HC Deb 12 March 1984 vol 56 cc22-30 3.31 pm
The Secretary of State for Defence (Mr. Michael Heseltine)

With permission, Mr. Speaker, I wish to make a statement about the future development of the organisation for defence.

This Government have increased significantly the defence budget, reflecting the priority that we attach to national security. By 1986–87, defence expenditure is planned to be 23 per cent. higher in real terms than in 1978–79. The threat that we face from the Soviet Union and the growing cost of defence technology fully justify this policy. At a time of rising defence expenditure, it is particularly important that we satisfy the public—who bear the cost of defence—of our determination to ensure that the resources made available are put to best effect. We must ensure that the resources are applied to enhance the fighting effectiveness of our armed forces, and there can be no place for unnecessary bureaucracy and overheads.

As Secretary of State for Defence, I introduced a new management information system—MINIS. Using this, I have carried out a review of the organisation of the Ministry and of staffs outside the front line. I have been much impressed by the quality of the staff—military and civilian — working in these areas. But the organisation for defence foreshadowed in the 1963 White Paper has only partly been carried through: the Ministry has a more federal structure than was envisaged then, and lines of accountability are blurred. There is overlap between the Ministry and commands. As a result, the organisation is less economical than it should be.

In judging the appropriate management structure for the Ministry, my overriding aim has been to strengthen the fighting effectiveness of our forces. Nothing must be done which would weaken the separate identities and traditions of the three fighting services. They play a vital part in the morale of our front-line units. Nor do I see any need to change the constitutional framework provided by the defence council and the three service boards. However, within this framework, I wish in future to draw a clearer distinction between the central formulation of advice on defence policy, operations and resource allocation and the management of the services.

I intend to create a combined defence staff, responsible under the chief of the defence staff and the permanent under-secretary for advising me on defence policy, military priorities and the conduct of military operations. The staff would incorporate the relevant parts of the naval, general and air staffs. I also intend that it should bring together my military and civilian advisers into an integrated structure.

In resource allocation and finance, I wish to see stronger central determination of priorities and clearer budgetary control through the creation of an office of management and budget under the permanent undersecretary. This would be coupled with clear financial delegation to identified managers through a system of responsibility budgets.

Under my proposals the management of each service would be the principal concern of the single-service chiefs of staff supported by the executive committees of each of the service boards. The boards and their executive committees would be responsible for administration rather than policy, as was envisaged in the 1963 White Paper. I wish to see the maximum delegation of day-to-day administration to commands outside the Ministry.

In future, I would look to the chief of the defence staff and the permanent under-secretary as my two principal advisers. The chief of the defence staff would continue to be advised by the service chiefs of staff, who would be responsible to him: the chiefs of staff committee would continue with its present membership. I also propose that the chief scientific adviser and the chief of defence procurement should in future be responsible to me through the permanent under-secretary.

I have today placed in the Vote Office copies of a consultative paper which I am circulating in my Department. It is my intention to improve efficiency and to achieve significant savings. I will report further to the House when I have completed my consultations.

Mr. Denzil Davies (Llanelli)

Is the right hon. Gentleman aware that we shall wish to study the consultative document — because the statement is somewhat thin in substance — before we come to any conclusions? Is it not fair to say that one of the effects of the statement will be, for good or ill, greater centralisation in the Ministry of Defence, and that possibly the man in the Ministry will know even more than he was supposed to have known in the past?

Can the Minister confirm that his exercise in centralisation and against federalism, which is how he has in the past described the Ministry of Defence, means a reduction, again for good or ill, in the power of the service chiefs? In his statement, the right hon. Gentleman said that nothing must be done to weaken the identity and loyalty of the three fighting services. does he agree that, behind the camouflage of those words, that might be his intention?

In the MINIS exercise, does the right hon. Gentleman intend to bring in the important procurement executive? As he will know, there is a symbiotic relationship between the Ministry of Defence and the arms manufacturers. Will the MINIS exercise look at this relationship in detail to see whether we can get more value for money?

At the end of the day, how much money will the right hon. Gentleman save from this exercise? Many Opposition Members suspect that the exercise probably has more to do with the right hon. Gentleman's Walter Mitty world of being a management whiz kid than with his addressing himself to the real problems of defence, such as the £500 million extra on Trident and all the other costs that will be incurred over the next few years. Is it not a fact that, at the end of the day, whatever effect the MINIS exercise will have, in the next few years there will have to be a major maxi-defence review because the Government cannot maintain their present defence commitments on their present budget.

Mr. Heseltine

I can help the right hon. Gentleman. There is no defence review in prospect as far as I am aware, and, within the budgets to which we are working, we can meet the obligations to which the Government have set their hand.

I shall deal now with the specific question. Yes, the review will cover the procurement executive, and I have already asked the National Defence Industries Council to help me in looking at the interface between the procurement executive and the arms manufacturing industries to ensure that we can get better value for money from that part of my responsibilities.

The right hon. Gentleman is right in pointing to the fact that my proposals involve a greater amount of centralisation, but that is why the Ministry of Defence was set up in 1963—to take over responsibility for the three armed services.

Sir Antony Buck (Colchester, North)

Will my right hon. Friend accept that most Conservative Members will welcome what he has had to say? Can he say a little more about the combined staff that is to be created? My understanding of the position is that it is an extension of something started by Admiral Lord Lewin as he now is and his predecessors at the Ministry of Defence. Will my right hon. Friend say a little more about the role of the central staff and its capability to deal with a crisis? Is he satisfied that because of these proposals we shall be in a better position to deal with the unexpected, such as the Falklands, than we have in the past?

Mr. Heseltine

I am grateful to my hon. and learned Friend. The concepts on which I have been embarked owe their foundation to earlier generations of politicians in this place, particularly my noble Friend the Earl of Stockton, as he now is, who was much involved in this process some 20 years ago. The original concept also owed much of its design to the late Lord Mountbatten and the late Lord Montgomery, who had commanded great military forces in battle and seen the benefits that came from a unified approach to those armed services. That is why the Ministry of Defence was created. Within the Ministry, the federal structure had to some extent lived on, and my proposals are designed to deal with that.

Mr. J. Enoch Powell (Down, South)

To promote the devolution to commands that the Secretary of State desires of administrative day-to-day work, will he encourage commands to deal direct with hon. Members more than they do on matters that fall strictly within that definition, because, for ordinary hon. Members, his Ministry is much the most centralised and, to that extent, the more difficult to deal with?

Mr. Heseltine

I am conscious of the issue that the right hon. Gentleman raises. If he can give me details of the problems that arise, I shall be happy to look at them. The difficulty, as the right hon. Gentleman will appreciate, is that there has to be some central coordination, because the final political responsibility has to be carefully fitted in to the individual views of commanders in post.

Mr. Julian Critchley (Aldershot)

Is my right hon. Friend aware that many of us welcome this exercise, which is ostensibly to achieve economy, not least because after 1986 there appears to be no increase in defence spending?

Mr. Heseltine

I thank my hon. Friend for drawing attention to the period after 1986. By that stage, of course, we shall have an even larger defence budget than the one we enjoy at present, but it is important, particularly with a rising budget, to intensify endeavors to give value for money from that budget. Otherwise, there is a temptation for management controls to become lax as financial availability increases.

Mr. Merlyn Rees (Morley and Leeds, South)

There is a need to concentrate and centralise the financial advice coming to a Secretary of State, but will the right hon. Gentleman beware of weakening and diluting the advice coming from the individual services, because what eventually emerges out of compromise at the centre in defence matters is too often wrong?

Mr. Heseltine

The right hon. Gentleman has raised an important matter. The centralised structure that I have in mind will contain single service building blocks, but I am seeking to replace the present situation whereby much of the advice depends on three individual single service staffs, which, by their very nature, can be competitive in their approach.

Sir Hector Monro (Dumfries)

Will my right hon. Friend accept that I welcome his plans to improve efficiency and co-ordination? Will he say a little more about the future of the three services? Will he maintain their complete independence so that they can retain their traditions and pride in their own ships, regiments, squadrons, which are so important?

Mr. Heseltine

I have deliberately expressed my determination to achieve that objective in the open government document that is available in the Vote Office. The House should be aware that there has already been a significant step in the direction in which I intend to go. For example, the chief of defence staff is now responsible for operations in which two or more services are involved. My proposal today takes that a step further, making him responsible for all operations. Within that, it is critical that the single service chiefs of staff should be responsible for the management and morale of their own services.

Mr. A. J. Beith (Berwick-upon-Tweed)

Is it not remarkable that, 20 years after the White Paper, and two reorganisations latter, there is still a federal structure in the Ministry of Defence to which the Minister has to address himself? Will the measures that he has described do anything to allay the fears of many people in the services that the Minister retains a complement of desk-bound senior officers far beyond the requirements of the services nowadays?

Mr. Heseltine

I should not wish to use the hon. Gentleman's language. He touched on an important matter in his first question, that 20 years after the White Paper was first published, in 1963, there has been more of an appearance than a form of rationalisation. We have to deal with that issue.

Mr. Cranley Onslow (Woking)

In his reorganisation plans, will my right hon. Friend consider lengthening the period for which senior officers in each of the services remain in post at MOD, thus making it possible for them to increase —by their experience—their influence on events, as well as perhaps reducing their numbers somewhat?

Mr. Heseltine

My hon. Friend has raised an important issue, and it is a matter on which I intend to have discussions. We may not need to have a general rule of the type that my hon. Friend postulates. We could perhaps have certain posts which attract a longer period of service.

Mr. Tam Dalyell (Linlithgow)

I see shades of Sir Solly Zuckerman and Sir Hermann Bondi. Why is it that the chief scientist to the Ministry of Defence is now humiliated in having to go to his Secretary of State through the permanent secretary? Is the explanation the annoyance of the Prime Minister that Professor Sir Ronald Mason, when he occupied that post, objected stridently and vigorously to nuclear weapons going south with the task force to the Falkland Islands?

Mr. Heseltine

The hon. Gentleman would find some way of introducing that subject, and I congratulate him on his ingenuity. However, I am afraid that my answer will disappoint him, because there is no such significance in the reorganisation that I have proposed. The reorganisation is simply a recognition of the real world within the Ministry of Defence that if anything were to become a matter of concern to me within the procurement executive, or within the field of the chief scientist, I would be bound to involve the permanent secretary in any discussions that took place. It seems appropriate to recognise that position in the management scheme.

Mr. Peter Viggers (Gosport)

As one who has served in two of the armed forces and now represents a large part of the third, I welcome my right hon. Friend's statement, because it recognises the unity of the three armed forces. My right hon. Friend has confirmed that he will retain the spirit of the ship, the regiment and the squadron, but does he envisage some increase in cross-posting?

Mr. Heseltine

I am grateful to my hon. Friend, whose conspicuous service to his country is known, for drawing the thoughts of the House to this issue. I do not immediately see this as an opportunity for cross-posting, but as a significant opportunity for a much closer working relationship between the services at the senior posting level.

Mr. Dick Douglas (Dunfermline, West)

What were the right hon. Gentleman's tactics in making this announcement in advance of the White Paper on defence? Will he give us some indication of its effects on procurement and allocation in the dockyards? Is there likely to be an intensification of navalisation and privatisation?

Mr. Heseltine

I am concerned that the dockyards should fulfill the general remit of value for money that I am applying to the Department at large and that there should be an opportunity for other yards to compete for some of the work within the dockyards. That would be widely welcomed by many hon. Members, particularly those who represent constituencies on a wider basis.

I am making this announcement in advance of the White Paper because the White Paper will contain many other matters of interest and I did not want the House to lose sight of this issue.

Mr. Michael Marshall (Arundel)

In view of the review of defence procurement which my right hon. Friend has announced, and which I welcome, and in view also of the relationship which I understand the chief of defence procurement will have with him, what does he hope to learn from the Falklands in terms of improved defence procurement and, indeed, the streamlining of that process which was brought out by the campaign?

Mr. Heseltine

I am grateful to my hon. Friend for what he has said. We have published a White Paper on the lessons to be learnt from the Falklands campaign and the Select Committee on Defence is considering some of those at this moment. When I visited the Falklands it was widely drawn to my attention how much people at all levels in each of the services felt that the one lesson that they had learnt from the Falklands experience was that there was great benefit to be gained from the individual armed services working much more closely with their opposite numbers. I hope that we shall be able to carry this lesson through in the way in which we run the defence programme.

Mr. David Winnick (Walsall, North)

Will the right hon. Gentleman give an assurance that in the reorganisation, as with other matters within the Department, there will be no investigation or transfer of civilian staff because of their political views, which, surely, they are entitled to hold? Is the right hon. Gentleman aware that a great deal of concern was expressed when reports came out last week that there had been such investigations into the private political views of civil servants within his Ministry?

Mr. Heseltine

There was considerable concern last week, as the hon. Gentleman mentioned, when we discovered that a member of CND was using the internal postal facilities of the MOD to spread propaganda. That seemed to me a legitimate concern, because we uphold the time-honoured traditions of all Governments that, while matters of political conscience should not be interfered with, there should be no use of Government time or machinery to further one's own political ends.

Mr. Andrew Rowe (Mid-Kent)

Is my right hon. Friend aware that many companies in this country, particularly smaller firms, feel that the spin-off from Ministry of Defence technology is less to British firms than that enjoyed by firms abroad? Will reorganisation help to deal with that issue?

Mr. Heseltine

My hon. Friend touches on an important matter. We are pursuing this issue in a number of ways, first, by inviting private sector companies to set up organisations alongside some of the research establishments to try to exploit any spin-off that might be available. Secondly, we are trying to introduce more opportunities for small firms to become involved in Ministry of Defence procurement. We are also talking to the National Defence Industries Council about the industrial property rights relevant in the civil field that it derives on the back of the defence procurement budget. These issues are not in the main line of the announcement that I have made today, but we have been pursuing them independently.

Mr. Tim Eggar (Enfield, North)

In addition to savings in administration, must there not be devolution of decision-taking, particularly regarding the budgets, at a specific level within the Civil Service and the armed services? At what level does my right hon. Friend intend to assign responsibility for budgets?

Mr. Heseltine

My hon. Friend, who has a deep knowledge of these matters, will have noticed that I referred to the special responsibility budgets that we intend to introduce. The purpose is to give line managers, whether they be military personnel of civil servants, the opportunity to administer control over specific budgets, which they will understand, and for which they will be responsible. This is a new concept and one which I think is exciting in its implications. I could not answer my hon. Friend's question specifically today, because what I have announced is the beginning of a detailed investigation into precisely what levels of responsibility should enjoy such budgets.

Dr. M. S. Miller (East Kilbride)

Further to the question that was asked about procurement, is the right hon. Gentleman satisfied with the way in which the two-way street process is proceeding? Will he ensure that, in procurement, the Ministry of Defence is not bludgeoned into accepting everything that the Americans want to sell us?

Mr. Heseltine

The hon. Gentleman will, of course, welcome the fact that the two-way process has advanced to the point where a very much less unfavorable balance exists between this country and the United States than existed a few years ago. It is an important point, and I constantly discuss it with my opposite number in America, who shows as much concern about it as I do.

Several Hon. Members


Mr. Speaker

Order. The House has an important Back-Bench day before it. I shall call those hon. Gentlemen who have been rising to ask questions if they will put their questions briefly.

Mr. John Page (Harrow, West)

How widely within my right hon. Friend's Ministry will the consultative document be spread for information to come back to him?

Mr. Heseltine

I suspect that it will be spread extremely widely within my Ministry. I have taken steps to ensure that that is the case, and I have taken steps also to ensure that it is widely available outside the Department. I have made the document available to the House, of course, and I hope that the House will feel that, at a time when one is trying to bring about change in Whitehall, an informed public debate in the open is extremely helpful.

Mr. D. N. Campbell-Savours (Workington)

Are there manpower implications in the right hon. Gentleman's statement for civil and military personnel?

Mr. Heseltine

I should think that there would be manpower implications for military and civil personnel. I cannot answer the precise question about how many, because we are only just beginning the detailed analysis. We are not trying to save money in total. What we are trying to do is to spend less money on the overheads of defence, in order to transfer that money to the fighting front.

Mr. Nigel Forman (Carshalton and Wallington)

Is it not desirable and timely that these organisational changes should be made, especially as, in the years beyond 1986, the Ministry of Defence will need all the help that it can get from this kind of efficiency?

Mr. Heseltine

I assure my hon. Friend that the Ministry of Defence will accept all the help that it can get in any circumstances. I am absolutely clear that, if we are to continue to enjoy public support for the level of defence spending that is currently Government policy, it is incumbent upon those responsible to be seen to be achieving maximum value for the money involved in our very high budgets.

Mr. Edward Leigh (Gainsborough and Horncastle)

Does my right hon. Friend agree that the purpose of the 1963 reform remains as valid today as it was then, namely, that neither inter-service rivalry nor inter-departmental jealousies can stand in the way of essential value for money? Is he confident that this reform will have a significant impact on preventing procurement costs from outstripping inflation?

Mr. Heseltine

The White Paper which we hope to publish in the not-too-distant future will have more to say about the achievement of value for money, which is critical. The relative sophistication of modern technology has brought about an ever-increasing need for a close interrelationship between the three armed services.

Viscount Cranborne (Dorset, South)

Is my right hon. Friend aware that his remarks about the importance of spin-off from defence research establishments, such as the AUWE at Portland in my constituency, will be widely welcomed? When considering procurement will he examine the relationship not only between the MOD and contractors, but that between contractors and subcontractors to see whether the best value for money is being obtained?

Mr. Heseltine

My hon. Friend addresses a difficult issue, and one in which I have taken a particular interest, because today not sufficient of my departmental procurement is subject to competitive tender, one reason being that there is often only a single source. We have, therefore, been spending much time trying to devise a system to get behind the nominated contractor to the procurement of that contractor, so as to get competition at the secondary and tertiary levels.

Mr. Patrick Nicholls (Teignbridge)

Does my right hon. Friend not find it remarkable that he should be criticised by the right hon. Member for Llanelli (Mr. Davies) apparently for not being prepared at some time in the future to spend enough on defence, bearing in mind how much we are spending on defence and how the Labour party fought the last election on a commitment to reduce defence expenditure, which was so extreme that it would have been the equivalent of cutting the Royal Navy?

Mr. Heseltine

I am grateful to my hon. Friend for that comment. If he is asking me if I am surprised to be criticised for inconsistency by the right hon. Member for Llanelli (Mr. Davies), the answer, sadly, must be no, because I would expect no less of him.

Mr. Denzil Davies

Leaving aside that irrelevant question and answer, may I ask the right hon. Gentleman why, especially given the practice of previous Conservative Governments—and remembering that he was a member of a Government who tried to reorganise local government with a McKinsey-type management which obviously did not work — he thinks that centralisation will save money, when experience does not bear that out?

Further to my earlier question, will he say how much he thinks will be saved, in view of his remark that not only will he improve efficiency—and we shall have to see what happens about that—but will achieve significant savings? He must have some figure in mind.

Mr. Heseltine

No, I do not have a figure in mind. It will emerge from the detailed investigation that we are about to undertake. My hunch is that there will be significant savings. I must remind the right hon. Gentleman of his rather unfortunate reference to local government, because under this Government we have got manpower in local government back to what it was in 1973. The only person ever to push local government down faster than we have done was the right hon. Member for Bethnal Green and Stepney (Mr. Shore), with the difference that we did it voluntarily and he did it at the behest of the IMF.