804 working with a clear focus and in close harmony with UK industry. We consider what is right for industry, but the equipment that our people need must be the main driver in this. If British is best, it will be purchased. That is why British industry must strive to be the best. There are many examples where it outshines its international competitors. I shall mention some of the procurement decisions that have been taken recently, which I hope will provide the assurance that my hon. Friend seeks.

Mr. Ian Davidson (Glasgow, Pollok)

Given that the Minister is stressing the willingness of Britain to buy abroad when the equipment is better, have any comparisons been run between Britain and other major industrial powers? Is it not the case that other countries are far less likely to buy from us than we are from them? What is he doing to open their markets to our efficient producers?

Mr. Ingram

I compliment my hon. Friend on his hard work for his constituency and the associated industries, particularly shipbuilding. I was not saying that it is imperative that our purchasing focus is on products from abroad. I was seeking to say—my hon. Friend may have misunderstood me—that our focus in terms of defence industrial policy is always to try to buy from the home base, but the equipment has to be good enough to match the very best that is out there internationally.

Joint ventures and partnerships are increasingly becoming the norm, both in Europe and with our partners in the United States. As my hon. Friend will be aware, a company that is seen as a UK company may be majority shareholder owned in another part of the world. There are always moves afoot as regards amalgamations. In that context, a procurement decision based on "buy British" does not mean much. What is important is that British-based companies receive the best support to enable them to produce the best for our armed forces—and, importantly, for export purposes. I hope that my hon. Friend shares my concern about the lobbying to try to stop the export of British-produced armaments, which significantly attacks British jobs. I look forward to him joining me in the campaign to make people more aware of the importance of the armaments industry to the United Kingdom.

Mrs. Anne Campbell (Cambridge)

Does my right hon. Friend agree that it is important to take into account a manufacturer's length of experience when considering it for a procurement contract? Will he take this opportunity to congratulate Marshall Aerospace in Cambridge on the 20th anniversary of its involvement in the conversion of the RAF tanker fleet? I hope that he will bear that in mind when he comes to make a decision about the future tanker project.

Mr. Ingram

I am always prepared to congratulate companies on the length of time for which they have been committed to such work and to wish them many more years based in the United Kingdom, and I do so in the case of Marshalls in my hon. Friend's constituency. However, I should not discuss from the Dispatch Box the sensitive negotiations about the future strategic tanker aircraft, which are reaching their conclusion. Our judgment will be based on what is best in terms of the needs of our armed forces in delivering our objectives.

805 The people who make up the armed forces enable us rightly to proclaim them as among the best in the world; in the modern age, we must ensure that our procurement programmes help them to maintain that crucial, battle-winning edge, now and in future. I hope that hon. Members agree that that should be our overriding priority. Getting it right means not only providing the right kit for today, but trying to read the strategic future well enough to ensure that we do so for tomorrow. The pace of change in the new strategic environment, which we examined in last week's debate, is challenging. As my right hon. Friend the Secretary of State informed the House, in the past been there have been periods during which we faced a static, if technologically evolving, threat. But there have also been key moments when significant shifts in defence posture were needed. The threat that we face at present is far from static, and we face another of those moments when a substantial shift in defence posture is essential if we are to continue to be effective. Change is the key—but not for the sake of it or because we have got it wrong in the past. As our defence posture changes, so do the tactics and strategies that we employ and, in turn, the equipment that we use to do the job.

The strategic defence review got it right in 1998. I doubt that anyone would seriously argue against the overall focus that it placed upon readiness, deployability, sustainability and flexibility of forces. It would be wrong, however, to allow any set of conclusions to remain inviolate. We owe it to our servicemen and women to review our conclusions and, where necessary, to redirect our efforts and to make changes to our plans. We must also respond to changes in the security environment such as those which, sadly, took place on 11 September 2001, three years after the SDR.

We used the new chapter to tune our assessment of where we were and where we needed to be. It considered how best to build on the SDR in countering international terrorism and the increased threat of asymmetric attacks. Its aim was to ensure that our armed forces have the right capabilities to play their part. At the heart of that is network enabled capability, about which I shall say more later. The new chapter came to some distinct conclusions about the way forward in policy terms, highlighting issues of technology, interoperability, flexibility and speed. It is clear that to achieve our aims, we need to invest heavily in new technologies and capabilities. Of course, like all Departments, our funds are not infinite—that will necessitate some tough decisions.

As my right hon. Friend the Secretary of State said last week, in investing in areas that are so crucial to the present and future we must recognise that systems that are rendered less effective as a result of the changing security environment will have to make way for those that can help the armed forces in the tasks that lie ahead. It would be very wrong to maintain ineffective structures and systems when we know that others would be better to meet our front-line needs. Sentiment for older pieces of kit is understandable, but sentiment will not give us that battle-winning edge. We should not assume that the future threat will neatly conform to a traditional notion of how the armed forces should look. Defence capability cannot be preserved in aspic—it needs to evolve to meet the new threats and challenges that we face.

Dr. Julian Lewis (New Forest, East)

I endorse what the Minister is saying. Does he accept, however, that 806 when procuring systems such as aircraft carriers and other pieces of equipment that take many years to build and have to be in service for many years, their specifications must allow them to be as versatile as possible, because we cannot predict how threats will come and go, develop and complicate over that very long period?

Mr. Ingram

I agree with that view, generally speaking, but not necessarily in terms of the aircraft carrier. The lifetime of an aircraft carrier may be 50 years, but that of other equipment systems will be shorter. Some may be much more easily adaptable than others due to the nature of what was procured. I shall deal specifically with the aircraft carrier procurement decision later.

In terms of equipment, we need to have the right industrial policies, the determination to drive through the benefits of smart acquisition, and an equipment programme that is designed to ensure that the armed forces retain their decisive edge. Much has happened since we last debated defence procurement in this House in July 2002. The Defence Committee's thorough and thoughtful annual report on defence procurement, published in July, and the Government's response, which was published only two days ago, demonstrate a wide range of activity in terms of industrial policy and important developments in a number of key equipment capability projects. Most notably, we have seen our armed forces engaged in major war-fighting operations in Iraq, where they faced, and continue to face, tough challenges.

I want to focus on the implications of those operations and the lessons that we draw from them for our equipment programme. First, I shall deal with how our equipment performed during recent conflicts. We intend to publish a full report on operations in Iraq in December, but I can offer the House a number of key conclusions relating to equipment. There was much good news from recent operations in Iraq. The RAF's newest air-to-ground missile, Storm Shadow, was used operationally for the first time and showed astonishing precision. Our Tomahawk land attack missiles fired from our attack submarines once again proved their worth, enabling accurate attacks at long range. We also showed progress towards our goal of integrating sensors, weapons and decision makers to deliver military effect more rapidly and precisely. In the past, the thorough planning of Tomahawk missions took days. In Operation Telic, the time line for Storm Shadow and TLAM planning was reduced to just a few hours, revolutionising the responsive nature of the capability.

It is worth noting that lessons were implemented from previous operations. Kosovo showed us the need for an all-weather precision-guided bombing capability. As a direct result, we procured enhanced Paveway bombs, which were used to great effect in Iraq. Similarly, the AGM-65 Maverick anti-armour missile had its first operational use in Iraq, integrated on to the Harrier GR7 aircraft. Approximately 85 per cent. of air-dropped munitions were precision guided. We re-emphasised the importance of smart weapons with the announcement in June of the selection of Raytheon's Paveway IV munition as the new precision-guided bomb for the Royal Air Force. It is due to enter service from 2007.

807 Afghanistan showed us the need for an improved maintenance regime for the modified SA80 A2 assault rifle. That ensured that it could cope with the hot and dusty environment in Iraq and early reports suggest that it was a success. The SA80 A2 was used for the first time in Iraq in combination with the new head-mounted night-vision system. That enabled our infantry to move and acquire targets simultaneously at night—a potent and lethal enhancement.

In the ground campaign, our Challenger 2 main battle tanks and the Warrior armoured fighting vehicles made an outstanding contribution to the speed and decisiveness of the coalition intervention. Their enhancements for desert conditions were a great success. Early reports suggested that they achieved an availability rating of around 90 per cent. during operations. In addition, fitting bolt-on armour considerably increased their protection. The AS90 self-propelled gun also performed well, delivering a great weight of accurate fire support with 95 per cent. availability.

All recent operations have highlighted the importance of the ability to deploy, sustain and recover our forces. Our strategic air and sea-lift capability, notably the C-17 and C-130 aircraft and the roll-on/roll-off ferries, were decisive in enabling us to deploy and sustain a force in Iraq the size of that deployed in 1991 but in half the time. That fully justified the emphasis we have placed on that aspect of capability from the time of the strategic defence review.

Mr. Colin Breed (South-East Cornwall)

I applaud the successes that the Minister enumerated. However, does he acknowledge that the threat that we anticipated was significantly less than that in previous operations and that success of our equipment and men must be set against that? I am pleased that they were successful but we must recognise that threats in future may be considerably more difficult to surmount. We need to measure that.

Mr. Ingram

I do not agree with the hon. Gentleman's analysis because the potential threat was great. I remind him of our discovery after the conflict of buried effective equipment, which the Iraqi forces did not use but had purchased for use. It was probably available for use and people had probably been trained to use it. The threat in the air and on land could have been great. The potential numbers in the Iraqi army were great and the concept of the operation was designed to degrade the Iraqi forces' capability of mounting an effective threat to our advancing forces. That is why I mentioned precision bombing, which took out communication lines thereby hitting the command chain network of the Iraqi senior command structure. That was important in achieving our success. Without that capability, there might have been a different sort of ground campaign. The joint approach—marrying the three elements of our armed forces—is vital. It was the underlying principle of the strategic defence review and the expeditionary concept implied in it.

On future threats, I was making the point that we live in a changing environment and that we must always make our best guess. If the hon. Member for South-East 808 Cornwall (Mr. Breed) has greater insight than the military planners who advise the Ministry of Defence, I look forward to his contribution and his perception of how the threat will develop and evolve in the months and years ahead.

Although we learn from operations and necessarily look at a distant horizon when planning to meet equipment need, we must recognise that each operation has its specific challenges. We therefore optimise our capability through urgent operational requirements. That allows us to take advantage of the latest technology. The comments of the hon. Member for South-East Cornwall fit comfortably with that point because we have the capability to be flexible and adaptable, depending on the circumstances. Let me give an example.

For operations in Iraq, the Ministry of Defence procured 190 urgent operational requirements at a value of approximately £510 million. The Select Committee on Defence is currently conducting an inquiry into that and we shall assist its understanding on a confidential basis with background information.

In some cases, UK industry had to supply equipment at extremely short notice. Industry and our organisations such as the Defence Aviation Repair Agency, ABRO—Army Base Repair Organisation—and the Defence Storage and Distribution Agency, responded magnificently to the surge of requirements in the build-up to the operation, thereby proving the value of the partnering approach that the Ministry of Defence has developed in recent years.

Some urgent operational requirements involved accelerating existing programmes such as the procurement of the temporary deployable accommodation and the head-mounted night-vision system. Others, especially the measures to enhance interoperability with coalition allies, were new procurements made within short time scales. However, the process is not flawless.

Peter Bradley (The Wrekin)

My right hon. Friend is right to credit the achievements of DSDA and ABRO, which are in my constituency, but will he extend his appreciation to the private sector, especially Alvis, which sent personnel to the Gulf to undertake modifications to Challenger 2, thus making a considerable contribution to the effort in Iraq?

Mr. Ingram

Yes, I shall. I said industry and our organisations. [Interruption.] We are reminded that the company's name is Alvis Vickers and there is obviously some competition on the Labour Benches to acknowledge the contribution. I acknowledge the role of Alvis Vickers and many other companies, which contributed in so many different ways. The Select Committee on Defence will be advised of that when it conducts its inquiry. Much of the information is given in confidence and I am sure that hon. Members understand that it is not appropriate to give all the details publicly. However, I know that the Committee will give the information that we provide full and detailed consideration.

Mr. Siôn Simon (Birmingham, Erdington)

Will the Minister go further on industrial policy and perhaps 809 learn a lesson from abroad? After going through the defence industrial policy process and considering the four key factors and the seven wider factors, will the Department ensure that the work is always given to a British company, preferably a Birmingham company?

Hon. Members

Answer that.

Mr. Ingram

Indeed. I could end up in a trading position, suggesting various cities and regions, including East Kilbride. British industry has tremendous capabilities in delivering for us—there is no question about that. I shall deal with defence industrial policy later, but buying what is best for our forces, not industry, must be the prime consideration. Members of the armed forces could be called upon to make the ultimate sacrifice in defence of the realm and our national interest. They would not respect us for saying, "Off you go and use this equipment because it's got a British flag", whether it came from Birmingham, East Kilbride or elsewhere. However, I pay tribute to the strength, depth and commitment of the United Kingdom industry.

I rightly considered our successes and the way in which our procurement policy progresses, based on previous conflicts and the most recent conflict. However, the process is not flawless. Although it would be inefficient and unaffordable to buy and maintain equipment for every contingency in every climate, we shall undertake further analysis to improve our understanding of the likely time scales in which different capabilities can be procured.

I make it clear that we will not fall into the old trap of planning to fight the previous war. Our plans revolve around the future, not the past but we must learn lessons from the conflicts and deployments in which we have participated.

I accept that there are areas in which we could have done better and in which lessons for the future have to be learned. No operation on the scale of Iraq can ever proceed perfectly in every detail. It has been a huge undertaking and has tested the organisational as well as the fighting capabilities of the MOD. Our people have met this massive challenge with commitment, professionalism and, ultimately, with decisive success—a fact not always acknowledged.

I recognise, however, that despite our best efforts, working night and day, we did not meet every unit's requirement for desert clothing and boots, and that some personnel experienced some shortages of other items of personal equipment. Action to improve asset visibility and tracking in theatre is something to which we must look to improve our capability. We have launched a no-holds-barred "lessons learned" process, the first reflections from which were published in July. The final report is expected at the end of the year. We want to ensure the continued high performance and capability of our equipment in any future operation and that we continue to meet the standards that our service people rightly expect.

We have a responsibility to plan for an uncertain future. That means concentrating on the key SDR capability goals and the network-enabled capability that will allow us to develop the effects-based approach that my right hon. Friend the Secretary of State 810 described to the House last week. We intend to keep network-enabled capability at the heart of our approach to future equipment. As Operation Telic demonstrated, and as we foreshadowed in the SDR new chapter, this has become a fundamental part of almost every aspect of modern war on land and sea, and in the air. Any country that neglects this will find itself outclassed and outperformed on and behind the battlefield, whatever mass of individual equipment it can muster. Ultimately, it will enable us to link our intelligence, surveillance and combat capabilities together faster, giving us the ability to achieve decisive effects on the ground. It is also vital in helping us to link up with our allies and coalition partners.

The network, integration, test and experimentation works programme, or NITE works programme, a three-year project that will serve to bring the MOD and industry into a partnership intended better to integrate existing assets to maximise operational capability, was launched in August. This process of practical testing and experimentation within synthetic environments has impressive potential advantages, and British industry has responded positively to the partnership approach on this programme. Another key enabler project is the Bowman tactical radio system, which remains the Army's No. 1 equipment priority, and which will supplement the personal role radio already in service. We intend to meet the demanding March 2004 in-service target date for this piece of equipment.

We also expect to place a contract for Skynet 5 with Paradigm Secure Communications very shortly. This private finance initiative contract will provide modern, robust and flexible worldwide communications for the front line and is very good news for the armed forces. Added to this, services will be offered to friendly third parties, such as NATO, opening up possibilities of enhanced inter-operability and improved value for money. It is also good news for UK industry, as just under 2,000 people will be in jobs associated with the programme at its peak. The north-west and south-west of England, south Wales and Northern Ireland will all benefit from this programme.

While sensors and networks are critical, we must also invest in the platforms that allow us to respond swiftly and flexibly. We are doing that across all three environments—land, air and sea. I would like now to deal with each of those in turn. We have recently entered stage 3 of the assessment phase for the future aircraft carrier, the CVF, providing further impetus to alliance operations and the constructive relationship with BAE Systems and Thales UK. This assessment stage will increase the maturity of the design, optimising capability and value for money.

Mr. Kevan Jones (North Durham)

Will my right hon. Friend comment on some of the headlines that have appeared in the north-eastern regional press? The Newcastle Journal has one that reads: Delays on ship deal put jobs in danger. That refers to work that could go to Swan Hunter. Obviously, the procurement of the CVF will have a great impact not only on the north-east but on other 811 regions. Will the Minister scotch some of the more alarmist rumours that have been put about in such articles?

Mr. Ingram

I do not know whether it is because I am from Scotland that my hon. Friend is asking me to scotch those rumours. We should not respond to lurid press headlines as this process develops. Every procurement process has decision-making points at which we have to get it right, otherwise we cannot move to the next phase. Clearly, the bigger and more complex the project, the tougher that task is. I understand my hon. Friend's very strong commitment to the shipbuilding industry in his own constituency and region. I have already made the point that we should not necessarily focus on what is right for industry. We should focus on what is right in terms of the eventual capability. It takes a lot of fine tuning and precise planning to get that right, both in terms of structure and, importantly, delivering on time, which can be critical.

I would love to be able to say that everything runs smoothly in every procurement, but it does not. So far as this particular procurement is concerned, there has been a lot of comment about the way in which we put together the strategic partnership between BAE Systems, Thales UK and the MOD. People said that it was flawed and that it would never work, but the opposite is happening. We now have a very committed high-grade project team driving forward to meet the tough demands that we at the MOD insist on.

Dr. Julian Lewis

I thank the Minister for giving way again. Of course, he is making reasonable points in a general sort of way, but this cannot all be put down to lurid press reports, can it? The Minister may recall that the Secretary of State said in his statement about the future aircraft carrier on 30 January this year: At around 60,000 tonnes, they"— the aircraft carriers— are approximately three times the size of our current carriers. They will rank alongside the most formidable and complex weapons systems deployed by any country in the world."— [Official Report, 30 January 2003; Vol. 398, c. 1026.] Whereas in August, in a response to a question from me about the size of the aircraft carriers and the rumours that they were to be much reduced, the Minister said in a written reply: In the strategic defence review published in 1998, it was envisaged that the two new future aircraft carriers would be in the order of 30,000 to 40,000 tonnes."— [Official Report, 16 September 2003; Vol. 410, c. 703W.] That is not the press making things up; those are two different messages from two different Ministers in the same Department.

Mr. Ingram

I should like to reflect on that, and obviously I shall read Hansard to see the context in which those questions were raised and the responses given.

Mr. Gerald Howarth (Aldershot)

Will the Minister give way?

Mr. Ingram

Let me deal with the intervention of the hon. Member for New Forest, East (Dr. Lewis) first.

812 The relationship between cost and capability forms a normal part of any assessment phase, and formal cost and performance parameters will not be set until the main gate decision. The hon. Member for New Forest, East said that I made my point in a general way, but it was also a specific way. As we define capability needs, in which nothing is static and everything is evolving, against certain fairly firm criteria—although they may be subject to change—the cost implication must come into play. We have to marry up those two important elements to deliver what has rightly been described as a decision that must be flexible and adaptable over the lifetime of these vessels, which will be in the region of 50 years. While it is right for the hon. Gentleman to continue to probe and to tie us down to specifics, that contradicts what he was asking for, which was to ensure that we had a procurement process that took account of his earlier concerns.

Mr. Howarth

I am grateful to the Minister for giving way, because this is an extremely serious issue. As my hon. Friend the Member for New Forest, East (Dr. Lewis) has pointed out, the Secretary of State made great play of this issue in January, having seen two specific proposals from two major contractors for large vessels of the order of 60,000 tonnes. In August, the Minister suggested that the figure had been retrenched to between 30,000 and 40,000 tonnes. That is a substantial difference, and the House deserves a more specific answer than he has been able to give us. Has there been a huge change in the configuration of the aircraft carrier that warrants such a dramatic change, or is the truth that the cost implications that he has just mentioned are the driving factor?

Mr. Ingram

It is not the truth in the way in which the hon. Gentleman puts it, but there must be an element of truth in it. Cost is a part of any consideration about the capability that we seek. I heard the First Sea Lord say recently that it did not matter how long, how tall and how fat ships were; what mattered was what they delivered in naval terms—the punch that they afforded the Royal Navy.

It would be wrong to say that the consideration was driven primarily by cost. We hear a lot about that when industry makes announcements about capability, or about the concept of a particular procurement, but when the concept is examined in detail, the need to ensure flexibility over the likely—in this instance, the known—lifetime of a carrier must come into play. Smart acquisition is all about that process of refinement.

Dr. Julian Lewis

Will the Minister give way?

Mr. Ingram

I must proceed, although I am not running away from the issue, and I am sure that Conservative Members will return to it.

Mr. Davidson

The Minister tells us that any changes are driven by capacity rather than cost. Can he assure us that the original plans for two aircraft carriers carrying approximately 48 planes have been retained, and that the number of planes that a carrier will be able to bear 813 has not been cut? Can he also confirm that the Ministry is still working on the basis of the estimated dates of 2012 and 2015 in terms of capacity and delivery?

Mr. Ingram

As I said earlier, delivery on time is critical, and we are continuing to work according to that timetable, although it will depend on the capacity and ability of industry to deliver. We are dependent on its expertise. We cannot necessarily drive developments from the top. Sometimes there is a shift in the timetable because of changed requirements related to the evolving nature of our understanding of the threat or of the capabilities available.

It is best to wait for the main gate decision. This is one of the things that we must get right according to the criteria that I have established. As I have said, the situation is evolving. I repeat that we are not building these ships for industry, or for shipbuilding areas; we are building them to meet the needs of the Royal Navy, and to supply part of its contribution to the expeditionary force and the punch that it must deliver along with the RAF and the Army.

Mr. John Wilkinson (Ruislip-Northwood)

Will the Minister give way?

Mr. Ingram

No, I must make progress.

These vessels will meet the requirements set out in the strategic defence review. Operating the short take-off/vertical landing variant of the joint strike fighter and a range of helicopters, they will constitute the most capable carrier force outside the United States.

Last December, considerable interest was generated by the Astute class attack submarines and the Nimrod MRA4 maritime patrol aircraft programmes. Those are hugely complex systems, which have presented significant challenges to the Ministry of Defence and BAE Systems. February saw the announcement of an agreement on the way ahead for those two important projects, putting the programmes on a much sounder footing for the future through restructured contracts and a reduction in overall risk. Both sides are now working on the basis of the agreement, and my noble Friend Lord Bach was in Barrow-in-Furness only yesterday to attend the keel-laying of the second Astute class boat, HMS Ambush.

Although risks and challenges remain, this represents a major milestone for the Astute programme, and further demonstrates our commitment to deliver these important capabilities to the armed forces as soon as possible, along with the company. Hard lessons have been learned from the challenges by both the MOD and BAE Systems, and we are applying them widely in order to go on making progress with smart acquisition.

Mr. Davidson

Will my hon. Friend give way?

Mr. Ingram

I have already given way generously to my hon. Friend.

One of the largest programmes is the joint strike fighter, a collaborative venture led by the United States but now involving many contributors, the United Kingdom being the main partner. We are very proud of the extensive role won by UK industry, a role that could reap as much as £5 billion worth of work for the UK in 814 the current system development and demonstration phase, safeguarding many thousands of jobs and our leading position in the aerospace industry. A further £24 billion could be in prospect for downstream production activities.

Typhoon, our next-generation high-performance fast jet, will serve as the cornerstone of the RAF's air defence capability in the future. The project achieved a major milestone in June, when type acceptance was completed. The UK remains committed to the Typhoon programme, and discussions with the four nation members and with industry on tranche 2 are continuing.

Mr. Gerald Howarth

Will the Minister give way?

Mr. Ingram

I do not want to have to extend my speech as much as I did when we last debated this subject, and to take every intervention to make up for the fact that hardly any Opposition Members are present. The hon. Gentleman will be responding for the Opposition, and my hon. Friend the Under-Secretary of State will deal with the issues he raises.

Our priority is to ensure that industry's proposals for the programme are soundly planned and are based on mature designs. Austria's decision to place an order for 18 Typhoon aircraft clearly supports the export potential that the aircraft offers, and Singapore has also shortlisted Typhoon to meet its future fast-jet requirement. It was partly to meet the new demands of training pilots for front-line service in the Typhoon and the joint strike fighter that my right hon. Friend the Secretary of State selected BAE Systems' Hawk 128 as the next advanced jet trainer for our armed forces.

Subject to the successful completion of contractual negotiations, we intend to make an initial purchase of 20 of the new training aircraft, with options to buy up to a further 24. The value of a full order for 44 aircraft is expected to be worth some £800 million. They will enter service in 2008.

The choice of Hawk offers the best aircraft for the training of pilots of our future advanced fighter jets. Importantly, it will also sustain a number of jobs at the BAE Systems factory in Brough, and numerous others in the UK supply chain. More than 800 Hawk 128 aircraft are currently in service with some 19 customers, and future sales prospects for Hawk are extremely bright. The recent decision by the Indian Government to select Hawk as their new advanced jet trainer clearly supports that.

On 5 March 2002 the hon. Member for Twickenham (Dr. Cable), now the Liberal Democrat treasury spokesperson—I hope that he did not get his promotion on the basis of what he said then—observed The system whereby British officials and ambassadors and the Ministers who direct them are running round the world, as the Foreign Secretary did with BAE Systems last week, selling Hawk jets to India, is not the sort of thing in which the British Government should be engaged." —[Official Report, 5 March 2002; Vol. 381, c. 189.] It is precisely that, which is why I have spoken about the scale and the scope of the project and its importance to British industry.

815 On the land side, there is a need to modernise elements of the armoured vehicle fleet. That gives us an opportunity to develop medium-weight forces in the Army, and to deliver a solution exploiting network-enabled capability. The programme is known as future rapid effects system, or FRES. To assist its progress, work is already in hand to investigate a number of new technologies.

Although it has taken longer than anticipated to launch the project on its assessment phase, the Ministry believes that additional time invested now is essential to ensure that it has a good prospect of meeting requirements. We hope to have a decision on the way ahead for FRES later this year.

Peter Bradley

I understand that the Government have a commitment to royal naval vessels being built in British dockyards. If that is the case, why cannot that privileged relationship be extended to British industry when it has the capacity to provide for our needs? FRES is a case in point.

Mr. Ingram

I understand where my hon. Friend is coming from with regard to the figures. I cannot address special pleading for individual industries from the Dispatch Box, because all the decisions are based on the capability and capacity of British industry to deliver. As for my hon. Friend's point about the shipbuilding industry, if we did not have a shipbuilding programme for building naval ships in British shipyards, we would not by and large have a shipbuilding industry. That does not necessarily apply elsewhere, but the defence industrial policy, which I shall touch on later, aims to make sure that we seek to get the best from the best of British industry. However, it is up to British industry to be the best. I pay tribute to the companies that I have mentioned for delivering at an extremely high level, which gives us a great deal of assurance and comfort for the future.

I mentioned the new FRES project, an exciting and important project for the Army. However, that is not to detract from the battle-winning qualities of our heavy armour. Operation Telic served to underline the crucial role that main battle tanks still possess, but that punch comes at a price in terms of deployability. We regard medium-weight forces combining ease of deployment with more firepower as an important force element for the future.

All decisions on individual equipment projects are viewed against the backdrop of our defence industrial policy. Government and industry have worked together for many years on defence industrial issues, but the publication of the policy last year galvanised both to adopt new ways of working together, which has resulted in a joint approach to implementation and the development of a joint action plan. I praise industry for its hard work in making that a success which, coupled with the support from the trade unions and the work force, gives us a strong base for the future.

We are determined to reduce the barriers to cooperation with our allies and partners, and have made good progress on doing so with our European partners through the letter of intent. We are working closely with 816 the US Administration to secure a waiver for UK companies from the US international traffic in arms regulations. We are concerned about moves by the US Congress to restrict procurement for US armed forces to American companies. We and the US Administration regard that as a retrogressive and impractical step that would ultimately harm US interests as much as our own. We are taking every opportunity to explain our thinking to our US counterparts, and I shall do so again next week when I visit Washington.

We are constantly making our US counterparts aware of the importance of not saying "Buy US, for the US." However, in today's debate, there is an element of "Buy Britain only." We cannot live in that world. If we are trying to open up markets to the quality of our goods, we have to expect competition. If we examine what is happening in defence procurement—I have spoken about partnership between companies and takeover—we can see that the industry is changing rapidly. It is important to make sure that we have good access to other markets.

Mr. Michael Jack (Fylde)

Can the right hon. Gentleman give me an assurance that in his discussions next week in the United States he will raise with our American colleagues the question of having full access to all the technologies that underpin the joint strike fighter?

Mr. Ingram

I will make every point that I can on behalf of UK interests. I am sure that that will be in my briefing pack and, if it is not, I shall certainly ask why. It is important that this country punches at its highest and best weight, and the right hon. Gentleman has raised an important aspect of our doing so.

Our procurement strategy continues to be delivered through our smart acquisition policy. The ethos behind smart acquisition has always been to acquire defence capability faster, cheaper and better while deepening and broadening the key principles of the original smart procurement initiative. We are currently looking in great detail at other areas to identify where improvements to our processes can be extended. We recognise that that is a continuing challenge—still more needs to be done, particularly regarding project slippage. We need to look at ways in which we can become much quicker and more agile in our procurement processes. As part of that ongoing work, we are discussing measures with industry that could be introduced to improve project management on major programmes.

Equipment procurement can sometimes appear to be for the benefit of industry, constrained by budget considerations. The reality is that we must all remember what that equipment is for. Ultimately, it helps our people to win on the battlefield—it increases their chances of doing so and coming home safely, which is why we must get it right. That means not only making bold and well-considered decisions about new kit but making honest assessments regarding old kit. We know what works, what is no longer effective and what we need to work in future. Everything that we are now doing is aimed at that goal. Changes must be made, and they will be made. We ask a lot of the men and women of our armed forces, which is why we are determined to do what needs to be done to equip them to be as outstanding in the 21st century as they were in the last.

Mr. Gerald Howarth (Aldershot)

On a slightly sad note, may I send condolences from Conservative Members and, I am sure, the whole House, to the Minister's predecessor, the right hon. Member for Warley (Mr. Spellar), who has just suffered a bereavement? I extend our sympathies to him and his family on the loss of his wife. He was an assiduous debater on defence matters in the House before he moved to the Department for Transport and beyond.

The Minister drew the short straw in having to open today's today. The Secretary of State obviously decided that it was warmer in Iraq than here, to escape having to answer for the debacle of the CVF—carrier vessel future—programme. The responses that the Minister gave his hon. Friend the Members for North Durham (Mr. Jones) and for Glasgow, Pollok (Mr. Davidson) will have given them no more reassurance about the project than it did us. I remind him that we supported completely the Government's decisions to order two substantial aircraft carriers and on their configuration. We welcomed the fact that they chose the STOVL—short take-off and vertical landing—version of the joint strike fighter to equip those aircraft carriers, and even issued a statement congratulating them on their decision. Needless to say, that did not get printed, because it is only the adversarial aspects of Parliament that strike a chord with the media. We welcomed the fact that the design of the aircraft carriers could incorporate retro-fitting of a catapult system in the event of the joint strike fighter not incorporating a STOVL variant. That is entirely dependent on the US marine corps deciding to choose that version—if it does not, there will be no STOVL version for the United Kingdom to acquire.

I take strong issue with the Minister's assertion that the question of the length and diameter of hulls and so on is not material. It is important that the dimensions of those aircraft carriers are sufficient for them to deploy 48 fighter aircraft—the hon. Member for Glasgow, Pollok sought reassurance on that—because that is the basis on which the project was put together in the first place. I hope that when the Under-Secretary winds up, he will be able to reassure the House that it is still planned that the sortie generation rate will involve 48 aircraft operating from those hulls. If not, the prospect that we face is very different from the one we welcomed in January, when the Government made their decision. Clearly, however, the speculation in the press is entirely right and proper—it is well focused and spot on. I am afraid that the Minister of State has failed to reassure anyone in the House, and many companies and constituencies around the country will be alarmed by what they have heard today.

This debate takes place in the context of a nation that has five times embarked on serious military operations in the six years of this Government's life, and in the context of widespread rumours that next month's White Paper will bring a further round of swingeing cuts to the defence budget, not limited to the carriers. Industry claims that the procurement budget is already underfunded, and now informed defence commentators are speaking of cuts well in excess of £1,000 million. We read that Lieutenant General Rob Fulton, Deputy Chief of the Defence Staff, has instructed his capability 818 managers to find £1,000 million of savings across each of the military's 12 "capability areas" over the next 10 years.

Reports suggest that the order for the Type 45 destroyers is likely to be cut from 12 to eight. As we have heard, the order for two new aircraft carriers is becoming ever more precarious and, as we have discussed, they are shrinking in size.

Mark Tami (Alyn and Deeside)

Will the hon. Gentleman perhaps tell us what the cuts were over the last 10 years of the last Tory Government?

Mr. Howarth

I remind the hon. Gentleman that the Labour party conference voted for defence cuts of one third and that Labour was for ever pressing us from the Dispatch Box, when we were looking to refocus Britain's defence interests after the fall of the Berlin wall, to go further and further than we did. His accusation is a boomerang that has come back to hit him. In fact, many of the success stories to which the Minister of State referred were projects that were started by the Conservative Government and of which this Government are fortunate enough to be reaping the benefits. The AS 90 is one of them. The Minister of State mentioned that.

The Minister of State also mentioned the Typhoon, another project that is looking vulnerable, with reports that the number is to be cut from 232 to 130. Little wonder, then, that the Chief of the Defence Staff, General Sir Mike Walker, was reported in The Observer last Sunday as saying privately that he found the proposed plans to be "incomprehensible." What a way to pay tribute to our armed forces for the fantastic job they have done in Iraq!

This is the third of the annual defence policy debates that we have held since the summer recess, yet publication of the White Paper has been conveniently delayed until after the debates are over. It is extremely unfortunate that the timing could not have been better ordered to enable the House to have the benefit of the Government's latest thinking on the safeguarding of our national security. This question arises: how can a Government who are so keen to project British power and influence around the world and who have committed Her Majesty's armed forces to a major and continuing operation in Iraq justify a reduction in investment in those forces? I remind the hon. Member for Alyn and Deeside (Mark Tami) that defence expenditure under this Government has fallen to 2.3 per cent. of gross domestic product, by comparison with 2.9 per cent. of GDP when the Conservatives left office in 1997.

Peter Bradley

Will the hon. Gentleman confirm that, after the excellent performance of British and other troops in the Gulf in 1992, the then Government cut defence expenditure by a third in the following years?

Mr. Howarth

It was not cut by a third. I think that the hon. Gentleman was in the House at the time and I was not. Whatever cuts were made, they were far less than his party was demanding of the Government of the day, at a time when I think he was in the House and I was not, so he is no position to make that accusation—certainly 819 not when he is seeking to bat for Alvis Vickers, which has an important facility in his constituency that he knows I have had the pleasure of visiting.

Mr. Jack

Would my hon. Friend care to reflect on the fact that the previous Conservative Government looked at their spending in the light of the changed threat at the time, which if anything was reducing, whereas at the present time threats seem to be increasing?

Mr. Howarth

That is the typically perceptive point that I would expect a colleague of mine who held a responsible position in Her Majesty's Treasury to make. The House is better informed as a result. My right hon. Friend is absolutely right.

The Government know that they are caught between a rock and a hard place, and in the past few months have been engaged in a desperate softening-up operation in advance of the White Paper. Even this afternoon, the Minister of State has told us that some capabilities will have to go. Unfortunately, he cannot tell us now what those will be, but we have been warned that some capabilities will have to go. That is part of the operation. As Lord Bach told The Economist and the Jane's conference on Tuesday, platforms are not the key; it is capabilities that count. In a sense, he is absolutely correct but surely the one thing that the Iraq operation told us is that numbers do count. We were hard pressed to field enough aircraft; we relied heavily on reserve forces; and the provision of £500 million-worth of urgent operational requirements illustrated how bare the resupply shelves had become. Indeed, the Government's determination to apply industrial "just in time" practices to the defence of the realm is potentially a recipe for disaster. As my hon. Friend the Member for North Essex (Mr. Jenkin) reminded the House last week, General Sir John Reith acknowledged to the Defence Committee earlier this year that we had come "perilously close" to being unprepared for the start of the Iraq war.

I do not want to imply that there is no common ground between us and the Government, because there is. I should think the public are rather fed up with incessant yah-boo politics. There are things we disagree about, but also things we agree about. We accept that, in the post-cold-war world, new challenges arose. My right hon. Friend the Member for Fylde (Mr. Jack) made that point. The defence posture required to confront a threat from across the north German plains was very different from the one required to move swiftly to a trouble spot anywhere in the world. Indeed, we fully support the concept of expeditionary forces. Furthermore, I personally believe that our default setting should now change from operations in a temperate climate to the expectation that operations will take place in a hot climate.

Let me run through some of the particular projects. We have covered the carriers, on which I hope the Minister will be able to enlighten the House further at the end of the debate. I turn to the Eurofighter Typhoon. That is unquestionably a superb aircraft, probably the finest air superiority fighter in production today. However, thanks in part to the drag effect of European collaboration, it is late entering service and over budget.

820 The Italians have already signalled that the project will be cut by a third. Alessandro Pansa, chief financial officer of Finmeccanica, our Italian partner, was reported in the Financial Times as saying: Tranche three of Eurofighter is something that is doubtful. The second tranche is also running into difficulties. The Germans were reported in the Financial Times on Monday to have become frustrated with what has been described as foot dragging by the British Government. Can the Minister say when he will approve the order for tranche 2, scheduled for delivery in 2006?

At oral questions last month, the Secretary of State told my hon. Friend the Member for Vale of York (Miss McIntosh) that there will be no changes in the Government's plans for procuring Eurofighter Typhoon", but he went on: We anticipate changes to the way in which those aircraft are configured, but those matters will be set out more clearly in the forthcoming White Paper."—[Official Report, 8 September 2003; Vol. 410, c. 2.] What does that mean for the project? It is unsatisfactory that this important procurement debate should be held without the Government revealing what changes in configuration they have in mind. For our part, we believe that the Government should now bring forward development of the ground-attack variant of the Typhoon. It should be capable of 24-hour all-weather operations; be equipped with global positioning system and laser designators; be able to deploy ALARM—airlaunched anti-radiation missiles—and other air-to-ground precision munitions; and have electronic scan radar, enhanced sensor suite and open architecture to accommodate later upgrades. If we were able to do all that, the UK would be provided with a potentially formidable aircraft to complement the carrier-borne joint strike fighter. It would also enhance the aircraft's attraction to allies and be available before the JSF enters service.

On that note, may I invite the Minister when he winds up to be a little more specific about the export opportunities for the Typhoon? I understand that Singapore and Greece are interested. If we could get ahead of the game in converting tranche 3, perhaps, into the ground-attack variant, we would have a formidable aeroplane that would not only enhance our own squadrons but be available in an export market—something which, as the Minister himself said, is extremely important. I agree with every word that he said about the Liberal Democrats. They parade around the country pretending to be in favour of defence, only for their spokesman on Treasury matters then to say that we should withdraw all financial support for our export efforts. To do so would of course kill those efforts, so the Minister was absolutely right.

I hope that the Minister will look at my suggestions, because decisions have to be taken now. If our partners in the Typhoon programme are reluctant, the UK should proceed alone, with the others continuing to develop the core programme. Whether or not the Government proceed now with development of the 821 ground-attack variant, they must sign this contract off by the end of the year, or risk a costly production gap. A Ministry of Defence spokesman was quoted in Monday's Financial Times as saying that we have not ruled out a full order by the end of this year, but given the obvious importance of the contract our priority is to ensure that industry's proposals for the programme are soundly planned and established on adequate design maturity"— whatever that means. Are the Government committed to the full order and to signing up to tranche 2 by the end of the year?

On the future rapid effects system, the Chief of the General Staff, General Sir Mike Jackson, told the Royal United Services Institute in June that it was clear to him that the concept of the Future Rapid Effects System is critical to the British Army's future capability. If we accept FRES's importance to the British Army's future capabilities, the difficulties that the MOD has run into become more acute. We expected progress to be made on this project in the summer. We were then told that it would be made in the autumn, but autumn is upon us and there is still no tangible progress. The Minister said that we should expect some form of decision later this year, but there is not much of this year left. Indeed, I understand that the Government recently and somewhat peremptorily rejected a joint proposal from BAE Systems, Alvis Vickers and Thales for a three-way alliance to supply FRES, not least because the procurement strategy for this programme is under review. Given the importance of this project to the British Army's future capabilities, as indicated by the Chief of the General Staff, why are the Government still only at the stage of reviewing the procurement strategy? How on earth can they hope to meet their projected in-service date of 2009 if they are still fiddling about working out what the strike procurement strategy will be? That is not a very fine example of smart procurement, if I may say so. Given the importance of this issue, the Government have to give us more information during today's debate about exactly what is proposed. As the hon. Member for The Wrekin (Peter Bradley) rightly pointed out, the continuation of British manufacturing capability is critical.

If, by some chance, the FRES project were to meet its projected in-service date of 2009, how would it be affected by our limited strategic lift capability? The in-service date for the A400M is 2011, two years after that for FRES, leaving FRES without adequate strategic lift for its first two years in service. I can only conclude that the delay is designed to coincide with the introduction of the A400M, but that has already itself been beset by serious delays. We are a decade into this project and still no nearer to cutting metal. As I am fond of saying to BAE, "When are we expecting to cut the first cardboard?" This project has not had a happy history to date. The requirement for a strategic lift capability, which the A400M is designed to fulfil, could have been provided by an off-the-shelf solution such as the C-17. Again, we salute the Government's decision to take on four C-17s, although I am not sure that the decision to lease them actually provided the best value for money in the circumstances. As the Minister knows, those aircraft played a key role in the recent Iraq deployment. The decision to opt for the collaborative A400M seems to 822 have been as much about European politics as the need to develop a strategic lift capability for Britain's armed forces.

Examination of these individual programmes leads to the wider issue of defence industrial policy, and in that regard I want first to consider research and technology. Today's front-line military equipment is the product of yesterday's investment in that technology, most of which, I remind the Minister, came from the previous Conservative Government. Without the continuation of such investment, we shall be left with two options: to offer our armed forces second-best kit, or to buy off the shelf from abroad. In effect, that means buying from the United States, a point to which I shall return in a moment.

In 1990, the Conservative Government were spending about £1 billion on defence research—equivalent to 14 per cent. of the amount spent by the US Defence Department. Last year, this Government spent about £450 million—less than half the 1990 figure, and equivalent to just 6 per cent. of US expenditure. Indeed, US expenditure is planned to rise from $27 billion in 2001 to no less than $37 billion by next year.

I want to mention a particular aspect of recent defence research that the Minister has himself referred to. Modern communications have brought high-intensity war fighting into the nation's sitting rooms. There is an understandable and growing revulsion at the loss of civilian life involved in conflict. We all saw on our TV screens the opening shock and awe attacks on Baghdad, which were apparently so violent and extensive that they must have flattened the city. However, having flown over Baghdad at low level in July with my Defence Committee colleagues, I was surprised at how little damage had been inflicted on the city. That civilian casualties were minimised was due in no small part to the use of precision-guided weapons, which have been developed at considerable cost since the previous Gulf war.

There is a message here. The truth is that it would be very difficult for a British Government—and perhaps others as well—to prosecute high-intensity war fighting if the public believed that widespread civilian casualties would follow. The public are reluctant to accept any casualties, but we should note that precision-guided weapons have played a major role in minimising them. We should also pay tribute to Britain's scientists, who were responsible for developing the technology that has enabled us to limit casualties.

Mr. Breed

rose—

Mr. Howarth

Is this Liberal policy coming up?

Mr. Breed

I concur with all that the hon. Gentleman said about the development of precision-guided weapons. Has he read a recent press report about the potential for manufacturing low-intensity nuclear weapons, which might even enhance such developments? Would he like such technology to be pursued?

Mr. Howarth

I am not aware—

Dr. Julian Lewis

That sounds like, "Liberals for the neutron bomb."

Mr. Howarth

Indeed. However, I am not aware of that report and cannot ask "my staff" to look it up 823 because they are not yet my staff. In due course, after the next election, things might be different. I shall certainly do the hon. Member for South-East Cornwall (Mr. Breed) the courtesy of reading the article; if he has it to hand, perhaps he could let me have a look at it.

Unless we as a nation are prepared to invest more in defence-related research, our technology lead—in those areas in which we do lead—will disappear. The Government have placed all their faith in the privatisation of the Defence Evaluation and Research Agency, which is now known as Qinetiq and controlled by the US Carlyle Group. However, as Qinetiq has pointed out to me, it cannot raise funds here and has to tap the US market. What will the consequence of that be? If US taxpayers or US investors provide the funds, they will own the resulting technology and the United States will control the release of that technology to us. Very serious consequences will flow from that Government decision, which was not popular on either side of the House. The Government owe it to us to develop their strategy more clearly to ensure the maintenance of our technology base, so much of which has been derived from Government expenditure.

Conveniently, that point brings me to our relationship with the United States, which is dragging its feet on approving the technical access agreements on the joint strike fighter—a point to which my right hon. Friend the Member for Fylde alluded. The UK does not have design and support authority for the UK-produced joint strike fighters. We failed to secure that with the Apache attack helicopter. We failed to secure it on the Hercules C-130J, although on the much older C-130K, we do have design authority, which has proved by comparison more beneficial to us, especially to the hon. Member for Cambridge (Mrs. Campbell)—who is not in her place—and to Marshall Aerospace in her constituency, which does a marvellous job. That is not an acceptable state of affairs. Will the Minister advise the House on the actions that the Government are taking to secure agreement on those issues? Can he confirm that, without having design and support authority on our own joint strike fighters, we could end up being dependent on the US, which could then exercise a power of veto over our operation of that aircraft?

Mark Tami

The hon. Gentleman mentioned the dangers of handing over such matters to the US. He also mentioned not taking the A400M and choosing the C-17 instead. Does he accept that that would hand over another matter to the US?

Mr. Howarth

No, because I seek to strike a balance. The Minister pointed out the danger of being xenophobic and saying, "Buy British on every occasion", because we are attacking elements in the US for advancing a "Buy American" policy. I believe in a two-way street, as I shall demonstrate shortly. I hope that the Minister will tell the House how well the joint strike fighter project is progressing, because it is currently overweight and somewhat over-budget. What assessment have the Government made of the project proceeding to the next phase of its development?

824 Our difficulties with the US do not end with the joint strike fighter. The Government have made representations to the US Administration about securing a waiver for the UK from the effects of the international traffic in arms regulations, and I pay tribute to Lord Bach for the vigour with which he is pursuing that matter in Washington. I wish the Minister of State every good fortune when he goes to beat the drum over there next week.

I understand that one of the issues standing in the way of progress on the ITAR waiver is the failure of the Department of Trade and Industry to lay the necessary orders under export control legislation to make it an offence for a British subject or UK businesses to trade on, disclose abroad or export information that they may receive under the waiver. Can the Minister tell us the score on that? Will the DTI move those orders and would that be of assistance in unlocking the impasse with the US?

Reference has been made to the "Buy American" proposal of Congressman Duncan Hunter, which, if successful, would be extremely damaging to British industry. The good news is that it is supported neither by leading US defence contractors nor by the Administration. I emphasise that there is a unanimous view on those matters across the Floor of the House. The Minister will know that the Defence Committee, on its visit to Washington last month, made very strong representations both to the Senate armed services committee and to members of the Administration, including Defence Secretary Donald Rumsfeld and his deputy Paul Wolfowitz. It would be nice if the Minister could acknowledge that it is not only the Government who are batting on this, but that we have formed a united front. We cannot afford to relent on the campaign.

Mr. Kevan Jones

I hear what the hon. Gentleman says about the change in position of the US Administration, but is he aware that as early as last week Paul Wolfowitz was trying to negotiate with Mr. Hunter about his Bill, not to veto it—as we were told in Washington—but to water it down? It would still have grave implications for the UK defence industry.

Mr. Howarth

The hon. Gentleman, who is a distinguished member of the Defence Committee, is right. Whatever protestations the US Administration may make about sharing our view, the fact is that the Hunter Bill is an amendment to a wider appropriations Bill, and it would require the President to veto it. A huge amount is at stake and it is not only the Minister's efforts that need to be harnessed in support of the campaign. The Prime Minister himself needs to be involved.

Mr. Ingram

He has been.

Mr. Howarth

I am sure that he has, but we need to fight those guys hard. When the Americans defend their commercial interests, they fight tooth and nail: let us fight tooth and nail as well. UK-US defence trade is running 2:1 in favour of the US. If those repeated standing ovations in Washington in July, and the repeated and undoubtedly heartfelt tributes to our Prime Minister for Britain's support for the US over 825 Iraq mean anything, the US has to give the UK a fairer deal than is currently on the table. Compromises that result in the UK paying the price are not acceptable.

The defence industry is at a crossroads. If the US does not accord the UK the treatment that we deserve, with access to its market and shared technology, it will risk leaving us with little option other than to throw in our lot with our continental partners. But that would not resolve our problems.

I do not wish to sound unduly negative about European procurement collaboration, but it has proved costly and inefficient, driven more by political than by military considerations. Collaboration with our allies is probably essential in developing our capabilities, but however we select our collaboration partners—whether we choose to go it alone or choose an off-the-shelf solution—our decision must be based on what will best fulfil the requirements of our armed forces in the best possible time and at an acceptable price.

The House of Lords European Union Committee warned that the proposed European armaments and capabilities agency could become a tool of protectionism or constraining the ability of member states to order armaments independently". The Government's response to the ninth report of the Defence Committee said that the Government were opposed to the creation of a closed European market". That may very well be the Government's intention, but that is not what is happening in Brussels. The European capabilities and acquisition agency set out in the Convention on the Future of Europe is part of a plan to create a single European army with a single European procurement process. In their response to the Defence Committee's report, the Government denied that it would act as a tool of protectionism, but failed to address whether it would constrain the independence of member states in their procurement decisions.

What effects will the proposals in the Commission's paper entitled "European Defence—Industrial and Market Issues—Towards an EU Defence Equipment Policy", which was agreed by the General Affairs and External Relations Council in May this year, have on the existing Organisation for Joint Armament Cooperation arrangements? That is another example of unnecessary duplication of existing processes by the EU that the Government are blindly going along with.

How does the NATO Prague capabilities commitment differ from the European capabilities action plan? This is riveting stuff. What progress has been made in achieving our commitments required by the PCC and the ECAP? How do the processes to achieve the requirement of those commitments differ? It is yet another example of unnecessary duplication by the EU in European defence. We support increasing European capabilities and much more needs to be done to close the capabilities gap with the United States, but those aims are best achieved through NATO and with European countries pulling their weight in defence expenditure.

The harmonisation of European research and development is seen as a quick fix to make up for the shortfalls in the UK research budget. Rather than assessing the risks posed to our procurement process 826 and research agenda by such harmonisation at a European level, the Government see it as an easy way to make up for the cuts that they have inflicted upon our research budget. The harmonisation of European rules on procurement and the development of an EU armaments agency would force the UK into a political straitjacket, reducing our ability to make procurement decisions based on British interests. It represents the intention of some in Europe to create a fortress Europe in defence markets and plays into the hands of those in the US who wish to create a fortress US, with the "Buy American" proposals that are making their way through the US Congress. That stand-off in defence markets will result in increased costs and a reduction in competition on both sides of the Atlantic. The biggest loser in any such stand-off will be the United Kingdom, which at the moment enjoys good relations with both the United States and our European partners.

All our experience on collaborative European projects such as the Eurofighter, Horizon frigates, the multi-role armoured vehicle—MRAV—and the A400M demonstrates the difficulties in harmonising different requirements that all too often result in a compromise system that fails to meet the full specification that we need. There is a real risk that the EU armaments agency would lock us into projects that might not meet our requirements. The Government pulled out of both the Horizon frigate and MRAV projects in favour of a UK national solution. The hon. Member for The Wrekin (Peter Bradley) knows that only too well. Would that have been possible if we had been locked into such a project through a common European armaments agency?

The defence industrial policy enunciated a year ago by the Secretary of State has been welcomed by many, although it seems to me little more than a statement of what has effectively been the practice for many years—competition, but with exceptions. The Government are under fire from BAE Systems and others who believe that at least the lion's share of taxpayer-funded defence procurement expenditure should come their way. The chaotic saga of the Hawk advanced jet trainer was a poor reflection of the much-vaunted defence industrial policy. Making the decision just hours before 500 people were to be served with redundancy notices hardly reflected a considered judgment, right though the decision was in the end. The highly publicised uncertainty on the part of the British Government nearly scuppered the aircraft's prospects in export markets; the Minister of State mentioned India.

The Government must develop a clearer sense of purpose in dealing with British industry. Of course, there must be competition, but only from those who open up their markets to us. I shall quote from the excellent Defence Committee report what Sir Richard Evans told us on behalf of the Defence Industries Council. He said: I am not saying that we should necessarily change the policy that we have but we should be doing a hell of a lot more to force the others to actually come in line with us … I do not think protectionism is the answer to this … The answer to this is not to shut the door, it is to exercise quite cautiously the degree to which we allow the door to be opened whilst at the same time exerting the maximum amount of political and industrial pressure on those other markets that are benefiting from entry to the UK to do the same for us. 827 I am sure that the Minister of State agrees with every word. It is common ground, but we have to put that into practice.

In conclusion, this debate comes at a crucial time with a number of procurement projects falling behind. Of the 20 projects in the 2002 major projects report that had reached main gate or the equivalent point, eight have slipped and overrun their time of approval. The Defence Committee's ninth report found that there remains a question about the agility of the Ministry's procurement systems. The Government failed adequately to address that in their response to the report published earlier this week. Evidence of the lack of agility in the smart acquisition process comes from the number of times that that process has been refined and, indeed, renamed. The claim of the chief of defence procurement, Sir Peter Spencer, about the need to "periodically refresh smart procurement" causes one to speculate about the agility of the process.

There is much to be done on procurement. We welcome concepts such as the capabilities-based approach, but as my hon. Friend the Member for North Essex told the House last Thursday, those concepts, such as effects-based warfare and talk of flexibility, must not merely become smart euphemisms for cuts as is increasingly the case in what we hear from Ministers.

I do not underestimate the scale of the task. The Government face difficult decisions in configuring our armed forces into the shape, size and capabilities needed for the post-11 September strategic environment. My hon. Friend the Member for New Forest, East (Dr. Lewis) will refer in more detail to some of those key capabilities, but it is a challenge to provide a continuing ultimate deterrent, develop a modern network-centric capability, maintain conventional forces and provide highly professional and motivated infantry to hold ground and engage in peacekeeping operations.

The Government's own chosen programme entails a great deal of expenditure. I hope that Ministers can convince the Chancellor to pay for the equipment that our armed forces deserve and need if they are to fulfil the tasks that we ask of them. They are the best and they deserve the best.

I said at the outset that this Government have sent Britain's armed forces into battle on at least five occasions since they took office in 1997. Only the United States has been involved in comparable operations. Put bluntly, we buy weapons systems that are used in anger. Too often, compromises on systems have been made for political, and not strategic, military reasons. We therefore need to ensure that our forces have the best and most effective equipment and that our procurement policy breathes life into Britain's domestic defence industry, which employs so many of our constituents.

Peter Bradley (The Wrekin)

I welcome the opportunity to contribute to this debate and raise issues that are of pressing importance to my constituents. Notwithstanding what the Conservative spokesman, the hon. Member for Aldershot (Mr. Howarth) said, the timing of this debate is appropriate given that decisions will be taken in the coming weeks about the future rapid effects system in particular.

828 First, I must emphasise how important defence industries are to my constituency. We have in it RAF Cosford, a major RAF training station, and DSDC Donnington, the defence storage and distribution centre. The Army Base Repair Organisation is on the same site at Donnington and Alvis Vickers is at Hadley. I shall focus principally on procurement—on Alvis and the work force there—but will first say a few words about the other defence establishments and their recent past.

We are extremely proud of RAF Cosford and the aerospace museum alongside it. We are proud of its contribution to the community, the local economy and the armed forces. It is worth bearing in mind that about 50 per cent. of ground support crews in the RAF have trained at one time or another there. Indeed, although it is a training establishment, it has sent a considerable number of personnel to the Gulf in recent months.

Cosford has grown in recent years and I am glad of that, but its growth has been at the expense of other establishments, notably RAF Locking at Weston-super-Mare. There have been substantial changes at Donnington too, but more in the nature of contraction than expansion. Within living memory about 8,000 men and women worked at Donnington. Six years ago, that figure was down to 3,000. It is now about 1,800, with 1,000 employed at ABRO and about 800 at DSDC. Every one of the seemingly endless programme of reviews and rationalisations not only reduces the work force at Donnington—it has certainly done so in the past—but creates massive uncertainty and anxiety among men and women who, frankly, devote their working lives to service and who have never failed our front-line troops when their support has been needed.

I am sure that the whole House will join me in paying tribute to the sustained effort that the staff there made not only from the onset of the military campaign in Iraq but long in advance—from the Christmas of last year. When I visited Donnington in March with my hon. Friends the Members for Telford (David Wright) and for Stafford (Mr. Kidney), they had already moved about 500,000 pieces of kit, from small batteries to tank engines and aircraft wings, out to the Gulf, and they were working around the clock, without the public recognition that they deserved, in an unsung but heroic effort. They now face yet another review. Having survived the strategic defence review and the depot rationalisation study as well as at least two major overseas military campaigns, they now face the future defence supply chain initiative. Their fear—it is a common fear—is privatisation, the loss of jobs and in particular the loss of the civil service ethos to which they attach great importance and which is the backbone of their commitment and achievement over many years.

I appeal to the Minister, in so far as it is within his power, to preside over a period of calm and consolidation and to take the opportunity to acknowledge the record of both the DSDC and ABRO at Donnington and to assure the security of their jobs and livelihoods in the future. That is important in my local community and the local economy because The Wrekin is traditionally an area of low unemployment but the price that we pay for that is low wages. The reason for those low wages is the low skill levels in Telford and The Wrekin. The Government rightly attach a great deal of importance to building on our 829 skills base. I suggest that it is important not only to build on that base, but to preserve what we already have. Alvis Vickers makes 90 per cent. of the British Army's vehicles, including Warrior and Challenger 2, so I was glad to hear my right hon. Friend the Minister's tribute to the performance of those vehicles during the recent campaign. Donnington and Alvis Vickers at Hadley are beacons in our local economy in my constituency, because they offer relatively decent rates of pay for high levels of skill. That is why it is essential that they should be protected at all costs.

The recent history of the Hadley plant mirrors a trend in British defence manufacturing. I may seem like an old lag to Opposition Members, but, contrary to what the hon. Member for Aldershot suggested, I was not a Member of this place in 1992, and when I was elected in 1997—although it seems as though I have been here since 1982—the plant was GKN Defence. It was then taken over by Alvis, which was good news for the Hadley work force, but not for the work force at Coventry where Alvis closed its plant and transferred the work to Hadley. As my hon. Friend the Member for North Durham (Mr. Jones) rightly pointed out, the company is now Alvis Vickers. It is crucial that there should be no further contraction in our capacity to manufacture armoured vehicles. If there is, the pips will have been squeezed for the last time: Alvis Vickers is the last company that remains capable of building high quality vehicles for the British Army and for export.

In 1997, there were four factories in the UK: GKN Defence at Hadley, Alvis Vehicles at Coventry and Vickers Defence Systems at Leeds and Newcastle. Just six years later, only two factories are left: Alvis Vickers at Hadley and at Newcastle. During the same period, the number of people employed has been reduced from about 3,000 to just over 1.000, 470 of whom work at Hadley. The work force and unions at Hadley fear that if they do not win significant business in the near future, probably by the end of this year, compulsory redundancies will follow by next spring, as surely as night follows day. We cannot afford to let that happen. The local economy and the local work force and local community whom I represent cannot afford it; nor can our defence industry and the MOD, and it would certainly not be in the national interest. Unless we take a big-picture, strategic view of defence procurement we could lose not only jobs at Hadley and elsewhere, but an entire defence manufacturing sector with all the industrial and security implications that would involve.

Earlier, in response to my intervention, my right hon. Friend the Minister said that the Government had made a commitment to procuring its naval vessels from British shipyards because without those procurement contracts those shipyards would close. The same principle applies in my constituency. If the Government make a commitment to protect jobs on the British coastline, they should also be looking to the protection of jobs inland.

I understand the MOD's difficulties in matching the needs of the armed services to British industry's capacity to fulfil them. I understand that the MOD cannot commission what is not needed and that it must constantly reinterpret the needs of our armed forces in the light of global politics, technological advances, battleground experience and, not least, costs. No one is suggesting that we must procure British kit and 830 equipment irrespective of cost, but the needs of industry must also be recognised, taken into account and addressed. The defence industrial policy that was published a year ago explicitly recognises the need to retain industrial capacity in this country, to preserve security of supply and to maintain our export potential.

I am sure that British business is happy to compete. I take the point that the hon. Member for Aldershot made about the fairness of competition. It is important that if overseas companies are to compete or to enter into partnership with British companies we must have the same privilege in their markets. I am sure that British companies, including Alvis Vickers, are prepared to compete, but they cannot survive simply on hopes and expectations. They cannot keep production lines running and skilled men and women employed without copper-bottomed contracts.

In his opening remarks, my right hon. Friend the Minister said that he is keen to see that the British Army, the Royal Navy and the RAF get the best kit to do the best job. That is important. He said that in ensuring that our procurement policy follows that principle he cannot have regard only for the interests of industry. I agree, but there is no point in the MOD trying to place contracts with British suppliers when those suppliers have been obliged to make their skilled work forces redundant for lack of contracts. Those skills will walk away; they will not come back and we shall no longer have the industrial capacity to respond to demand.

I am saying not that we must buy only British—I am certainly not saying that we should buy British at any cost—but that we should buy British where we can, and that where there is the capacity to produce tested, high quality equipment, such as Warrior, Challenger and other kit, we should seek to procure it. I mentioned earlier the importance of security of supply. If we lose that important sector of our defence industry, who will carry out the kind of emergency work to which I referred in my intervention and which Alvis Vickers personnel undertook in upgrading Challenger 2 in the Gulf and in Kuwait during the weeks and months leading up to the hostilities in Iraq and during those hostilities? Who can we look to if we no longer have the defence capacity to meet that need? On which foreign powers will we have to depend to meet our defence needs? Furthermore, how will we compensate for the loss of export earnings from Alvis and others—companies that research and develop their equipment in this country for the MOD?

I was pleased to receive the Minister's reply to my recent question about the future rapid effects system, which is due to produce the medium-weight armoured vehicle by 2009. He said: The Department is considering procurement options and will have regard to all relevant factors, including industrial issues, in determining the way forward."—[Official Report, 6 October 2003; Vol. 410, c. 1160W.] I very much welcome that and hope that the outcome of the decision-making process will be favourable to my constituents.

I hope, too, that not only MOD Ministers but, crucially, Treasury Ministers adopt the same approach to FRES as they did in making their decision—albeit a belated one—about the Hawk jet trainer. I remind the 831 House that, when making her announcement about the Hawk jet trainer, my right hon. Friend the Secretary of State for Trade and Industry said that the decision underlines our commitment as Government to the new defence industrial policy and manufacturing strategy". My right hon. Friend referred to major economic benefits to Humberside and wider to the UK through key suppliers". If that same—I am struggling not to use the word "holistic"—

Mr. Kevan Jones

Wll my hon. Friend give way?

Peter Bradley

I hope my hon. Friend can offer a substitute.

Mr. Jones

I will try to help my hon. Friend. Does he agree that the strange thing about the FRES programme is the fact that after spending several million pounds, through Alvis Vickers and other companies, on the development phase, the Government have suddenly pulled the plug on the programme? Has not that sent a message to UK suppliers that they may not be in the loop for the next procurement of the project?