HC Deb 20 January 1981 vol 997 cc151-62
The Secretary of State for Defence (Mr. John Nott)

Mr. Speaker, with your permission I should like to make a statement about expenditure on defence.

In the financial year 1981–82 defence expenditure should rise to £9,753 million at 1980 survey prices. This takes account of the reduction of £200 million in planned expenditure announced earlier by my right hon. Friend the Chancellor of the Exchequer. This figure is about 8 per cent. more in real terms than the defence outturn in 1978–79, the last year of the previous Government. This year we are likely to exceed the 3 per cent. NATO aim, but until the outturn is clear we cannot assess the distribution of growth between this year and next. In cash terms, although the cash limit has not yet been finalised, next year's defence budget is expected to be of the order of £12¼ billion—more than £1 billion higher than the budget this year.

The scale of the increase, in relation to the containment of expenditure on other programmes, fully accords with the Government's expressed determination, which I reaffirm today, of giving the highest priority to our defence in the face of the growing threat from the Warsaw Pact. It also represents an increase in defence expenditure per head at a time when the proportion of our GDP devoted to defence is already much higher than that of our main European allies, and close to that of the United States.

Let me make it plain beyond doubt that I share without qualification the objectives stated by my predecessor in the House to sustain and improve the front-line quality of our forces and of our contribution to the Alliance, which remains the cornerstone of our security and the ultimate safeguard of our freedom against any aggression.

In accordance with these objectives, I can confirm that next year the major programme of improvements will continue. Even after trimming recruitment there will be over 5,000 more Regulars in our Services than in this financial year. A nuclear-powered fleet submarine, two new air-defence destroyers, an anti-submarine frigate and several other vessels will enter service; other new warship orders, including anti-submarine carriers, nuclear-powered submarines, destroyers and frigates, together with major maritime weapon systems such as Sting Ray and Sub-Harpoon, will be moving forward; substantial further orders for ships and other naval equipment will be placed; and the Trident programme is under way.

The Army's new Challenger tank, the new armoured personnel carrier, the Milan anti-tank and Rapier and Blowpipe air defence systems and the Ptarmigan and Clansman communications systems continue in procurement. Deliveries under the very large Tornado programme, the core of the RAF's future capability, will be accelerating.

Contrary to some reports, development work on the Sea Eagle anti-ship missile will continue, although further consideration will be needed before its place in the programme can be confirmed. Large sums will be spent on the Nimrod airborne early warning aircraft, improvement of our Harrier and Jaguar capability, and air-to-air defence missiles. We spend a bigger proportion of our defence budget on major equipment than any other NATO country. Next year we shall spend over £5 billion on equipment, which will sustain hundreds of thousands of jobs, many in the highest fields of technology.

Nevertheless, there remain hard choices for next year and further ahead. The problems are well known to the House but they are worth recalling briefly. The real cost of defence equipment, much of it inevitably highly sophisticated to counter the threat, continues to rise. The recession has led industry to concentrate more heavily on defence work, which means that certain equipment has come forward faster than we expected. This is to the benefit of our Services but has continuing effects on our cash flow. With so much of the programme already committed it is not easy to make adjustments quickly.

Defence, like other Departments, has to make adjustments every year, in all sorts of ways, to fit its programme to planned expenditure, but for the reasons that I have given the scale this year is more extensive than usual. In order to avoid continuing speculation and uncertainty harmful to the Services and to industry, I think it right to give the House before the defence White Paper is published an early indication of the character of these adjustments.

The main changes that I propose accelerate the phasing out of some older equipment, the deferment of certain equipment procurements, the trimming of our works and training programmes, and further reduction of overheads; in essence, to concentrate our resources where they are most valuable.

Some older ships of the Royal Navy will be sold or scrapped; HMS "Bulwark" will be disposed of about six months earlier than planned, and the planned reductions in the Vulcan force and Shackleton airborne early warning aircraft and the rundown of Canberra photographic reconnaissance squadrons will be accelerated.

There will be some adjustment to the forward warship construction programme, which will involve the slowing down of a number of orders. Logistic support road vehicles, Jetstream and Hawk aircraft orders will be deferred and the Skyflash Mark 1 missile will continue, but instead of the Skyflash Mark 2 we will proceed with a programme to demonstrate a new technology for short-range air-to-air missiles.

To save overheads, No. 41 Commando will merge with the other commandos, without reduction in the present overall strength of the Royal Marines and with a continuing Royal Marine presence in Deal for the time being. The Naval communications squadron at Lee-on-Solent will be disbanded. The extra Lightning squadron will not be formed as planned, but we shall provide for a squadron to be found out of training units, which could rapidly be made operational in emergency.

I turn now, briefly, to the future beyond next year's Estimates. In accordance with the expressed objectives of NATO, it is our aim to continue from the revised 1981–82 base line an annual increase in defence expenditure in real terms in the region of 3 per cent. Even with an increase in expenditure, however, we face, as do other countries, a major task in matching resources to our clear defence needs—a task made more difficult for us than for other countries because of our low growth.

Talk of apocalyptic choices between key defence tasks is wide of the mark, but we must, over the next year or so, look realistically at our programmes in order to match them to the resources that may be available. We shall do this in an Alliance context and, we hope, in close concert with our allies. But let it be clear that, whatever our economic problems, the maintenance of effective security within and through the Alliance remains an overriding commitment of this Government.

Mr. Brynmor John (Pontypridd)

I welcome the Secretary of State's statement, which, contrary to the Government's election pledges, is a tiny recognition of the reality that defence is bound up with the economy. It cannot be insulated from the disastrous performance of the economy under the Government of which the right hon. Member is a member.

I wish to ask the right hon. Gentleman some questions about detail. First, he itemised the planned saving of £200 million against commitment. What total saving does he envisage, taking into account the equipment rundown and the deferment of certain programmes? Secondly, what are the employment consequences, especially in view of the cancellation of certain projects? Thirdly, what will happen to the £400 million overspend that the Ministry of Defence managed to achieve this year? Will it be written off, will it be found out of the MOD budget, or, worse still, will it be found from some other Department's requirements?

Upon what basis have the cuts that have been chosen been singled out? Is it because equipment options are easier to cut than other matters? Has there been any consideration of the defence priorities involved? If so, what reasons led to the cancellation of the projects mentioned in the right hon. Gentleman's statement? Will he spell out the reasons that led him to choose those projects?

Should not the right hon. Gentleman, in accordance with the last paragraph of his statement, now begin a careful examination of our defence expenditure and the commitments that we have undertaken to determine a sensible approach to NATO in future? Is that not better than simply maintaining all our commitments on a reduced and less effective scale? The whole history of defence planning has been equality of misery—every Service has taken its proportionate share of cuts. Is it not about time that we seriously considered the priorities in the light of the changed circumstances, to determine which are the most important?

Will the right hon. Gentleman please examine again the Trident project, the acquisition of which will add little or nothing to the Alliance's deterrent but which will probably increasingly prevent our carrying out our wider range of tasks that are of more use to NATO? If we wish to be a member of the Alliance, is it not time that we gave up national power dreams that are becoming increasingly unreal and sought to provide the kind of defence that is most helpful to the Alliance?

Mr. Nott

By the end of the next financial year defence expenditure will have risen by about 8 per cent. in real terms from the time that the Government took office. That is fully in accordance with the expressed commitment of my party at the last election. The reduction of £200 million, which was announced by my right hon. and learned Friend the Chancellor of the Exchequer, is the only reduction that has been made in the planned defence budget. Of course, some adjustments were made in the planned programme. There always are. Every Department has to make adjustments to bring its planned programme back into line with what has already been published, but the only cut—if I may use that word—in what was anyhow a substantial planned increase was the sum of £200 million referred to by my right hon. and learned Friend the Chancellor.

The employment consequences of the measures that I have announced will be that some jobs that would otherwise have been created by the additional planned expenditure will not now be created. If I understand the Opposition party's defence policy correctly, thousands of jobs would be lost. We are talking about a number of job opportunities that will not now arise as we had hoped.

The Ministry of Defence probably will have an overspend this year, but we do not yet know the figure. We shall have to await the outturn and determine what action needs to be taken.

My announcement basically concerns itself with a faster phasing out of older equipment. My right hon. Friend the Leader of the House left me some useful work. I was able to choose from a range of options that he had considered with great care in conjunction with the Chiefs of Staff. We are seeking to phase out older equipment at a faster rate. We have done our best to preserve orders for new equipment that are coming forward, and as much of the procurement programme as possible. We have had to slow down a few of the shipbuilding orders, which otherwise we had hoped to bring forward this year. All those reductions have been made in the light of the defence priorities that my right hon. Friend the Leader of the House, the Chiefs of Staff and I regard as essential.

We shall, of course, examine the long-term position. I said that in my statement. But, as the hon. Member for Pontypridd (Mr. John) knows perfectly well, an examination takes place every year as a matter of course. That will take place, as it always does, between April and June this year.

The decision on Trident has been made. It has been announced and it will remain. It is the most cost-effective way to provide for a strategic nuclear deterrent. That decision will not be changed.

Mr. John

I must press the Secretary of State on two matters. First, did he intend to imply that there would be no savings as a result of the phasing out of older equipment? If so, he should say that clearly. His statement implied that he hoped for savings over and above the savings in the equipment programme. If that is so, he should put a figure on it. Secondly, although my party's defence policy is of overweening interest to the Secretary of State, we are equally interested in his party's defence policy. What are the employment implications of the slowdown in warship orders? Why does he not put a figure on the likely redundancies so that the loyal civilian staff in the defence establishments may know what blow will hit them?

Mr. Nott

Savings will be made, and I have already explained where they will fall. We are talking about a cut of £200 million in what we had originally planned. Savings are clearly embodied in bringing down that figure.

On the question of employment in the shipbuilding industry, we must discuss with British Shipbuilders how to allocate next year's programme among the yards. We can then make a firm estimate of how many jobs will be affected. The number of jobs that will be affected by the Government's defence policy—which will be increased by 8 per cent. in real terms over three years—is nothing like the number of jobs that will be affected by the policies advocated by the different Opposition parties.

Mr. Peter Viggers (Gosport)

I assure my right hon. Friend that the confirmation of new orders and the necessary phasing out of obsolescent equipment will be warmly welcomed by the Armed Forces. When can we expect a replacement for diesel-electric submarines?

Mr. Nott

Tenders for the coming year under consideration include nuclear-powered fleet submarines, two frigates, and minesweeping trawlers, among other vessels. I do not know to which diesel-powered submarines my hon. Friend refers, but I shall certainly answer his question.

Dr. David Owen (Plymouth, Devonport)

Is it not clear that this country cannot continue to make both a major contribution to BAOR and a major maritime contribution to the Western Alliance, and that a strategic choice will have to be made? Will the Secretary of State confirm that if he is to reduce employment opportunities in defence establishments by 32,000 over the next three years he will protect those parts of the country where unemployment is already extremely high, and particularly the South-West region, which he knows well?

Mr. Nott

I understand the right hon. Gentleman's concern about employment opportunities. I take full note of his point about regional employment.

I have had an opportunity to read the right hon. Gentleman's views on future defence strategy. I read with interest the pamphlet that he published a short time ago. In the normal long-term review that takes place every year in the Ministry of Defence I shall take into account many of the points that he makes. However, the stark choice that he poses between a maritime capability and the central front is, frankly, unrealistic. We must maintain balanced forces, although there may be changes in emphasis between the two, and those are matters that we shall have to discuss with the alliance. My right hon. Friend the Leader of the House was already in close consultation with our Allies on the subject. I hope to remain so.

Sir Frederic Bennett (Torbay)

The Minister earlier referred to our relatively favourable defence contribution, in terms of GDP, compared with that of our allies, which is known to all of us. If he cannot do so now, perhaps he will tell us, in the form of a written answer, what that comparison would be in terms of per capita expenditure. Secondly, he reaffirmed, to our great pleasure, the determination to press ahead with Trident. Can he yet indicate when we shall have an opportunity to debate Trident and reaffirm the decision specifically by a majority vote in the Commons?

Mr. Nott

I have already told the House that per capita expenditure on defence will rise next year on the basis of the figures that I have given. As my hon. Friend knows, the previous defence White Paper contained a table that set out the comparison of this country with others. At that time, I believe, that we came somewhere in the middle on expenditure per head, although we come right at the top of the table in expenditure in terms of GDP.

I would welcome a debate on Trident, subject to arrangements that my right hon. Friend the Leader of the House can make. I have asked him whether we may wait a week or two so that I can do my homework. As soon as I have done it, I should welcome a debate. It is important to have one as soon as possible.

Mr. J. Enoch Powell (Down, South)

The Secretary of State placed great stress on front-line capability. Will he bear in mind that in any but the briefest conflict our survival and victory would depend very largely upon our second and third line—our industrial reserves, reserves of manpower, training and training capability? Will he be careful not to be mesmerised by the nuclear theology that prevails in NATO?

Mr. Nott

I can assure the right hon. Gentleman that I am far from being mesmerised by anything, except, occasionally, him. I entirely agree that our reserve forces—our second and third line behind our forward troops—are vital. We shall be spending more next year on the Territorial Army, and I shall be giving great attention to our reserve forces.

Mr. Antony Buck (Colchester)

Is my right hon. Friend aware that everyone on the Conservative Benches would like to congratulate him on picking up his present portfolio? The way that he dealt with questions earlier made it clear to the House that he is a worthy successor to our right hon. Friend the Leader of the House who I believe should allow time for a debate in due course about Trident. Will my right hon. Friend confirm that what he has announced is merely a particularisation of decisions that have already been made, which should help to dispel any idea that he has been appointed as a defence expenditure hatchet or kukri man?

Mr. Nott

I cannot imagine how anyone could have seen me in such a role. That we all acquire such labels is a cross that we have to bear. I assure my hon. and learned Friend that I shall be as dedicated as my right hon. Friend to preserving and improving the front-line capability of our forces. If I may say so, the task that he performed when he held my office was a tremendous one. I shall continue to rely on his advice and help.

Mr. Stephen Ross (Isle of Wight)

Will the Secretary of State assure us that if Trident is to continue—which we must regret—he will try to spread the work load over the different yards? Can he also assure us that the Vulcan bombers will not be phased out, at least before the end of 1983? Can he give us a bit more information on the updating of Harrier? Is Lee-on-Solent to be closed? Can he assure us that there will be no further moratoriums on defence spending such as those of last August, which put many component manufacturers in difficulty?

Mr. Nott

The spreading of the shipbuilding programme load is, in the last resort, for British Shipbuilders. My Department will keep in the closest touch with British Shipbuilders to try to make sure that new orders go to yards which are, first, cost effective but which also provide necessary employment opportunities.

I said in my statement that we were having to bring forward the phasing out of older equipment, including certain Vulcan bombers, rather earlier than we had planned. We are talking about an effective reduction from seven Vulcan squadrons to six next year. As the hon. Gentleman knows, the Vulcan is becoming an expensive aeroplane to maintain and operate.

The replacement for Harrier is under consideration. As my hon. Friend the Under-Secretary said, we shall be considering the matter fairly shortly.

Lee-on-Solent will close. That is a decision that has been taken.

Mr. Julian Amery (Brighton, Pavillion)

My right hon. Friend's statement will require careful analysis, but is he aware of the historical background against which he makes it? Lord Salisbury, in the previous century, accepted the resignation of Lord Randolph Churchill, who wanted to cut the Defence Estimates. Mr. Harold Macmillan accepted the resignation of Mr. Peter Thorneycroft, who similarly tried to cut the Defence Estimates. This is the first time that the Treasury team has managed to oust a defence Minister. Will my right hon. Friend realise that, while we wish him the best of luck in his new appointment, it is up to him to convince the Conservative Party, the House and the country that it does not mean a serious retrenchment in defence expenditure?

Mr. Nott

It will always be a privilege to receive fatherly advice from my right hon. Friend. I shall look forward to receiving it in defence debates. However, I am not aware of any resignations that have taken place. I am not sure that the historical analogy is wholly appropriate to the move of my right hon. Friend to be Leader of the House and my translation to the Defence Ministry. I have not been a member of any Treasury team, if that is the suggestion. I was not a member of the Treasury;. I was a distinguished President of the Board of Trade.

Perhaps I can give my right hon. Friend the assurance that he wants. I and not the Treasury will be in charge of the Ministry of Defence, but I am sure that we shall work closely together. In the end, we are all on the same side.

Dr. John Gilbert (Dudley, East)

As all the programmes that the right hon. Gentleman boasts of as remaining unmutilated by his statement were carried on by the predecessor Administration, what news, if any, can he give the House of new programmes to modernise Her Majesty's Armed Forces during the two years that his Government have been in office?

Mr. Nott

I read out a long list of programmes that are continuing next year. An increase in defence expenditure of 8 per cent. in real terms over three years, at a time when our gross domestic product has not been rising, is a substantial indication of the high priority that this Government give to the defence of our country.

Mr. Michael Mates (Petersfield)

In the light of my right hon. Friend's statement, containing much detail that will need to be examined, will he take this opportunity to confirm in simple and unequivocal terms the statement that was made by the present Leader of the House on 28 October, that the Government remain committed to a 3 per cent. increase this year, next year and the year after?

Mr. Nott

When the White Paper on public expenditure is published in March it will show that for future years we shall be planning an increase in defence expenditure of 3 per cent. in real terms from the adjusted base from which we shall now be operating. We are making the £200 million cut in planned expenditure. That is not a cut in real terms; it is a cut in a plan. From the revised base, we shall be planning 3 per cent. real growth in volume in our defence expenditure in future years. That will be clearly shown when the White Paper on public expenditure is published in March.

Several Hon. Members


Mr. Speaker

Order. I propose to call five hon. Members from each side of the House. That represents another 10 questions, which will be a good run.

Mr. Robert Maclennan (Caithness and Sutherland)

Will the Secretary of State take a direct personal interest in the possibilities of further economies in defence procurement through greater co-operation in procurement policies within NATO? In particular, will he bear in mind the unanimous strictures of the Public Accounts Committee about the Sting Ray programme, which is an example of national procurement policy being pursued with apparent disregard of NATO's lack of interest in this weapons system? We are spending nearly £1,000 million when an alternative system—an American system—at a cost of £200 million is available.

Mr. Nott

Of course I shall be looking for sensible economies in defence procurement. The Defence Ministry does that, whichever party is in power. It is part of the job. With regard to Sting Ray, I was aware of the arguments for the development of a British weapons system or the purchase of an American one. It was decided to continue with Sting Ray, and I am delighted to say that it is going extremely well. It is a British weapon that is still in procurement, and it is performing very successfully.

I made an error in an earlier comment. I said that Lee-on-Solent was closing. I meant to say that the naval communications squadron at Lee-on-Solent was closing.

Mr. Cranley Onslow (Woking)

Is my right hon. Friend aware that all Conservative Members must welcome the Government's stress on priority for defending the nation's interests. I should like to pay tribute to the work of my right hon. Friend's predecessor in defending that cause. Will my right hon. Friend now take up the cudgels at the Ministry of Defence and make sure that there is an overhaul of the contracting and budgeting procedures, which many hon. Members regard as the major reason for the present situation, where some programmes still remain unconfirmed? Is he aware that there is no wish on the Government Benches to see projects such as Sea Eagle and Skyflash jeopardised because of an obsolete contracting procedure that prevents them from going ahead?

Mr. Nott

The reasons why there is likely to be some overrun in planned defence expenditure this year are well known to the House, and I mentioned them in my statement. These are exceptional conditions, and it cannot be right publicly to condemn those who operate the system for a series of problems that arose for a variety of reasons, many of them outside their control. Of course, I shall be interested to learn about the contracting and budgeting systems in the Ministry of Defence. So far I have had only four days in my new office, and I have not yet examined this question. It will take me a few days to understand, but I shall look at it with interest.

Mr. David Lambie (Central Ayrshire)

Is the Secretary of State aware that his decision to defer orders for Jetstream will be received with concern and anger in the West of Scotland, especially by the work force of the British Aerospace factory at Prestwick? In view of the high rate of unemployment, which is approaching 20 per cent., in the immediate area and the reported statement that the Secretary of State for Scotland supported the order, which was also supported by the Prime Minister, will the right hon. Gentleman now consider the effect of this disastrous decision on the prospects of the work force at Prestwick? If he is not willing to do that, will he give a letter of intent to British Aerospace for future orders of this aeroplane in order to allow the civilian version of the aeroplane to continue to be manufactured?

Mr. Nott

I am sorry that we cannot go forward with the plans for Jetstream at present. It is a communications aircraft, and, having had to look at the priorities within the defence programme, we considered it more important to enhance our front-line capability than to concentrate on communications aircraft such as Jetstream. I accept that it is a good aircraft and, like the hon. Gentleman, I regret that it has not been possible to go ahead with the programme as we have hoped.

Mr. Victor Goodhew (St. Albans)

I congratulate my right hon. Friend on his appointment and thank him for his statement, but may I press him a little on the question of Sea Eagle? Is he aware that it is far in advance of any other similar weapon elsewhere, that it can be financed by British Aerospace Dynamics, and that it must be cheaper than cancellation over the next two years? Will he look seriously at the matter, because it would be a grave error to throw this project overboard and buy foreign? That would disperse a great capability and a team of men that has worked hard on the weapon.

Mr. Nott

I have already studied the importance of Sea Eagle, and I acknowledge what my hon. Friend says. It is well in advance of developments in many other countries, and it is very important to British Aerospace Dynamics. I am conscious of all the points that my hon. Friend has made. I cannot say at present that Sea Eagle will necessarily continue for all time, through to production, because there are several hundred million pounds still to be spent on Sea Eagle before we get the weapons system. That includes production costs as well as further procurement costs.

Therefore, Sea Eagle must take its place, together with other weapons systems, in the normal annual review that I shall conduct between April and August. Until I have examined all the systems, as part of the general review—the long-term costings—that all Defence Ministers make, I cannot confirm that Sea Eagle will remain in the programme after that study. However, I assure my hon. Friend that it will continue in procurement at present.

Mr. Bruce George (Walsall, South)

Will the Secretary of State pass on my congratulations to his advisers, whose verbal and statistical dexterity—indeed, sleight of hand—may convince those who wish to be convinced that Tory performance matches up to its rhetoric? Will the right hon. Gentleman agree to use the next four days as busily as he has used the last four days in convincing himself that Britain's maintenance of balanced forces is likely to be detrimental to NATO, because we are likely to end up by performing very badly all four functions to which we are currently committed?

Mr. Nott

I understand the hon. Gentleman's point, but we are conducting all these matters within the context of the NATO Alliance. Without co-operation and full agreement within NATO there can be no defence of this country against the Warsaw Pact countries. The NATO Alliance is fundamental to us. If, in discussion with our NATO allies, there are changes made in emphasis between one role and another, I still think, as I said earlier, that the maintenance of balanced forces by this country is enormously important. We are still a sovereign country and we must look to our own defences as a nation. I understand the hon. Gentleman's point, but balanced forces will always be very important to us.

The commitment of the Government to increasing defence expenditure is clear. As I said, over the three-year period it will have increased by 8 per cent. in real terms. I cannot be certain of the increase that will be made by our NATO allies, and our increase may well prove to be greater than that of our allies. I do not know their figures, but I doubt whether many of them will be higher than ours.

Sir John Langford-Holt (Shrewsbury)

In my right hon. Friend's statement, and in one of his answers to a supplementary question, he announced his intention to maintain the strength of the front-line capacity of the defence Services. Will he assure me that there is no conflict between that statement and the statement that he made concerning the amalgamation of 41 Royal Marine Commando with other commando units?

Mr. Nott

The amalgamation of the commando units will bring up to nearer full strength the other commandos. We are not at this moment reducing the number of men in the Royal Marine Commando. It is a merger; we are bringing the commandos in Deal in with the others. I take my hon. Friend's point about the strength of the Royal Marine Commando and I would be happy to discuss the matter with him. One of the problems is that the barracks at Deal are extremely expensive to maintain, and we can make economies by bringing about the merger without any reduction in the strength of the Royal Marine Commando at the present moment.

Mr. Frank Allaun (Salford, East)

Did not the Secretary of State, in answer to an earlier question, admit that it would save Britain between £3½ billion and £4½ billion a year if we reduced our share of expenditure on arms to the level of the other European NATO countries? Did not he also say that our per capita expenditure was being increased? Will not the additional 2½ or 3 per cent. increase per annum—at a time when other services are being savagely slashed—encourage the hawks against the doves within the Kremlin and speed up the arms race?

Mr. Nott

I cannot imagine how we can obtain peace in the world except by strength. The hon. Gentleman's view, as I understand it, is that by weakness we shall somehow lead the Russians to cut back on the arms race. I find that a totally inexplicable point of view. We are likely to be spending more than some of our European NATO allies as a proportion of our gross domestic product, but it is to the Warsaw Pact's increasing threat that we should look, as my hon. Member the Member for Stretford (Mr. Churchill) said at Question Time today. There is no point in our looking at each other the Whole time. We must look at the threat, and we must encourage our NATO allies to do as much as we do ourselves.

Mr. Eldon Griffiths (Bury St. Edmunds)

Will my right hon. Friend confirm that there will be room in his Estimates for the United Kindom to play a part outside Europe in the common defence of the West? When he has had a little more time to study the matter, will he advise the House whether he thinks the method of cash limits is appropriate to defence expenditure?

Mr. Nott

It is desirable that we should maintain the capacity for a flexible force. By the very nature of our position we shall be providing political force by our ability to respond in different parts of the world, in conjunction with our allies. The size of whatever support we may be able to give will depend on the circumstances, but I agree that it is important that we should give that political support to our NATO allies and to the United States.

I have read with interest the comments on cash limits made by my right hon. Friend the Leader of the House. Even among colleagues and good friends, we sometimes put slightly different emphases on these matters. The cash limit system is absolutely fundamental. We must keep to cash limits. Unless we respect money as well as volume, we cannot conduct our affairs sensibly. I agree with the point made by my right hon. Friend, that it is very difficult for the Ministry of Defence, with an enormous procurement programme, always to get its expenditure absolutely within its cash limits each year. It is difficult for other Departments to do so, too. But cash limits are very important.

Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)

As the 26 Command REME workshop, in my constituency in Stirling, has a fairly large number of very good civilian jobs—and also provides very good apprenticeships and engineering training for youngsters leaving school in the Stirling-Falkirk area—may I have an assurance from the Secretary of State that there is no intention to close down or in any way to interfere with the work of the 26 Command REME workshop?

Mr. Nott

I must confess to the hon. Gentleman that I know of the existence of that unit but so far I have not discovered it in my studies. Now that he has drawn it to my attention—I am sure that it is a very important unit—I shall study it with care.

Mr. Neville Trotter (Tynemouth)

I congratulate my right hon. Friend on his timely statement, which spells out in statistics as well as words our commitment to defending this country. May I draw his attention in particular to warships? Will he assure us that the front-line strength, in terms of the number of warships, will not be reduced as a result of the scrapping of older warships and the deferment of new ones to which he referred?

Does my right hon. Friend accept that it is important for British Shipbuilders that there should be a continuing programme? Would it not be sensible to have a five-year programme, as in America—bearing in mind that in America the President tends to put most of the ships into the fourth year?

Finally, will my right hon. Friend have regard to the export prospects of different types of warship and bear that very much in mind in discussions with the Navy? The new type of submarine to which reference has been made is not yet in production and has therefore lost orders in a large part of the world to the German submarines.

Mr. Nott

I entirely agree that we are not selling nearly enough warships overseas. I have seen that all round the world as Secretary of State for Trade. We have not sold any major warships for several years, and we must put that right.

The announcement that I made will mean that there will be some reduction in the number of warships available, because we are phasing out some of the older ships. Some of them are more than 20 years old. Unless we phase out some of the older equipment we shall not have room within the programme to bring forward new warships.

We have ordered eight warships for the Royal Navy since we came into office. My hon. Friend knows what they are. In the coming year, tenders will be under consideration for a nuclear-powered fleet submarine, two frigates and minesweeping trawlers, so that the shipbuilding programme will carry forward. Unfortunately, we have had to slow it down to some extent because it was simply impossible to do all that we would wish to do in 1981–82 and yet keep within our programme. But we are going forward with tenders for the coming year.

Mr. Arthur Palmer (Bristol, North-East)

Does not the right hon. Gentleman accept that it would help hon. Members if he could make a statement on the effect of these changes on employment in various parts of the country? Naturally, I have in mind in particular the Bristol area.

Mr. Nott

We must decide about shipping orders and whether we can make any in the coming year. Tenders are being sought. Until all this has been discussed with British Shipbuilders it is difficult to know what the impact will be on employment. I do not wish to pretend that today's statement will not involve the loss of job opportunities. Of course it will. However, given the very substantial increase in the volume of defence expenditure, it does not behove the Labour Party to criticise us about jobs. I realise that the hon. Gentleman is a member of the Opposition, but, given the 8 per cent. increase in real terms over three years, we cannot be criticised for causing the loss of jobs.