HC Deb 13 March 1992 vol 205 cc1222-30

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sackville.]

5.56 pm
Mr. Hugh Dykes (Harrow, East)

I am very grateful for the opportunity to raise this matter on the Adjournment. After the last spurious point of order, we return to the serious business of the House and come to the Adjournment debate, which is very important because of its subject matter. I am grateful to the Minister of State for coming to the House this afternoon to respond in, I hope, a positive manner to my complaints and strictures. When I say "complaints and strictures", I do not mean that I am making the obvious kind of complaint that one makes when a decision such as this is made.

On 3 March, the Secretary of State announced his decision regarding the choice of the contracting parties for the advanced short-range air-to-air missile project and contract. One accepts that a choice had to be made and that there would be a winning party and a losing party. In this case, there were three applicant groups, including a foreign group. There were the two British-led clusters— one with American partners, the other with French partners. The one with French partners is of particular concern to me because of my local constituency interest. I repeat that on these occasions one has to accept that there are winners and losers. The excellent high-technology space missile defence company, GEC Marconi, with its headquarters in Stanmore—of which I, as the local Member of Parliament, and others both in that area and in the territorial zone around it are intensely proud because of its past achievements and, I hope, its considerable future achievements—has been the recipient of contracts for excellent projects from the Ministry of Defence over many years.

This was a crucial project. One can only congratulate the British Aerospace group on having won the contract. The decision was widely welcomed by other hon. Members who have local constituency interests. Most of them sit on this side of the House. Therefore, I was somewhat of a lone voice when I said that I thought that the wrong contractor had been selected. When the Secretary of State made his announcement on 3 March I said: Of course, the equipment is essential and vital for the future defence of the realm and we are proud that missile equipment of that sort is British."—[Official Report, 3 March 1992; Vol. 205, c. 167.] I believed then, and I believe now, that the wrong contractor was selected. In my view, it is a bitter blow for GEC Marconi.

I hasten to add that these remarks are made entirely on my own initiative. People often feel that on these occasions Members of Parliament are doing some respectable, legitimate and proper lobbying on behalf of an equally legitimate outside interest—a company in their constituency—and that they have been prompted to do so by that particular company. That is certainly not the case on this occasion. Although I know the company well, have visited its headquarters many times and know its executives and staff, this is very much my own initiative and I do not wish to engage them in any commentaries that I may make on this project. These are entirely my views. I stick to them, and I welcome the opportunity of this short debate for the Minister of State for Defence Procurement to reply to the points that I shall make.

I wish to make one crucial but obvious point. As I said, a series of comments were made approving of the Secretary of State's selection. My hon. Friend the Member for Wealden (Sir G. Johnson Smith) also welcomed the Secretary of State's decision and statement and said that it underpins the strategy of flexibility outlined in 'Options for Change'. However, my hon. Friend, significantly, added an important question, which perhaps stood out. He asked: Can he assure us that Hughes, whose parent company is based in the United States, will not run into problems of technology transfer when seeking to export?"—[Official Report, 3 March 1992; Vol. 205, c. 163.] That is a crucial question which must be answered satisfactorily to reassure people.

During the post-war period there has been much American domination of such projects. We often start out believing—I see that the Minister has decided not to listen to my remarks for the moment. Perhaps I should pause while he returns to the Front Bench. It is funny to see a Minister leaving when a colleague is making a speech. I am a trifle surprised, but I shall continue now that he is returning to take an interest in the debate.

In the post-war period it has been on the weaknesses of European and British defence contracts that we thought that we were going to be an equal partner and would have full control over the development of the technology, instrumentation and equipment, especially in electronics defence projects. However, we ended up being dominated —perhaps unduly—by the Americans.

The crucial advantage of the alternative in this instance—the MICASRAAM, in which MICA represents the French missile configuration component—was that that would not be so. It was to be a European project and Matra, the French partner, was to be fully and heavily involved. It was to be a quintessentially European project, getting away from the old weakness from which United Kingdom defence projects have suffered repeatedly in the post-war period and from which they perhaps still suffer even now that European defence projects are at long last gaining greater ascendancy.

I remember many visits to the Pentagon when embarrassed senior officials of that great department in the United States would give a list of the United Kingdom's share of American defence orders. It would usually turn out to be extremely puny despite their protestations that they would do better next time. The new project for the European fighter aircraft and for our existing fighter aircraft was to get away from that.

On the day of the selection, I wrote to the Secretary of State to express my disappointment about the choice. I am still waiting for a reply to my letter, but I imagine that the Minister of State will deal with some of the points today. In order to be fair to the Government, I said that I knew of the difficulties in making such choices. There will always be one set of aggrieved parties and another set that is delighted to have won. One hopes that GEC Marconi will be the recipient in future.

In the fourth paragraph of my letter of 3 March to the Secretary of State I wrote: I was glad to note in answer to my supplementary question"— by the way, I fully appreciate that the Secretary of State tried very hard to be helpful in his answer in what was a difficult situation, and I pay tribute to him for that— that you expected Marconi to be the recipient of other key government defence orders in the future. I shall crystallise what I believe would have been the main salient advantages if the MICASRAAM alternative had been chosen as opposed to the British Aerospace ASRAAM offering. I am an outside party and probably do not have access to all the expert, behind-the-scenes figures available to people in the Department and companies involved, but, having considered the project, I believe that one advantage would have been that it was the competitive and compliant bid. It drew on the combined expertise in missile seekers of GEC Maconi and on Matra, the outstanding French group, in airframe and propulsion systems.

The bid represented value for money, too, and a low-risk development programme, bearing in mind that such equipment has often gone wrong in the past and has cost public departments of defence—including the Ministry of Defence—a lot of money when things did not quite work out. I imagine that it is always difficult to be certain about different competing specifications.

The French Government had clearly and unequivocally offered a French ministry of defence financial contribution to the development programme, and there was a strong certainty—I was about to say that there was a "likelihood", but that word is not strong enough; it was a certainty—that there would have been a French order, too, for the armée de l'air, of a size similar to that of the Royal Air Force order. That would have followed the selection of MICASRAAM rather than ASRAAM.

The Anglo-French missile configuration would have represented a significant opening up of a genuinely European defence market. Things are a little better than they have been over the previous decade, but there is still far too little in the way of a genuinely European defence equipment market, involving joint contracting efforts between the member states. There are still plenty of national efforts, but not enough joint efforts. We need to encourage that, and the MOD has missed an opportunity.

Within Europe, and elsewhere, the export prospects of MICASRAAM would have been truly outstanding. For Europe, as a centre of defence equipment excellence, to be able to sell a total weapons system with missiles and aircraft, without the danger of a United States veto—I have emphasised that risk before—would have enhanced the prospects for both MICASRAAM and the European fighter aircraft.

I stress, too, the high-technology seeker expertise that has been developed by Marconi over several decades for highly successful British Aerospace missiles, such as Skyflash, Sea Skua, Sea Eagle and Alarm. That is a crucial part of technology, upon which future national security depends. We saw the excellence of such pieces of equipment during our efforts in the Gulf, yet our equipment now runs at least a risk of being surrendered to the eventual control of the American supplier, rather than staying in British and European hands.

The expertise is crucial; that is why I am raising the matter. I am not criticising the Government severely, because of the difficult nature of such choices, and I hope that Marconi will receive many such valuable orders in future. However, as the local Member of Parliament, with those fantastic headquarters in my constituency, I worry about what may happen to the excellent outstanding team of scientists and researchers. Such a team of experts in electronics and missile technology has been built up over decades—it take time. They are highly qualified, brilliant people. Yet the original staff of 450 people has been cut to less than half that number as a result of the inevitable redundancies that, sadly, the firm has recently had to make. I am acutely concerned to preserve that highly skilled executive work force of scientists and technicians at Stanmore to ensure that it remains intact for employment and—

Mr. David Evans (Welwyn Hatfield)

I am surprised that the hon. Gentleman, who is well known for his European views, seems to be speaking on behalf of the Commission, rather than on behalf of his constituents. Some of us believe in competitive tendering and in the freedom and fairness of choice. Some of us actually believe in Anglo-American relationships, and we are not so keen on the frogs. I must tell the hon. Gentleman that I speak on behalf of the hon. Member for Stevenage (Mr. Wood) and of the people of Welwyn and Hatfield and we welcome the fact that the Ministry of Defence has given the order to that great manufacturing company, British Aerospace. I wish that the hon. Gentleman would pay more attention to British interests and less attention to the French.

Mr. Dykes

I knew that it was a serious mistake to give way to my hon. Friend—as I call him, although he called me an hon. Gentleman. Presumably, the fact that Luton Town football club has had difficulty getting into Europe has led him to sound off in his characteristic way.

Ignoring that contribution totally, and returning to my speech, I was describing the essential anxiety of a local Member of Parliament. To express that anxiety is my job on such occasions. Who would have thought a few years ago that in an area such as Stanmore or Hertfordshire we would be worried about unemployment developing into a serious and durable problem among highly skilled people as well as among what would be described as ordinary applicants for work? It is serious when highly skilled teams are reduced in size. It affects adversely our ability to compete in projects for national orders and for international orders. Where do those people go? Do some of them go abroad because they cannot get jobs here? The technology, expertise and skills of those brilliant scientists and technicians will be lost to this country for ever unless the Government have regard to those matters.

Would anyone have believed a year or two ago that the specialist design team at Stanmore would be cut from about 450 graduate engineers to just under half that number? If that project had been selected instead of the other, which was widely welcomed by my hon. Friends because of the location of the plants that would benefit from the British Aerospace alternative, employment from the project would probably have been greater than under the British Aerospace alternative. The greater number of MICASRAAM's export potential effects in different countries—I believe that some countries were already expressing considerable interest in the possibility, subject to the development configuration and success—would have provided greater employment.

Some 400 or 500 jobs at headquarters alone would have resulted from the project going to GEC Marconi. If the Minister, in return, can reassure me that GEC Marconi will receive other orders which will make up for this danger of loss of employment, value and money, my concerns will be partly allayed. However, I am sure that he understands fully the reasons why I raised this serious problem on the Adjournment today.

6.11 pm
The Minister of State for Defence Procurement (Mr. Alan Clark)

I am grateful to the hon. Member for Harrow, East (Mr. Dykes) for giving me the moment that I relish to answer him in this last Adjournment debate on the last full day of the last Parliament in which I shall attend the House. The hon. Gentleman said that he would not labour me with strictures. Had he done so, it would not have been the first time. He and I have a particular personal relationship—I use the word "relationship" in its archaic form. In the course of my almost nine years in Government and three Departments—

Mr. Dykes

Are you going to answer the debate?

Mr. Clark

That is exactly what I intend to develop. I admit that I have had idiosyncratic, some would say tendentious, moments of behaviour which have always been treated with great tolerance by the House. Although there have been calls for my resignation, they have largely been jocular.

I recall the hon. Member for Harrow, East exhibiting an altogether higher level of commitment. He did not invite me to resign—he actually said that I should be sacked, and to make his feelings absolutely clear, he called on the Prime Minister to sack me. To ensure that his views would be widely disseminated, he expressed that view not in a letter, as I might reasonably have expected, nor even in the Chamber, but full-frontally before the television cameras. I am sorry to say, as testified by my presence here today, that despite being so widely publicised, the call fell on deaf ears.

It is unusual—indeed, I have no recollection of its occurring before—for an hon. Member of one party to call for the dismissal of a colleague who has ministerial office in the same party, except in the Tea Room where, as we know, it happens all the time. I am glad to answer the hon. Gentleman's debate. I might have thought that his insistence that I be dismissed from the Government suggested a certain lack of confidence, and I suggested through the usual channels that he might prefer another Minister to answer the debate. However, the hon. Gentleman insisted that I answer it. I infer from that that I have regained his confidence.

The requirement for a new advanced air-to-air missile dates back to the early 1980s when the strategic environment was very different. While the monolithic threat in Europe has receded, however, regional tensions remain which could affect us. In terms of specific systems, the most potent threat comes from the MIG 29 and SU-27 aircraft, and the highly capable air-to-air missile known as Archer. I must emphasise that these weapon systems are not confined to the former Soviet Union; they have already been widely exported and further proliferation is likely in the future.

Our overwhelming success in the Gulf conflict was the result of the early establishment of air supremacy. Clearly, we must continue to maintain our superiority in air defence to protect the United Kingdom itself and British forces operating elsewhere.

Our original intention was to procure the missile in collaboration with our NATO allies. Under the family of weapons memorandum of understanding signed in 1980, the United States was to develop an advanced medium-range air-to-air missile, and the United Kingdom and Germany a short-range system. France took observer status only and did not participate in either programme. Later, Norway and Canada joined Germany and the United Kingdom in the short-range programme. Both programmes experienced the difficulties and delays so often inseparable from collaborative projects. Eventually in 1989 and 1990, our partners withdrew from the project.

The withdrawals led to reassessment of our own position. The threat was re-examined, and the operational requirement found still to be valid. In the absence of collaborative partners to share the burden of development costs, however, I decided that we should follow our standard procurement procedures and hold a competition. British Aerospace Dynamics was the United Kingdom industrial leader in the former collaborative procurement, and naturally could be expected to put forward the ASRAAM missile which was to have been procured collaboratively. We were also aware that GEC Marconi, in association with Matra, would wish to offer a derivative of the short-range variant of the French MICA.

The competition was successful in attracting bids of systems to meet the requirement, and a lower-cost, lower-capability system offered by the German company Bodenseewerk Geratetechnik or BGT. Two United States companies expressed interest, but in the event neither submitted a bid.

After careful examination of the BGT offer, including mathematical modelling, we decided that the improvement that it offered over the most sophisticated hostile system was not decisive and could not justify the expenditure. But I am grateful to BGT for its bid, and I repeat that it was given the most serious consideration.

As for the BAe and GEC Marconi bids, although their systems adopted different technical solutions to the problems, each was broadly compliant with the operational requirement. In addition, we took into account three other factors.

We attached much importance to having a contract with taut terms and conditions which placed the risk with industry rather than with my Department. We therefore paid close attention to compliance with our contractual requirements. Price was obviously of great importance, but the competitiveness of a price depends very much on the terms and conditions associated with it.

The prospect of export sales was also a factor taken into account, and this aspect was of interest to many hon. Members on both sides of the House last week. Both companies were optimistic about achieving export sales in different markets. My right hon. Friend the Secretary of State, as he said, has been in contact with the United States Secretary for Defence in relation to export sales of the ASRAAM, which uses the United States designed seeker. I am pleased to say that we received a satisfactory letter of assurance from him.

Finally we quite properly took account of the prospects for jobs in the United Kingdom, and I pay tribute to the insistent and persuasive advocacy of my hon. Friends the Members for Welwyn Hatfield (Mr. Evans), for Stevenage (Mr. Wood), for Bristol, North-West (Mr. Stern) and for Bolton, North-East (Mr. Thurnham) in that regard. My right hon. Friend the Minister of State, Foreign and Commonwealth Office, also took a keen interest in the progress of the project. British Aerospace pointed to more than 80 per cent. of the work in total being carried out in the United Kingdom and claimed that the jobs of some 7,000 people would be secured. The GEC Marconi offer, on its own figures, would have led to a lower proportion of work being done in the United Kingdom, even when potential sales to a third party were taken into account.

Of course, I recognise that jobs in the United Kingdom is not a concept which has much significance for the hon. Gentleman. He has long since ceased to consider, still less to welcome, the concept of the United Kingdom as a national identity of its own. His loyalty, as we know, is to the European Community, if not, as my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) said, to the European Commission. And so a "job" anywhere in the Community will, of course, be of equivalent value to him.

Our assessment of all those factors pointed to British Aerospace as the winner. The assessment was supported, as in all major investment decisions in the public sector, by a formal investment appraisal. That also pointed to British Aerospace as the clear winner of the competition.

In every competition, of course, there must be losers. It would be wrong for me to disclose the grounds on which the GEC Marconi bid fell short of our needs, as the information in its offer was submitted to us in confidence purely for bid assessment purposes. I understand that GEC has asked for a briefing on the reasons why it was not not selected, and I hope that it will take full advantage of the opportunity. I must say, however, that my hon. Friend is, at best, premature in his criticism of the decision.

Mr. Skinner

Friend?

Mr. Clark

At that moment.

GEC Marconi will have a much clearer understanding of the factors that we took into account once it has received the briefing next Tuesday. I hope that it will enable it to improve its prospects in future competitions for defence requirements.

As for my hon. Friend's concern for his constituents in Stanmore, I can assure him that GEC Marconi is highly valued by my Department as a major defence contractor which has made a significant contribution to a range of defence projects. We have some 150 contracts, worth more than £2 million each, with GEC Marconi Stanmore, with a total current value of approximately £3.3 billion.

In addition, on 20 January I announced that a consortium led by GEC Marconi had been chosen to develop the defensive aids sub-system for EFA. That contract is due to be placed very shortly and it will be worth more than £100 million. Much of the work will be undertaken at GEC Marconi Stanmore, where some 200 jobs will be created. Taking the GEC group as a whole, since the beginning of last year orders worth more than £2 billion have been placed either directly with GEC companies or with those companies acting as major sub-contractors.

All potential defence contractors need to show that their proposals represent cost-effective use of public funds. The best way to do that is through competition, which not only ensures keen prices but offers a vehicle for original and innovative technical solutions. We were fortunate in the competition to have three European bids, two of them British-led. It is a tribute to British industry that both those bids were enterprising and professionally presented.

I am confident that ASRAAM will be a successful programme, and that it will make a vital contribution to the defence of the United Kingdom well into the next century.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past Six o'clock.