§ 7.24 p.m.
§ Mr. Ronald Brown (Hackney, South and Shoreditch)
I wish to raise an item under Class I, Vote 10 of the Supplementary Estimates dealing with defence procurement and air systems, but there are some preliminary comments I wish to make first.
I have no interest to declare in any companies, firms or contractors. My interest in this matter arises solely from my membership of the Western European Union and my continuing interest in technology, avionics and air systems. My concern has been about the quality of the weapons systems for the multi-role combat aircraft and its success as a European aircraft.
I am aware, and so is my right hon. Friend, that the hon. Member for Hastings (Mr. Warren) and my noble Friend, Lord George-Brown, have been concerned with a company in Hastings which was unsuccessful in its tender. I am not concerned with that argument, and I have not been concerned with it. The Secretary of State sent a letter to Lord George-Brown on 6th February and was courteous enough to send me a copy, since I had been speaking to him on some other matters. However, I did not request the letter and I wish to make it 1628 abundantly clear that it is not part of my inquiry.
It is more in sorrow than in anger that I have sought this debate. I am a supporter of the MRCA. It is a first-class aircraft and weapons system. I became concerned when I heard that Herr Eichorn was unhappy about the situation in relation to the project. I asked the Secretary of State if he would allow me an unofficial contact with him and his procurement advisers to discuss in private the sort of thing I have been driven now to discuss in public. I very much regret his decision. I would have been far happier if I had had the privilege and courtesy of being allowed to discuss this matter in what I regard as the proper place.
In 1971–72 tenders were sought for a number of contracts, and specifications were sent to suitably qualified firms. I believe procurement is always subject to what I euphemistically call a "carve-up", particularly by the big boys in the industry. In certain fields, the heavyweights carry a lot of muscle. Procurement becomes more like "Buggins' Turn". This is not peculiar to this country; it happens in every international sphere in which I have worked. In this case, everything appears to have run true to form.
The Muhammad Ali of the electronics industry is GEC-Marconi-Elliott. Sir Arnold Weinstock is in the corner of this great Muhammud Ali. It had earmarked for itself the main computer contract. This was a contract well worth having and, if the information I have received is correct, the company's documentation was very full. To keep the game looking good, the company put in for other contracts, but with very slender documentation and in some cases at absurd prices, mainly because it had neither the knowledge nor interest in any of the other contracts. Because it was so large, it expected to win the main contract.
A German firm—Litef—was expected to get the inertia navigation system contract, but it was at this point we got the first switch. Litef was given the main computer contract and Ferranti got the inertia navigation system. Smiths, as anticipated, was given the head-up display contract. This caused problems, because Plessey anticipated getting the stores management system contract and had put in 1629 a remarkably good bid at very competitive prices, as did some other organisations and firms, because they were competent in the field and they wanted the work. They could do the work, but the giant itself—the GEC-Marconi-Elliott group—put in a holding bid with very thin supporting data and a very silly price to boot—about half the cost put in by everybody else.
I have had to work out the figures, changing them from deutschemarks to sterling. My hon. Friend knows how difficult this is, bearing in mind how the pound has been floating recently.
The company was not competent, on the one hand, and on the other hand it did not want the job, thinking that it would get the main contract. The company failed to get the main contract, and this is where "Buggins' turn" comes into it. In view of its weight and muscle, it had to be given something—therefore it was given the stores management system, or weapons delivery system, in spite of its very silly tender.
From 1972 to 1974 the company struggled manfully—I do not know whether Sir Arnold was helping it—to deliver the goods in this very vital area of weapons delivery systems. To help it the company was given about £1 million pounds of development money.
At that point I began to get so edgy that I put a Question to my right hon. Friend the Secretary of State about the public funds being used to develop the weapons control system of the multi-role combat aircraft. I asked who authorised the payment and who monitored the expenditure. The answer I received was:Development of a weapon control system is an element of the MRCA weapon system development programme which is being jointly funded by Britain, Germany and Italy. Work has been monitored and paid for in accordance with the conditions of the contract."—[Official Report, 5th March 1975; Vol. 906, c. 761.]We still have not been told, therefore, what money the company was getting and how it was getting it. I asked the Secretary of State, in a further question, to tell me the tender price and who were the tenderers. I was not told the price of the tenders but I was told that the successful tenderer was Marconi-Elliott. I was not able to get from my right hon. Friend the information I was seeking 1630 as to how much development money had gone to this company between 1972 and 1974 to help it in its struggle to provide this weapons delivery system.
By then it had become obvious to the eagle eye of the Ministry of Defence Procurement Director that the company was beginning to flounder seriously, because of the falling back in the time scale. It was clear that although the development of the MRCA was going ahead on a full compatability basis, which is exactly what it was designed to do, the weapons system being developed by Marconi-Elliott was a complete flop. This was in spite of the fact that the company had £1 million to help it find an answer.
We now come to the second switch. As Marconi-Elliott was unable to produce a weapons system which would fit in the space allowed for it on the aircraft, it was apparently decided by the Procurement Executive to give some relaxation. This relaxation was introduced into the specification in order to allow more room for the weapons system, as the company was unable to manufacture a system within the specified parameters.
The weapons programming unit, which is the real computer heart of the system, I am advised, is now to be contained in two boxes instead of one. This means added weight, and no doubt re-wiring. The overall effect is to make the aircraft more difficult to operate, and therefore more vulnerable in the event of attack. That is quite apart from the extra cost involved. As a further result of the company's incompetence, more room has had to be provided for the decoder units which hang underneath the wing of the aircraft. I believe that there are eight of these.
As a result of these artificially contrived design changes in the specification, the Ministry of Defence decided to ask for tenders again in 1975, claiming that it now had a different specification and therefore ought to go round the mill once more, after wasting three years. The management systems contract was therefore put out to tender on this revised specification.
By now the German partners were feeling frustrated beyond belief at the incompetence of Marconi-Elliott, but went along with the re-tendering because the MRCA was itself going ahead. But 1631 the Germans made it clear that there would be no more German money to go into Marconi-Elliott. The House will recall that expenditure on the MRCA project is shared in the proportion of 42£ per cent, by the United Kingdom and Germany, and 15 per cent. by Italy, the third partner.
I understand that the official reason of the Ministry of Defence for re-tendering was that a more simplified system would not only reduce the cost but would be more suitable in operation.
To convert that statement into simple language, the Ministry of Defence was saying, in effect, that it had reduced the weapon-carrying capability of the MRCA because Marconi-Elliott was unable to design the switch device to select weapons that need a lot of power. That is what was meant by the Ministry of Defence in the rather trite terms that were used.
The irony of the whole story, as I understand it from what I have heard on the other side, is that all the other bidders could have done the job as originally specified, and would have required no form of relaxation at all.
Now we come to what I regard as a piece of supreme folly, notwithstanding all that has gone before, as I have described it to the House. One can still hardly believe it, but the Secretary of State has again chosen GEC-Marconi-Elliott to have the contract for this weapons system. This was too much for our German friends. They could no longer put up with the situation.
The most disastrous aspect of all is that the Germans have now gone to an American firm. What we were hoping would be for the first time an all-European aircraft has, due to the absurdity of my right hon. Friend, become something quite different, with the Americans involved in a major part of the aircraft. The Germans have said quite clearly that they do not wish to be associated with the British company. They do not trust Marconi-Elliott to produce a satisfactory weapons system for the MRCA. The Germans also resented what they felt was a subtle change in the specification.
I tried very hard to get the information from my right hon. Friend, but he was not forthcoming. He stated that there 1632 was no change in the integrity and safety requirements of the system.
I understand that the subtlety of the change is related to what determines the fail-safe situation, which is of vital importance. This is why the whole system had to be duplicated—in order to make sure that there could never be a failure. It had to fail safe.
It was stipulated—I am only paraphrasing—that a single system failure must not cause any inadvertent release. I understand that the procurement officers have added some words so that it now reads:wherever possible any single system failure must not cause any inadvertent release".By adding the two simple words "wherever possible" Marconi-Elliott has been let off the hook, because it could not do it. When I think of these aircraft flying over my constituency under these circumstances I am a little worried if my hon. Friend does not plan to do something about it.
I asked the Secretary of State, in a Written Question,if the integrity and safety of the weapons control system of the multi-role combat aircraft have been altered by upgradng or downgrading; when such changes took place; what were the costs involved; who authorised the changes; and for what reasons they took place.My hon. Friend answered:The integrity and safety requirements of the weapons control system for the MRCA have not been altered."—[Official Report. 5th March 1976; Vol. 906, c. 761.]In my view it is outrageous to give a reply of that nature. I think that that is an important element, which my hon. Friend and I might discuss elsewhere.
The Germans have gone ahead with their contract to an American company to produce a safe weapons system for their own MRCA. So much for European compatibility. That means that our weapons system will be different from the Germans' and therefore they will not marry up at any time. We now have virtually two aircraft, which is exactly what we did not want.
I could not understand why these changes had taken place and, like many other hon. Members, I began to think about it. I sought information on how many serving Royal Air Force officers 1633 who were negotiating contracts with this firm had left the Service and gone to work for that firm within two years. I received a straightforward answer from my hon. Friend telling meThere have been five requests in that category"—that is from squadron leader and above—All were granted, in 1971, 1972, 1973 (two) and 1975."—[Official Report, 8th March 1976; Vol. 907, c. 47.]I turn to the third switch. Having authorised the contract which, according to the Ministry of Defence procurement officers would reduce the costs—in fact the bid by Marconi was substantially higher for apparently less work—the firm set about getting itself out of trouble. First of all it subcontracted the most difficult and sophisticated part of the weapons system—the Pylon Decoder Unit—to a small Italian firm called Selenia. Its only claim to fame was that it had been part of a much larger organisation in which the top man had just had to resign because of charges of corruption. He has been notified that he is to be pursued for corruption.
This firm has been identified as a classic example of making corrupt payments in connection with an order for radar equipment by the Italian Air Force. In the light of the information which I had sent my hon. Friend in my letter, I asked him whether he was satisfied about authorising a subcontract to such a firm. He wrote back in his usual way telling me how glad and satisfied he was to authorise such a payment to such a firm. I found it extraordinary that he was able to do so, but nevertheless this is the firm to which Marconi-Elliott gave the most risky and difficult part of the weapons system.
We now come to the fourth switch. As everyone on the Continent knows, Selenia cannot do the work. It has neither the capability nor the know-how. Moreover, it is a very suspect type of company, anyway. It is now going to every company in Britain finding out who it can possibly get to do the work. I am told that it has had a number of "goes" and that at present Lucas Industries is taking an interest in the matter. I received a paper from that organisation today.
1634 When talking about its aerospace industry it says that it deals with gas turbine engines, fueling, combustion components, flight control, electrical generator systems, de-icing equipment, actuators—and then it says "et cetera". I gather that this piece of important work would come under the item "et cetera".
Therefore, it is manfully attempting to "have a go" at developing a very complicated power system that should never have been required in the first place if the contractor who won the contract had had the capability and expertise for doing it.
We could go on for a long time discussing the appalling saga of this fine aircraft. Now the prototype of the MRCA is ready for flight tests—or it will be very soon. The House will not be surprised to know that flight tests will have to take place without the weapons system being tested, because there is no weapons system to test. How much will it cost to simulate the weapons system? Who will pay for that added cost? Is it an on-cost that Marconi-Eliott will add, or will Selenia or Lucas pay for it? I ask my hon. Friend to tell me. How will they test the weapons system when the prototype is undergoing flight tests in order to make sure that they are flight testing the real article and not leaving half of the equipment behind? Perhaps they will throw out "pineapples".
I am led to believe that the Germans are pouring out large sums of money to the United States contractors in order to get the results as quickly as possible, because they have been let down. How much shall we pour in? When we have poured it in, how late shall we leave it before getting the weapons system? When does my hon. Friend expect it to be available for testing?
In view of the events that I have briefly outlined, does not my hon. Friend believe that there is something radically wrong with the advice he is getting from his procurement department? What we have seen is an absolute disgrace. Will he immediately look at the way in which he and his right hon. Friend are getting advice? Is he satisfied with the ease with which one makes the transition from being paid by one's Department to negotiate with a contractor to joining the 1635 contractors' firm in order to negotiate back with the friends whom one has left behind? Does he not regard that as a little too easy for comfort?
I have no knowledge of the contractors who tendered generally, but I am advised that they were competent. Why should Selenia be obliged to go hawking round the country?
I urge my right hon. Friend to move in and ensure that one of these companies is given part of the work so that we may get the weapons system we are entitled to expect. Will he also consider whether, in future, it might be more advantageous both to the Alliance and to this country if he occasionally took time out to talk to his Back Benchers?
§ 7.50 p.m.
§ Mr. Robin F. Cook (Edinburgh, Central)
I am happy to begin by echoing the fact that I, too, have no interest in any of the companies associated with the MRCA programme, although it would come as a surprise to hon. Members, I am sure, if they learnt that I received any remuneration from any of the defence industries.
I congratulate my hon. Friend the Member for Hackney, South and Shore-ditch (Mr. Brown) on having contrived this debate on the project tonight. It gives the House the opportunity to discuss the Government's decision a fortnight ago to confirm the order for the full project, an order upon which they will spend £2,000 million of public expenditure over the coming years and which will be the largest item under this part of the Consolidated Fund for many years. I appreciate the manner in which my hon. Friend pursued his constituency point with considerable tenacity. I am grateful, too, for his comments on the project, and I shall take care to read his speech again in Hansard.
I propose to deal with the subject in more general terms with expenditure on the aircraft—the Tornado, as it seems we will have to learn to call it. It is only three hours since I learned that there would be an opportunity to debate this issue, and I am therefore not as well prepared as I would wish. I shall be putting some detailed points to the Minister which he may not wish to deal with at this stage, and I will understand if he prefers to reply later in writing.
1636 The timing of the announcement a fortnight ago was, perhaps, rather unfortunate. I recollect that it was made on 6th March. On 29th February this House ordered to be printed the Second Report from the Expenditure Committee which dealt with the defence review and which included a section dealing with the MRCA. I shall quote a paragraph in that Report which expresses the doubts and reservations of the Defence Sub-Committee of the Expenditure Committee about the MRCA. It saidIn the light of the evidence given, and taking account of information published elsewhere (e.g., in United States Defense Department Reports), we are not yet convinced that the ADV of the MRCA is the right choice for air defence of the United Kingdom and for service with RAF Germany).It continues, in the same paragraph:We therefore echo the recommendation of the 1973–74 Expenditure Committee that there should be a most stringent review of the air defence requirement, and of all the means by which it might be met, before substantial expenditure is committed either on the ADV of the MRCA or on a high performance fighter aircraft.I can only say that it was unfortunate that eight days after the Report was presented to the House, and before the House had had the opportunity to debate the Report, before the Government had published their observations on the comments and recommendations of the Report, they should have proceeded with a decision which over-rode the reservations I have just quoted. Since the Government appear quite confident that they can meet the doubts expressed by the Committee, they have presumably considered the Report and prepared their reply. When may we expect to receive their observations on the Report? Since the decision to confirm the order has been made, the sooner we receive those observations on why they rejected the paragraph, the more it will help the House.
My second point concerns the cost of the project. Will my right hon. Friend the Minister clarify some of the points made to the Press at the time of the announcement? I noticed that the figure of £5.3 million per unit production cost was quoted in the Press. That seems to be a rapid escalation from the £3.9 million given to the Expenditure Committee in July last year and as quoted in the Expenditure Committee's Report. Will my right hon. Friend clarify what this 1637 figure includes? Does it exclude the cost of spares and ground equipment, which is included in the standard presentation of the costs of the German aircraft to the German Parliament? If it does, does my right hon. Friend accept that, on the basis of the German figures, the cost of ground equipment and spares is about 50 per cent. of unit production costs? If so, is it not realistic to estimate that each aircraft will cost £8 million rather than £5.5 million?
Will my right hon. Friend confirm that these figures, irrespective of what they include or exclude, are based on 1974 prices? If so, it would be helpful to have updated figures. I understand the difficulties of updating costs to keep pace with inflation, but with the rapid rate of inflation over the last 15 months it does not help the House or the Expenditure Committee to have to reach decisions based on figures at 1974 levels.
There is the issue of the air defence variant. It will cost £1 million more per aircraft than the common version. All hon. Members would expect that, if any part of the project was likely to be revised or cancelled, it would be the version which is unique to Britain, which has its own technological problems and is the more expensive of the two. The Economist said at the time of the announcement:For interception, the American F-15 could not only be bought off the shelf for at least £lm a copy less but is also designed from the start as a fighter aircraft".I was surprised to note that reservation in a journal as reputable and with as good connections as The Economist, but that sentence goes to the heart of the matter. We are here concerned not only with costs but with performance. There have been suggestions that the rôle of the air defence variant is in conflict with some of the rôles of the common version and that it is not easy to combine the interception rôle with the interdiction rôle.
I was a member of the Committee which a year ago met representatives of the British Aircraft Corporation who came to discuss with us the four-nation project when four nations were proposing to buy a common plane. Sadly, we know that BAC failed to win any contract or order associated with that order. BAC, 1638 however, submitted a memorandum and I was struck by the fact, in considering the requirements of the four nations, that BAC had come to the conclusion that it would be better to have two separate planes than one common multi-role version.
In its memorandum, BAC said:BAC is still firmly convinced that its proposed 'two-type' solution, i.e. the low-level strike/attack/reconnaissance Jaguar and a specialised high altitude interceptor fighter, offers the best answer to the problem, on military, economic and political grounds.The memorandum continued:In order to provide the F.1 or the F-16 with a low level strike capability, which is not required by either the French or US Air Forces, long and expensive development programmes would be necessary, paid for largely by the taxpayers of the four countries. This would possibly result in degradation of their high level interceptor performance, and probably produce a low level capability inferior to that of the Jaguar, which is already proven and on which the development costs have already been paid.I appreciate that the memorandum was produced for a given situation which was different from the situation which MRCA will meet, because it will be used in a different rôle and at a different location However, much of these comments appears to have a common general application and truth.
If BAC believes it to be so difficult to produce a common version to meet the rôles required by the four nations, it is difficult not to see the same problems in adapting the common version to a unique British defence variant. It is difficult not to believe that the adaptation may not also prove expensive and degrade the capacity of the plane in its other version.
My fourth issue is the one that concerns me most. If my right hon. Friend the Minister of State can help me on this matter tonight, the debate will have been worth while. There has been speculation in the Press lately that some £400 million is to be spent over the next three years on improving the British nuclear deterrent. Those figures have not been confirmed by the Government neither have they yet been denied. It is difficult to believe that money of that magnitude would be spent on improving a nuclear deterrent based on the Polaris submarine, on a missile system which can have only a limited life and in particular on submarines with an even more limited life—possibly only a further five to ten years. If money of 1639 that magnitude is to be spent, it can only be intended to adapt a nuclear deterrent to another form of delivery.
Therefore, I was particularly interested in an article published in the Daily Telegraph on 1st March this year by Air Commodore E. M. Donaldson, who, I assume, is well connected, which said:Optimists see the aircraft (MRCA) as capable eventually of being used in the nuclear deterrent rôle, able to deliver H-bombs to Moscow, although this rôle is being kept in low key for the time being.I should not have thought that it was keeping it in low key to publish it in the Daily Telegraph, but if that was at the back of the Government's mind I can understand why they wish to keep it in a low key.
Not only has the Daily Telegraph spoken in this fashion, but in the same article I quoted from the Economist the MRCA was referred to as having a "long-range nuclear strike" rôle. That is particularly distressing. Only the other week my right hon. Friend the Secretary of State categorically denied that Britain was developing a second-generation nuclear deterrent. I hope that when my right hon. Friend replies he will repeat that denial with specific reference to the MRCA.
The suggestion advanced lately that the MRCA may take over the function of Polaris in providing a nuclear deterrent is very distressing, particularly if it is related to a short-range attack missile or to a cruise missile which involves real difficulties over arms control and leads us into a more tense and fragile international situation in which it would be more difficult to achieve agreement on observation and disarmament.
The last point that I wish to raise relates to the major doubts that have been expressed about whether we should go ahead at this point in history with such an expensive programme to produce a manned aircraft. It has been suggested that we could fulfil that rôle with a surface-to-air missile more cheaply and that its effectiveness would not be much less. This suggestion has been made with particulr reference to the air defence variant.
The argument was presented at some length in the previous Report of the Expenditure Committee two years ago.
1640 When the Government presented their observations on that Report two years ago, they did not give any argument against the suggestion that missiles could fulfil the rôle of manned aircraft. I have been unable to lay my hands on those observations, but, as I recollect them, the Government answered with only one sentence. They said that those arguments would be borne in mind when the decision was made. However, no arguments have surfaced publicly. Nothing has been said in public about why the option of a surface-to-air missile rather than an air defence variant has been rejected.
I hope the House will note the Press sources which I quote today are of impeccable impartiality. Last week, after the confirmation of the order, an article in the Financial Times referring to the suggestion that surface-to-air missiles could be used as a substitute said:Mr. Mason said on Friday that all these doubts had now been cleared up, but he has yet to explain how.The House is entitled to some explanation of the "how" and of what the arguments are that have been used to reject the surface-to-air missile operation. In particular, we are entitled to know how since we face a spiralling cost of manned aircraft which is common to other nations of the West and in the advanced world generally.
It has been estimated in the United States that if the escalation in costs of manned aircraft for the air force continues at the same rate as in the past 15 years, 50 years from now the United States will be able to buy only one plane per year for its air force by using its entire defence budget, and by the end of this century it will be able to maintain that only by allocating its entire GNP to aircraft procurement. Such extrapolation is preposterous and will never happen, but it illustrates that we cannot go on producing manned aircraft at the escalating costs of the past decade. In particular, we cannot do it at a time when aircraft are becoming increasingly vulnerable to precision-guided missiles which can be produced at one-hundredth of the cost of the aircraft they destroy.
This is not a new debate. It was raised in the 1957 White Paper of a Conservative Government, which said that 1641 the manned aircraft then being constructed would be the last generation of manned aircraft and that subsequently missiles would fulfil the role of manned aircraft. It is now 20 years later, and we should have more information about the debate which has presumably gone on within the Government.
I am not an expert on these matters and am in no position to judge the relative merits. It may be that there are weighty arguments in favour of maintaining manned aircraft and rejecting surface-to-air missiles. All I am saying is that at least we are entitled to know these arguments when we are faced with an expenditure of this magnitude, which will commit a high proportion of the procurement expenditure of the defence budget for about the next five to seven years.
§ 8.9 p.m.
§ Mr. David Walder (Clitheroe)
I should like to encourage the Minister of State to walk along a path which I do not believe he will find unwelcome. We all recognise that the MRCA is important for two reasons. First, it contributes to our military potential. I do not intend to say anything about either its need or its efficacy, both of which I accept. However, it is also important as a vehicle of co-operation between three nations. The hon. Member for Hackney, South and Shoreditch (Mr. Brown) referred to this.
The contractual arrangements into which we shall have to enter in relation to this aircraft are relatively small. However, there is concern in the House and outside among firms as to how a venture of this sort concerning three nations will develop. Therefore, I want to encourage the Minister of State to say a little more about the way in which he views the next stages of the development of this tri-national aircraft—something which I am sure is a positive plus for co-operation in Europe. May I suggest that the Minister goes a little further along that road?
§ 8.10 p.m.
§ The Minister of State for Defence (Mr. William Rodgers)
When my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Brown) told me that he wished to raise this matter this evening, I greatly welcomed the opportunity to relieve some of the anxieties that he 1642 expressed this evening and has expressed in correspondence with the Ministry of Defence. I did not at that time anticipate that the debate would go rather wider and in the direction which my hon. Friend the Member for Edinburgh, Central (Mr. Cook) has opened up. He said that he realised only three hours ago that he might speak in this debate in the manner in which he has spoken. I think that he will confirm that he told me only five minutes before the debate opened that he intended to do so. I appreciate his forbearance in not expecting a substantive reply to all the points he has made. Nevertheless, I should like to make a brief comment on some of them before turning to the particular matters raised by my hon. Friend the Member for Hackney, South and Shoreditch.
Perhaps I may say something first to the hon. Member for Clitheroe (Mr. Walder). I am glad that he has said—because I believe this to be true—that the MRCA is a very good example of successful international co-operation. It is fair to say that in many other respects—technically, in cost, and in administration—given the complexity of the project, it has gone better than anyone could have expected. All the evidence I have is that those who have been involved in the project and those who will in the end fly MRCA in operational circumstances are very pleased with the way in which things have gone.
I believe that most of the firms—as the hon. Member for Clitheroe mentioned—which might have wished to play their part in building this aircraft are aware of the procedures involved, though I shall be dealing with that matter shortly. The number of subcontractors is very large indeed, in this country and in the countries of our other two partners. I thought at one stage, when my hon. Friend the Member for Hackney, South and Shoreditch was referring to hawking around some of the work, that he probably underestimated the extent to which all the main contractors have subcontractors, because were this not so the project would not be completed on time and to the specification. Further, if it were not so, there would not be so many people in different parts of this country, as in Germany and Italy, engaged today in designing, developing and building the project.
1643 I hope that when the project is complete, is flying and is accepted into service, it will be recognised as a very good example of co-operation, and that we shall build on this in Europe, in civil as well as in military collaboration.
My hon. Friend the Member for Edinburgh, Central referred, quite rightly, to the Report of the Expenditure Committee. I read that Report with the greatest of interest, not only because it was a very good one and I might have been obliged to read it as Minister of State for Defence, but also because, as a former member of one of the sub-committees of the Expenditure Committee, perhaps I, even more than some of my colleagues, attach great importance and value to its work.
However, I must say two things to my hon. Friend. He knows that the Report that was published was based on evidence taken some time previously. That is inevitable, not only because of the procedures of the House but because of the time it takes to print any report. Therefore, it will be no surprise to my hon. Friend if I tell him that between the time the Expenditure Committee took evidence—and probably during the time in which it formed its view—and the time when the Report was published, there has been adequate time to carry out the very stringent review for which the Committee rightly asked. I can tell my hon. Friend that such a review was conducted in depth before the making of the decisions that were announced by my right hon. Friend in the House two or three weeks ago. Such a review has taken place. In so far as some of us might have anticipated the Report that the Expenditure Committee produced, my right hon. Friend and I, and my hon. Friends in the Department, were very anxious to satisfy ourselves very fully before any decisions were made and announced—because our concern must be my hon. Friend's concern—that this is the right aircraft for the rôle for which it has been assigned.
My hon. Friend's second question referred to the unit cost. I should put it to him that, of course, there are a number of different ways in which one can measure the cost of an aircraft. One can, for example, include the research and development cost in the unit cost, or one can exclude it from the unit cost. One can speak in terms of a life cycle, because—this is what I think my hon. 1644 Friend was referring to—this is a form with which the Germans are familiar. However, if we are comparing the unit cost of this aircraft with that of any other, and the unit cost of this aircraft in 1976 and the unit cost that was anticipated in 1969, I suggest that we should do so vertically, as it were, following the usual form that we use in this country, and not horizontally by comparing our costing with that of the Germans. Both are valid, but like should be compared with like.
I repeat what I have said previously in the House. Allowing for inflation and changes in exchange rates, although the unit cost of this aircraft has increased, broadly speaking, from £1.5 million in 1969 to £21 million today, at 1969 prices, I take the view that this escalation is no more than could have been anticipated in the circumstances of projects of this kind over a period of this sort.
My hon. Friend then referred to the air defence variant and quoted the views of the Economist. The views of the Economist were that the F15 would be cheaper and more effective in the air defence rôle. I must tell my hon. Friend that, leaving aside the whole question of the very large investment in technology and the very large number of jobs involved in this aircraft—a matter of high concern to everyone in Britain, particularly when unemployment is at an unacceptable level—the best evidence available to us is that the cost and performance of the MRCA air defence variant makes it the best aircraft for the rô1e.
I shall, of course, scrutinise the BAC memorandum, but I do not think that my hon. Friend should draw general conclusions from a specific example, and I think that he was cautious, in the last resort, about doing so.
My hon. Friend then referred to the improvement in the British nuclear deterrent. I am rather surprised that he attaches more importance to the views expressed by Air Commodore Donaldson in the Daily Telegraph than I would normally expect in his case. With no disrespect to Air Commodore Donaldson or to the Daily Telegraph, I have to say that they have never been my favourite reading, even if they have been that of my hon. Friend. I think it is fanciful in the extreme to believe that any improvements 1645 in the British nuclear deterrent, whatever they may or may not cost—and again, I would not believe all that I read in the newspapers—are designed to give the MRCA a further rôle. It is news to me. I do not believe it for a moment. I do not believe that my hon. Friend has any cause to worry.
Finally, my hon. Friend the Member for Edinburgh, Central rightly referred to the debate on the question whether surface-to-air weapons would be a substitute for manned aircraft. He said that this debate first came into focus over 20 years ago. Again, I hope that he will not mind my saying that he and Lord Sandys appear to be in concert in this matter. I do not always believe what Lord Sandys says. I believe that some of his decisions as Secretary of State were wrong. However, if my hon. Friend wants to revive the argument and wants to endorse Lord Sandys' views, he is entitled to do so. It will be met with a great deal of interest on both sides of the House.
This is a proper subject for debate.
However, with respect to my hon. Friend, all the evidence available on this matter, including a consideration of the technical problems—my hon. Friend says that he is not an expert—goes to show that a mix of surface-to-air weapons and manned aircraft is the best way of ensuring air defence. As my hon. Friend will know, the MRCA air defence variant will be added to surface-to-air missiles, which will provide precisely the mix that I think is likely most nearly to meet the need.
I do not want to suggest that these are not important problems or are not matters about which we can argue, or questions on which it is not possible to have two views. I should love to argue these matters more fully tonight, Mr. Deputy Speaker, if you were to allow that, but the issues go far wider than the issue originally raised by my hon. Friend the Member for Hackney, South and Shoreditch, to which I must now return—the subject of the MRCA and the question of research and development and contracts for it.
As my hon. Friend the Member for Hackney, South and Shoreditch has said, and as I have implied—and as I think 1646 that my hon. Friend the Member for Edinburgh, Central accepts, with the hon. Member for Clitheroe—the MRCA is a project of the very greatest importance, not only to the Royal Air Force and, therefore, the defence of Britain, but to the strength of NATO and to British industry.
Whatever hesitations my hon. Friend the Member for Edinburgh, Central may have, I greatly welcome the endorsement given to this project by my hon. Friend the Member for Hackney, South and Shoreditch, who need not worry when it flies over his constituency.
Like any collaborative project, the arrangements for the procurement of the aircraft are very complex, but I hope the House will bear with me, because an understanding of them is essential to tonight's debate and the anxieties expressed by my hon. Friend the Member for Hackney, South and Shoreditch.
In the case of the MRCA, the three Governments concerned—the United Kingdom, the Federal German Republic and Italy—control the project through the NATO MRCA Management Organisation, called NAMMO, in which all three are represented at a high level. Detailed management is conducted by NAMMO's Agency, which is called NAMMA.
There are three prime contractors—Panavia, Turbo-Union and Mauser—which I will call functional organisations to distinguish them from the interests of the three Governments. Those contractors are responsible to the three Governments through the international agency, NAMMA.
Mauser makes MRCA's cannon, and Turbo-Union is a London-based engine consortium. I do not think that I need comment further on them.
Panavia, by far the largest of the three functional organisations, was formed in March 1969 to design, develop and produce the airframe for the MRCA. It is based in Munich, close to NAMMA, and its component companies are BAC, Messerschmitt and Aeritalia. BAC designs and builds the nose fuselage, cockpits, rear fuselage and tail. Messerschmitt makes the centre fuselage and wing pivot. Aeritalia makes the wings. It is Panavia
Procedures for procuring components varv according to their importance. The with which we are concerned tonight. 1647 first stage in the procurement of the most important components for the airframe, to which my hon. Friend the Member for Hackney, South and Shoreditch referred, is for the specifications to be agreed by the three Governments and passed to Panavia through NAMMA. Then requests for proposals are made by Panavia to possible suppliers of the equipment, as nominated by the three Governments. These invitations specify a wide range of conditions to be met by possible suppliers in their tenders, including technical specifications, performance characteristics, prices for various batch sizes, and so on. The bids received are first evaluated by Panavia against the criteria laid down in the request for proposals sent to the firms. Panavia provides NAMMA with the results of this evaluation and its preferred choice.
While this is going on in the international consortium, the national procurement agencies of the three countries—in our case, the procurement executive of the Ministry of Defence—also receive copies of the bids made by the nominated suppliers and evaluate them independently.
Final selection is made by the Equipment Control Panel, which is chaired by the international agency NAMMA and includes expert technical and administrative representatives from the three nations. In this final selection process Panavia, which is the commercial consortium—one of the three functional bodies—is in attendance. Selection from amongst the bids received must be by unanimous agreement of the three nations.
At this important meeting which I have described, with Panavia in attendance, both the bids and Panavia's assessment of them are cross-questioned. Challenges can be made about the technical aspects of the bids, the competence of the firms, and the financial composition of any of the bids. I must emphasise that the process is extremely searching. If necessary, visits are made to the firms involved during the selection process.
Should the Equipment Control Panel fail to agree, a report is made to the NAMMA board of directors. The board members, who are representative of the three Governments, can in turn refer back to Ministers in their own countries for guidance. In the last resort, though this is not a step which is lightly undertaken, 1648 a country can decide to provide that part of the aircraft nationally—in effect, to opt out of collaboration in one area.
These exhaustive and complex procedures—they are more complex than I have described and would choose to describe tonight—are designed to ensure that all bids are fairly considered. I shall give one obvious example. The procedures are designed to discover whether any subsidy might be involved, because a subsidy by a Government is not allowed under the rules of collaboration on the MRCA.
Separately from this process, elaborate though it is, great trouble is taken to ensure equitable work-sharing arrangements over the programme as a whole. This is designed to reduce, as far as possible, the flow of money across the exchanges—something in which we have a great interest—and to ensure that each country's industry receives roughly the same proportion of work as the proportion that it pays to the total cost of the project.
In this process the job of the Ministry of Defence and my Department is to ensure that the agreed procedures are followed and that the competing bids are considered on all fours with each other. I stress that we are aiming at the best aircraft possible and, in the context of the give-and-take of collaboration, to ensure that British firms get a fair share in producing it.
My hon. Friend the Member for Hackney, South and Shoreditch said that he talked from experience of his membership of WEU. I think that he knows that, as a former leader of the United Kingdom delegation to the WEU, I put my own value on its work, particularly regarding parliamentary contacts. My hon. Friend was right to imply that the stores management system is at the heart of the MRCA weapons delivery system. That is a very good reason why it should be a subject of discussion amongst Members of Parliament and a subject of fierce competition in some areas.
The prime objective of the MRCA weapons delivery system is to release the correct weapon from the correct position on the aircraft at the right moment for maximum delivery accuracy. That seems an elaborate way of saying that it is to make the MRCA serve the purpose for 1649 which it is intended. In other words, it is absolutely essential to the effectiveness of the weapons system. The MRCA store management system is part of the weapons system which the MRCA as a whole represents. This elaborate system must cater for the different characteristics of all the different weapons of the partner nations—we have not yet reached a stage of perfect standardisation—satisfy demanding safety requirements, and contain the potential to handle new weapons in future. It represents a considerable advance in complexity and sophistication over any previous system of this nature. It is not a simple piece of engineering, even by the standards of our largest and most experienced and sophisticated firms, as I am sure my hon. Friend will accept.
I turn now to the timetable, which I broadly endorse, as described by my hon. Friend. Competitive tenders to provide this equipment were received from five companies in 1972. The proposals submitted by Marconi-Elliott Avionics Systems Ltd. was selected by agreement between the partner nations and the airframe contractor, Panavia, in the way that I have just described.
It subsequently emerged—my hon. Friend the Member for Hackney, South and Shoreditch should not be too surprised at this, given the complexity and originality of the project—that the specification laid down by the three Governments was in some areas insufficiently detailed. Furthermore, the size of the task had been underestimated. To some extent this was unavoidable because assumptions had to be made about related equipments which had not yet been developed. The firm of MEASL did its best to produce a stores management system to the agreed specification, but by early 1974 it became clear that it would not be able to do so at an acceptable price and in the required time-scale.
§ Mr. Ronald Brown
This is an area of contention, and the Minister's explanation is not acceptable. It is not much good saying that the matter was looked at again. This was a throw-away item for that organisation and the fact is that it was not competent to carry out the work.
§ Mr. Rodgers
If my hon. Friend is patient, I hope that I shall solve his 1650 anxieties in the latter part of my remarks. It does not surprise me that those who are unsuccessful in a competition take the view that their system is better and that they should not be ready to applaud the efforts of the company that wins. That is the nature of commercial competition in a sensitive area. Those who are disappointed as a result are not prepared to say that they lost the deal because the price was wrong, the reliability not so great, or the delivery time not so keen. If a firm loses a contract it has gone, and it tends to believe that the fault lies on the other side and that its competitors do not deserve their success. My hon. Friend and I can argue this case until the cows come home, but we must accept that the procedures are clear and carefully laid down.
I have no obligation to be a spokesman for MEASL, nor would I choose to be its spokesman, but I thought that my hon. Friend was unfair in his references to that firm. I am sure that he was not referring to that firm's total capacity as incompetent. That is certainly not a view that I would endorse, because the firm has had a remarkable record of success. It has achieved that record in competitive markets at home and abroad, and that fact should be put on record. Therefore, I do not go along with my hon. Friend's verdict, which could be damaging if it stood without any further comment.
If I continue the story, it might provide an answer to my hon. Friend. In 1974 the company put forward revised proposals for a simplified system which would not only reduce costs but be more suitable to Service requirements. I emphasise that the specification was laid down by Governments. That was not the responsibility of MEASL. If anybody should bear the responsibility for an underestimate of the size of task or any failure of specification, in that it was insufficiently detailed or too ambitious, the responsibility lies with Governments and not with any one firm.
There were further discussions between the firm, Panavia and NAMMA about the system, which led to a revision of the specification by the three partner countries. To be fair to those companies which had taken part in the original competition, we and our European partners felt it right to run a new 1651 competition. It seems to me, on the face of the matter, that it was right for us and our European partners to run a new competition, although in the interim, after discussion with MEASL, we had produced a revised specification that we felt met the need. When we ran a new competition there was no reason to exclude Marconi-Elliott, because that firm was experienced in this work and the difficulties which it had encountered earlier were not of its own making. My hon. Friend may dispute that.
§ Mr. Rodgers
We cannot resolve that matter tonight. Certainly the difficulties encountered earlier were not of that firm's own making.
Submissions were received from five companies, including MEASL, in conjunction with Selenia of Italy. I appreciate what my hon. Friend said about that firm. However, any comment I make tonight on that score would be inappropriate. If further inquiries require to be made, we shall make them.
Quite apart from MEASL, Computer Devices Limited, which had a work-sharing agreement with LITEF in West Germany, was one of the other five firms which competed. This elaborate system of assessing bids was applied to the submissions received from the five companies, including MEASL and Computer Devices Limited. The procedure was rigorously and, in my view, properly applied and eventually it was decided by the United Kingdom and Italy that the contract should go to Marconi-Elliott. The German Government decided to go for a third company, Base 10, as my hon. Friend said.
I listened to my hon. Friend with great care, but there is nothing that I have seen in examining the matters which he raised that leads me to believe that the outcome of the second tendering procedure was sinister, that it was in any way a matter of "Buggins' turn" or that there was anything squalid or disgraceful about it. I say again that we must discount at least some of what may have been said, perhaps in this country and certainly abroad, on the ground that this is a world of tough commercial competition, in which everyone is naturally out to get what he can from this very valuable contracting work.
1652 It is not the practice of the three countries collaborating over the MRCA to give any company the detailed reasons for selecting or rejecting a bid that it has made for a piece of equipment. Nor do I think that it would necessarily be the wish of firms for details to be discussed in public. However, the Government and the Ministry of Defence see it as part of our duty to assist all our contractors to become more efficient and competitive in world markets. The Ministry keeps in touch with Computer Devices Limited, for example, and is always ready to advise it on how it can improve its products for the future.
I deal now with my hon. Friend's reference to my right hon. Friend the Secretary of State. My hon. Friend will understand that it is simply not possible for Ministers themselves to meet representatives of all the firms engaged in contractual work of this kind. The list is very long, as he will know from the list which was printed in Hansard a short time ago.
§ Mr. Ronald Brown
My right hon. Friend is taking this line. However, I must emphasise to him that I do not know any contractor, I have never asked any contractor, and I have never been concerned with any contractor. I asked the Secretary of State to talk to me. He said that he could not. I felt so sure of my ground that I asked him whether he would allow me to meet his advisers, because I wanted to test them out and to give them an opportunity to test me out. Apparently, he consulted these people, who refused to see me. I asked for that interview because of my concern and belief that what I said happened to be true and that the MRCA weapons delivery system would be the worse off for it.
§ Mr. Rodgers
My hon. Friend has many affectionate characteristics, one of which is his well-known impatience. I was just about to come to that very point. I understand the burden of his argument. It has rested on a number of different matters. I am sure he will accept that I was talking generally and without reference to him when I said that it was not possible and, indeed, that it might in the end raise problems, for Ministers to be lobbied when competitive tendering was taking place. It is not possible for Ministers to meet representatives of all the firms engaged in it. 1653 Nevertheless, in the special circumstances of this case and in view of the fact that misunderstandings have arisen—that is clear from what my hon. Friend has just said—if my hon. Friend wishes to bring representatives of the firm to meet me, I shall be prepared to meet them.
§ Mr. Ronald Brown
I have no reason to bring anyone. That is the point that I am trying to make. I do not know any firm. It was the Member of Parliament for Hackney, South and Shore-ditch—me—who wished to have words with the Secretary of State and, if not with him, with his advisers.
§ Mr. Rodgers
I was simply going to say that if my hon. Friend does not wish to come with the firm to talk to me I shall be delighted to see him to discuss any matters on which I have not given a satisfactory reply tonight.