§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]9.34 am
§ Mr. Lindsay Hoyle (Chorley)
I am grateful for the opportunity to lead this debate.
I welcome the Secretary of State's determination to move to smart procurement. The major review carried out over the past few years made depressing reading and it is vital that the Ministry of Defence moves away from an inevitably confrontational relationship with the industry, which unalloyed competition policy brings. It should form a partnership with the industry, which would be wholly in line with the competitive procurement policies practised in industry.
One of the keys to smart procurement must be the early resolution of industrial policy issues and the adoption of a procurement approach based on partnership between customer and supplier. Three programmes where smart procurement could be applied beneficially are the five-year ammunition purchase programme, the future large aircraft programme and the beyond-visual-range air-to-air missile programme. In each case, the MOD is currently holding a competition, the outcome of which could have potentially fatal consequences for the UK's industrial capabilities. Several key decisions on procurement will be made in the near future, and I call on the Government to support British firms in those major contracts.
Chorley holds an historic position in defence. It is the home of Royal Ordnance, where 40,000 people were once employed. Today, the factory employs only a few hundred. Nearby are other major defence contractors employing many of my constituents. Warton is one of the UK's principal aerospace locations where the Tornado and the Eurofighter are designed and built. As Lord Gilbert, the Minister for Defence Procurement, recently confirmed to me, Leyland Trucks manufactures many of the Army's heavy and light trucks. I urge the Government to give that firm every opportunity to tender for contracts in the future. Those vehicles are quality British products made by a quality British work force with a proven history in Bosnia and the Gulf.
Aerospace and defence account for more than 20 per cent. of Lancashire's manufacturing industry. Many other firms have business in the defence industry. Examples from my constituency include NIS Precision Engineering, Xelflex and the Computer Science Corporation, based in Chorley and Preston.
268 I shall concentrate today on procurement policy. Procurement principles are simple: the Government must give value for money; nothing must stand in the way of quality and suitability for job requirements; and if there can be spin-offs in terms of jobs, investment and technology transfer, so much the better. Our service people are our most precious resource. If we ask them to risk their lives on our behalf, they must have the best equipment, from aircraft to the tool box. We must give them the protection that they deserve by giving them the best.
I was fortunate to lead a debate in the House on 9 July when I stressed the importance of the Eurofighter project. It is a quality product. It was designed and built by Britain and Europe, and it represents a massive investment by our aerospace sector, both civil and military. It has also given a major boost to the associated industries, such as design, engineering and computing. Without their skills, the project would not have gone ahead and we would not have the success that has put us at the cutting edge of technology.
For example, the Computer Science Corporation might not have been sited in Chorley, if not for the proximity of Warton. Its IT know-how will now be transferred to other areas of the local, regional and national economy.
Other aerospace projects, such as the Airbus, benefit from the technology transfer—for example, in aerodynamics, avionics and navigation systems. That is especially true of the transfer of the FLA, which is a military project with a spin-off for civil aviation. The FLA is a military aircraft which easily becomes a civil aircraft for moving large amounts of cargo around the world. That is a massive market. The FLA has had some problems, but that is natural; it is still at the design stage. The flight control, engines and radar of the Eurofighter are all performing well and could easily be transferred.
The importance of air superiority to any campaign has been proved time and again in the Gulf and in Bosnia. Eurofighter is much cheaper to buy than the American F22, and is only marginally less capable. I congratulate the Prime Minister, the Government and the Opposition on their support on this important subject—the House has united for the benefit of Eurofighter, which would give us the technology to compete with the Americans.
I am delighted that the German Government have finally agreed to the project, ending years of doubt and speculation. At last, we see the green light. I look forward to the signing of the agreement to construct the aircraft, and to seeing it into service. We all look forward to that.
Like the Eurofighter, the FLA represents the future of the aerospace industry and can be developed for the dual use that I mentioned. Like Eurofighter, it has incidental spin-offs such as technological and engineering advances, which benefit the country. Like Eurofighter, it seems to be continually shrouded in doubt and subjected to unwarranted criticism.
For example, I was told that the FLA was deficient, because it cannot carry a tank; nor, however, can the C130J. The C130J cannot carry a Warrior infantry fighting vehicle, which is a crucial element of our infantry support and is being used extensively in the former Yugoslavia. The C130J is an updated 1960s plane.
The only transport aircraft that is capable of carrying the tank is the C17, which has 50 per cent. more capacity than the FLA, but is three times more expensive to buy, 269 and four times more expensive to run. It cannot meet the European staff requirement in terms of operation from short, soft or rough airstrips.
Other FLA advantages include twice the tonnage per day of the C130J, and 20 per cent. more types of equipment. It is more flexible and can be produced in transport, tanker or maritime patrol variants. It has 100 per cent. greater cargo box volume, 70 per cent. higher average payload per sortie and 20 per cent. higher cruise speed. It could bring up to £5 billion into the United Kingdom economy.
Those are the crucial facts. The global military transport market is estimated to be worth £40 billion. The FLA is a quality European product which has served our services well and would also be a big money spinner for us. The five European partners will now work together to assemble a proposal to define the FLA's performance, capability and production time scale.
Critics of the FLA and the Eurofighter do not seem to understand that, or perhaps they have a financial interest in competitors of British firms. It should be borne in mind that the transfer of technology to the next generation of Airbus will be considerable. The FLA will give us that crucial next generation of civil aircraft for Airbus. I believe that Airbus military will be the way forward for Europe.
§ Mr. Alan Clark (Kensington and Chelsea)
I hesitate to interrupt the hon. Gentleman's very interesting dissertation. I agree with many of the compliments that he has paid the future large aircraft, but it cannot carry a main battle tank, can it?
§ Mr. Hoyle
I shall Help the right hon. Gentleman by repeating what I said. We know that the FLA cannot carry a main battle tank, but we are buying the C130J, which also cannot carry a main battle tank. The FLA can carry everything except the main battle tank, but, as we have noticed, the main battle tank is not needed by a fast reaction force. Unfortunately, the C130J cannot carry many tanks either, so we must make a choice. I believe that the decision lies with the FLA, because the C130J cannot carry the infantry Warrior, which is important.
The delivery date for the C130Js that the UK is buying has yet to be confirmed. Is it true that they are suffering from technical problems? Is it true that they are still awaiting a licence from the United States Government? According to press reports, the planes are 17 months late already. Is that correct?
Airbus has proved that it can make a quality product in the civil sector and that it is capable of the same for the military transport sector. As well as BAe, other firms such as Rolls-Royce and Shorts would be given a secure future.
The ASTOR programme will create several thousand jobs in the north-west—for example, at Raytheon Corporate Jets in Chester. More than 50 companies in the north-west would benefit from the ASTOR programme. In discussions with Raytheon, it seems that the Government have three options—Raytheon, Lockheed Martin or JSTARS, which is already in service with the US air force.
The original competition was between Raytheon and Lockheed Martin. JSTARS should be considered too big, too expensive to run and too old to be brought in. Recently, however, JSTARS was brought back into the competition, which I consider a retrograde step.
270 Defence firms hate such instability. They are spending millions of pounds on projects lasting many years and requiring the highest technological advances. If the Government are to run a competition, it must be a fair one with clear guidelines, which must be adhered to. There is too much at stake, and a quality product cannot be produced unless suppliers have the stability to develop and deliver it.
Will the Government consider changing the parameters, to ensure that they are clearly restated for the participating firms? Will the Government learn that if they change the parameters, there must be open and clear reasons for doing so? They must be up-front about that.
I shall now deal with munitions supplies. Chorley was once the home of Royal Ordnance, which has been making munitions there since the war. The headquarters remains at Chorley and there are a couple of hundred jobs on site. The ability to manufacture and supply armaments and munitions to our services is surely a key part of our defence procurement. To get rid of that, or to place it with another country, would threaten our ability to defend ourselves.
The previous Government have a lot to answer for. They closed plants throughout the country and left us in our present predicament of open tendering for munitions. Surely the provision of ammunition and the associated capabilities of propellant and high explosives are central to our strategic capabilities.
The responsibility lies with the Government and British Aerospace, as owners of Royal Ordnance, to preserve that capability. The Government should try to buy British first and foremost, rather than inviting tenders from other countries, even if they are allies or friendly states, such as the US, Germany, Italy, South Africa and Belgium.
BAe wants to move to a joint venture between Royal Ordnance and SNPE and GIAT Industries of France. That would effectively move production to France, and we would lose the capability to equip our own armed forces. Our armaments production would be based in central France. We would lose the high-explosive works at Bridgwater, on which we are dependent. To give up our own high explosives would be wrong, and would make us dependent on suppliers around the world.
We would depend on France for everything containing explosives—bombs, warheads, missile propellant and even some small arms and gun propellant. If we lose that capability, we shall never be able to regain it. It is easier to maintain a site on this island than on the European mainland, as history has shown, or as Belgium showed by not supplying arms in time of war.
The French always want to take the HQ of any joint venture to France, and especially to Paris. Most mergers with French firms tend to become takeovers, rather than partnerships. Competition in defence procurement that robs this country of key skills and strips us of a key strategic armament capability cannot be allowed to proceed.
The Government should immediately review their policy of competition in this area. British Aerospace must abandon plans to close the Royal Ordnance plant at Bridgwater. BAe is always ready to knock on the doors of Members and ask for support, yet it is threatening to close a BAe company. It cannot have it both ways. If it wants the support of the House, BAe must keep that plant open. Never mind the blackmail tactics; BAe ought to 271 be up-front, keep the plant open, and work with the Government, not against the Government when that suits it. BAe should learn that quickly.
How many other NATO countries have abandoned their munitions production capability? Not many—in fact, none that I know of. The local unions at Bridgwater have produced alternatives to BAe's current plans, which maintain viability and independence. The unions should be heeded. Will the Minister consider those plans seriously?
I believe that we all recognise the need for an aircraft carrier: 2010 will soon be upon us and we now have the chance to procure a 40,000-tonne aircraft carrier. That is where the future lies. However, it is crucial that we get it right: there is big money involved. We must produce the right class of carrier. There are many hot spots around the world and we will need to maintain a floating land mass from which to exercise our forces. Offshore protection is particularly important, and it can be provided by a huge floating land mass.
We also have an opportunity to develop a naval version of Eurofighter. We have a wonderful aircraft coming on stream and everyone is talking about joint-strike aircraft. What better time to develop for the next century a naval version of Eurofighter that can work from a big aircraft carrier? A 40-tonne carrier would give us the opportunity to begin a joint-strike fighter programme to meet future carrier-borne aircraft need. That is the direction in which we should move. I hope that the Government will consider my views.
I turn now to the beyond-visual-range air-to-air missile. The choice of the Matra BAe Meteor solution for the Royal Air Force's staff requirement Air 2039, the primary armament for Eurofighter, provides a European solution for that key requirement. It gives an opportunity to provide a common weapon across the Eurofighter nations and a further opportunity to drive forward the consolidation of the missile sector of the European aerospace and defence industry. Matra of BAe Dynamics has already formed a further relationship with Dasa's LFK subsidiary, and the adoption of Meteor will bring France, Germany, Sweden, Italy and Spain into the project.
During the 1996 missile campaign, BAe stressed that it was important for the company to win two or three competitions in order to retain critical mass in key technology areas. Only Storm Shadow was awarded, so Meteor remains vital to the future of the United Kingdom's missile capability and to the retention of long-term jobs at Stevenage and at Lostock, which is about one mile from my constituency.
Ammunition capability in the United Kingdom is dear to the House and to the hearts of all hon. Members. If nothing else, we shall at least generate discussion today about that topic. Procurement is about the future of our armed forces. They deserve the best, and we have a golden opportunity to provide that. Smart procurement by smart Ministers will be the answer.
§ Mr. Nigel Evans (Ribble Valley)
Does the hon. Gentleman agree that it is strategically important to ensure that work on the Al Yamahma contract, EFA, the Tornado, Hawk and other aircraft production continues in and around my constituency? It is also important to retain research and development skills in that area in order to ensure that we secure alliances with other European countries in the future to produce aircraft such as the 272 European fighter aircraft. We must be able to look forward to whatever will replace EFA in 10, 15 or 20 years' time—we must remember that the EFA was 17 years in the making.
Does the hon. Gentleman agree that the Government must look now to maintaining Lancashire's existing defence manufacturing capability by ensuring that good orders are given to British companies with interest in the EFA and other defence aircraft, ships and munitions in the next 10 or 15 years? That will enable long-term planning by companies such as British Aerospace, and will secure the future of smaller companies that depend on the existence of those larger firms.
§ Mr. Hoyle
I welcome the hon. Member's remarks—and I welcome his conversion to Labour's procurement policy. I take on board his comments. We have the research facilities, the skills, and the development in the north-west: it would be madness to move it elsewhere. The Government are planning for the future. I am pleased that the hon. Gentleman supports that, and I look forward to his continuing support of the Government's policy. I cannot disagree with a word that the hon. Gentleman said.
§ Mr. Alan Clark (Kensington and Chelsea)
I commend the hon. Member for Chorley (Mr. Hoyle) for seeking an Adjournment debate on this important topic, and for the lucid and comprehensive way in which he set out his case. This topic must be approached from several different angles, and I caution the House against treating the defence industries in isolation as an engine of employment. The real importance of the defence industries is their high-technology and research qualities and that aspect of their function that keeps this country at the leading edge of the various technologies associated closely with the defence field. Maintaining those industries as consistent laboratories of research is just as important as retaining them simply as engines of employment, often making products that are either obsolete or obsolescent.
Before I go on, I must congratulate the hon. Gentleman on drawing the attention of the House to the fact that we are divesting ourselves of the capacity to make high explosives in this country. We must put that issue in an historic context and consider the events of the whole century—particularly some of the tremendous debates at the time of Lloyd George's Government, and, to a lesser extent, during the second world war, about the shell shortage and the need to produce bomb, missile and shell warheads. The very idea that, at the end of the century, the House of Commons should submit meekly to the fact that Britain is totally divesting itself of the capacity to make high explosives and delegating it to the French—of all people—is utterly incredible; it literally passes credibility. It is a commentary on the fact that fashion in opinion is everything; no one seems even to have noticed what is happening.
The defence industries are part of the whole defence policy structure which, if it is to be credible, must have input from the Foreign Office, which determines our long-term strategic objectives; from the Department of Trade and Industry, which is concerned about industrial capability and determines what capacities we must retain 273 at all costs in this country; and from the Ministry of Defence, which determines security requirements. The hon. Gentleman talked about buying British, and I endorse his remarks completely. However, one problem with competition and with foreign bids is that they never calculate the real costs—such as the costs of paying unemployment benefit in this country, the benefits of direct taxation levied on industrial activity in this country and so on. The costs are too net and they do not take on board the gross accounting. A responsible Government should consider those factors.
But it is no good buying British if the British are not producing what we need. Defence procurement projects develop their own momentum. Hon. Members on both sides of the House, such as the hon. Member for Chorley and my hon. Friend the Member for Ribble Valley (Mr. Evans), become greatly attached to such projects largely because of the employment implications for their constituencies. That is perfectly proper; it is how constituency Members of Parliament should respond to pressures. However, those pressures often become separated from the real consideration: the merit of the weapons involved.
As the hon. Gentleman and the Minister well know, MOD input in defence projects is driven by the Operational Requirements Committee, whose output has a very long gestation period. It comprises largely serving officers—who are often nearing the end of their careers and who are on secondment—and there is a perfunctory, and all too cursory, input from the chief scientific adviser. Broadly speaking, the Operational Requirements Committee conceives of weapons—it is a classic example of commitment to fight the next war with the weapons of the last war. The last war was the cold war, which we won—it was an almost bloodless victory. However, there is a huge time lag in which we become saddled with weapons that were conceived in a totally different context. At some point—I hope that this will be part of the review that the Secretary of State and his team are undertaking—there has to be a major strategic reappraisal of what our military function is meant to be.
As I understand it, the objective of the Foreign and Commonwealth Office is that our military capability should carry sufficient weight to merit our place on the Security Council of the United Nations, and, deriving from that, our place on the various other bodies that determine world policy, such as the Group of Seven, and so on. If we are to maintain this, our defence industries and our strategic posture will need a totally different configuration from that still being carried through, which is part of the old cold war configuration. I am in total agreement with the hon. Member for Chorley that, essentially, it has to be naval in its bias. If we are to justify our seat on the Security Council of the UN, we have to be able to take part as primary partners in any intervention or peacekeeping in distant waters, and for that it is essential that we have, for example, a fixed-wing carrier. We have to reconfigure the whole procurement strategy.
I have a series of tables that are absolutely terrifying. They show the amount that has been spent in the past eight years or so on major weapons products. Leaving out the unit costs of purchasing, more than £11 billion has been spent so far simply on aircraft and associated systems. The amount spent on the Navy and on naval 274 procurement is barely 15 per cent. of that. These are simply development costs and the very early stages of conception. The whole naval field has been completely neglected.
The House should remember that, at the time of our naval supremacy, when we really knew how to do it, and when there were a whole range of competing yards around the country, the building of the Dreadnought, which was the very first of its line—a completely revolutionary ship with turbine propulsion and heavy main armament—took exactly a year and a day from laying the keel to completion and commissioning. The tonnage was the same, and in many ways the throw power was the same, as a CVS carrier, whose replacement is a matter that the defence team now have to consider.
I hope that I can enlist the help of my hon. Friends and the hon. Gentleman to support a radical rethink by the Ministry of Defence about how we should restructure our strategic defence capability, and the direction in which we should focus our procurement. If some pain is caused—there may be job losses if we shift from one sector to another—the House has to accept it, providing that we retain at the backs of our minds always the need to keep certain capabilities in this country. I am particularly glad that the hon. Gentleman raised the extraordinary scandal of divesting ourselves of that very core element in our fighting capability—the ability to make high explosive.
§ 10.3 am
§ Mr. John Hutton (Barrow and Furness)
I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on initiating the debate. It is also a great pleasure to follow the right hon. Member for Kensington and Chelsea (Mr. Clark). Both my hon. Friend and the right hon. Gentleman spoke with a great deal of common sense.
I take much pleasure from the fact that there is an emerging consensus in the House about Britain's future defence requirements in terms of procurement and our longer-term strategic defence posture. I should point out to the right hon. Gentleman, who spoke very eloquently and with a great deal of knowledge, that, since the election of the Government on 1 May, we in this country are not suddenly divesting ourselves of our ability to procure ammunition. I am sad to say that it is a process for which the previous Government, in which he was a Minister, took a very significant responsibility. That leads me to make a wider point about procurement generally.
In shipbuilding, with which my constituency has a direct interest, the Government have inherited a pattern of defence procurement that worships dogma above common sense. Time after time, artificial competition exercises are manufactured between commercial entities to pursue what we believe to be value for money for the taxpayer. We all understand that value for the taxpayer is very important, but there are other ways of ensuring it than following a doctrine of artificial competition. The Ministry of Defence has evolved a sensible procedure to ensure value for money and state-of-the-art technology from the defence industry without the need to resort to artificial competition exercises.
I hope that the Minister will be able to say that the Government will explore seriously the benefit of widening the scope of the "no acceptable price, no contract"— NAPNOC—procedures. As the right hon. Member for Kensington and Chelsea rightly pointed out, in many areas 275 of the defence industry there is no effective competition, because of the restructuring of the industry. Hundreds of thousands of defence jobs have been lost in the industry since the early 1980s. If we constantly look to manufacture these competition exercises, we not only increase expenditure for the taxpayer but can delay important procurement decisions unnecessarily and end up with not very good value for money.
I am not saying that in some cases competition and a competitive tendering exercise are not important. I believe that they are. However, we should approach all the issues in defence procurement from the standpoint of common sense. I hope that, in some cases, common sense will lead us to conclude that, by developing the NAPNOC procedures—this particularly applies to shipbuilding—we can get better value for money and develop a more coherent relationship with the defence industry, which needs firm guidance from the Government about their long-term procurement requirements.
That is why I endorse the right hon. Gentleman's implicit welcome of the Government's strategic defence review, which will be important not only for putting our defence forces on to a proper basis to meet some of the very difficult threats and challenges that we will face in the next century, but will help the defence industry to wake up to the challenges. The review will require the defence industry to negotiate with the Government over a longer term, and with more certainty and confidence, about their future procurement requirements.
One lesson that we all learned in the 1980s and 1990s is that, with the best will in the world, it is impossible for the defence industry to survive on a diet of hot air and promises. People have to make things. As the right hon. Gentleman made clear, we cannot use the defence procurement budget simply to manufacture jobs. We all understand that. It has to be for a purpose.
Often, the attitude and stance of the previous Government made it very difficult for companies to plan over the long term, which is the basis on which all successful companies have to operate. The constantly changing agenda, delays in procurement and ineffective management of the budget all contributed to a very serious state of affairs for Britain's defence industries.
I also welcome my hon. Friend's surprising support for aircraft carriers. Although I had not expected him to mention them, I am delighted that he did. When we talk about Britain's future defence requirements, it is important that we recognise the central role of the Royal Navy. I also welcome what the right hon. Gentleman said about that. The figures that he quoted were significant. I used them in debates in the previous Parliament. Defence spending over the past 15 to 20 years has largely been at the expense of the Royal Navy, notwithstanding the rundown of the Trident programme. It is clear that the Royal Navy has borne the brunt of many of the reductions in defence spending in the past 15 to 20 years. That is a serious mistake.
I do not have any illusions of imperial grandeur, but I want Britain to pull its weight in the international community. We should support the United Nations properly and effectively when required. If we are to do that, we must have the ability to project force around the world, not threateningly—I am not arguing for that—but to support our international allies and to protect our allies around the world.
276 Amphibiosity is important. In my constituency, the first deal is now being cut for the new assault landing ships for the Royal Marines. That is a very welcome procurement. For amphibious forces to be effectively and safely deplored around the world, they will undeniably require aircraft protection. We will not always be able to rely on protection from land-based allies: we may be able to do so in some operations, but not in others. We would jeopardise the safety of any deployment if we proceeded without the effective provision of air cover. Some people may argue that our allies could provide that, and of course the United States navy has a significant carrier force. However, with the benefit of hindsight and prudence, it would be a mistake to assume that that cover will always be available.
That leads me to conclude that we should consider a replacement for Invincible class aircraft carriers. That is what my hon. Friend has concluded, and I hope that it is what other hon. Members will conclude. My hon. Friend referred to a carrier capable of carrying 40 aircraft. That is probably what we should be considering. The Invincible class, which carries a maximum of nine Harriers, is not really designed to perform a full air cover operation to protect amphibious landings. That is probably the most expensive decision that the Government will have to make as part of the strategic defence review: it is one of the key strategic challenges.
We can argue the toss about whether it should be a vertical, short take-off or more conventional, assisted take-off and landing aircraft carrier. Those operational considerations are largely secondary to the important strategic issue of whether we want British forces to be able to deploy safely and effectively around the world. I hope that my hon. Friend the Minister will explain the Government's view on those important issues.
I broadly welcome the Government's commitment to the establishment of a proper policy for defence diversification. We argued in the previous Parliament that the then Government had a special responsibility to the defence industry, given that they were essentially its only customer, and that they should give the industry practical help to cope with the significant downturn in defence spending.
That was not an appeal for an interventionist industrial policy based on some ancient dogma: far from it. It was a matter of common sense, because the defence industry was one of the few areas in which British companies had a leading edge, a technological advantage, a proven record of innovation, markets abroad and a reputation abroad that was second to none. I am afraid that there are few such sectors left in British industry. We felt that the defence industry was not properly supported and was not being allowed to make the necessary adjustments in an era of significant reductions in defence spending, which fell by a third under the previous Administration.
This Government's commitment to consult industries and others about the establishment of a defence diversification agency is welcome. I do not believe that it is a panacea, or that an agency on its own will be able fully to compensate for the job losses, because hundreds of thousands of jobs have been lost already due to the previous Administration's neglect. In my constituency, 10,000 jobs have been lost in the VSEL shipyard in Barrow-in-Furness since 1990.
277 However, evidence from successful practice in other countries shows that a defence diversification agency can help defence companies and others in a community affected by defence job losses to explore the best practical use of technology transfer initiatives. Some of the leading edge innovation in research and development that defence companies have undertaken can be transferred. We should explore the potential for commercial exploitation of those designs in the civil markets.
That will not be easy: I am not making false claims about what a defence diversification agency can do. However, it is completely unacceptable for a Government, who are the industry's only significant customer, to say to defence companies after years of an exclusive commercial relationship, "We're sorry, you're on your own now. We've decided to go elsewhere, and we're no longer interested in what happens to you." That is an unacceptable abdication of responsibility. I am delighted that this Government have broken with that neglect, and have taken a practical approach to diversification issues.
I made a plea earlier in this Parliament for a defence diversification agency to be based in my constituency. I know that the Minister will not be able to say anything about that matter today, but, with respect to my hon. Friend the Member for Chorley, my constituency is the most defence-dependent area in the United Kingdom. We look to the Government not only to make early progress on the establishment of an agency, but to give favourable consideration to putting it in my constituency.
With the strategic defence review, we have a unique opportunity to put the Government's relationship with the defence industry on a secure basis for the future. Clarity of objectives is crucial, so that we know exactly where the Government want to take us. The defence industry needs clarity and clear direction to be able to make the necessary plans for the future. The strategic defence review is overdue, and it is welcome in my constituency and elsewhere. I hope that the Minister will say a little more about the progress that is being made and about what we can expect from the review in the future.
§ Mr. John Greenway (Ryedale)
I am grateful for the opportunity to say a few words on a constituency matter. I congratulate the hon. Member for Chorley (Mr. Hoyle) on securing the debate. Two points that he made stand out and fit very well with the comments that I want to make.
First, I agree with him that we should support British defence jobs. I also agree with my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) that that does not mean that we should buy equipment that is of no use to our armed forces. However, if the armed forces desperately need equipment, and there is a British product of the highest quality that is better than anything else in the world, we should seek to procure it. That is a wide-ranging issue. There is a wide definition of what constitutes defence equipment. It embraces the aircraft on which pilots in our armed forces learn how to fly. It may look like an aircraft that we could fly at Blackbushe airport, but it is military equipment.
The other point that the hon. Gentleman made was that air superiority has been paramount in recent armed conflicts, of which we have had experience. It is important 278 for us to have the best fighter and combat aircraft. I listened carefully to what the hon. Gentleman said about the European fighter aircraft: I have generally supported that project. It goes without saying that air superiority requires our pilots to have the best possible training. I have two interests in that. During my first 10 years in the House, the RAF base at Linton-on-Ouse was in my constituency. The initial jet pilot training for the Royal Air Force is now carried out there. Sadly, I lost Linton-on-Ouse to the Vale of York. None the less, I take this opportunity to pay tribute to the tremendous work that is done there. It is the only major flight training school that we have, so it is important that it continues.
About two or three years ago, I took a small aircraft manufacturer in my constituency, Slingsby Aviation, to see the then Minister of State for Defence Procurement, Mr. Roger Freeman. We put to him the proposition that it would make sense financially for the RAF to scrap the Bulldog aircraft, which is used by the University Air Squadron, when it came up for its midlife refit, and to replace it with the Firefly aircraft, which already serves 11 air forces throughout the world. In addition, our armed forces had already acquired about 17 and were about to acquire a further 25 for the joint elementary flight training scheme. We suggested that the Firefly was a better aircraft and that better value for money would be obtained if it replaced the Bulldog. I should add that it is manufactured by Slingsby Aviation in Kirkbymoorside in my constituency and that it has proved to be successful.
It is a matter of record that a review was undertaken, and a decision was made to scrap the Bulldog and to replace it with a new aircraft. However, as the hon. Members for Chorley and for Barrow and Furness (Mr. Hutton) have said, the system by which aircraft are procured is crazy. We go through this charade of competitive bids. The Ministry of Defence buys nothing. It asks a contractor to supply aircraft for so many flying hours. It does not say which aircraft it prefers and we get into a downward spiral of bids, underbids and further underbids: achieving best value for money for the taxpayer seems to be the only criteria that really matters. Perhaps I exaggerate, but the fact is that, a year ago, it looked as though a decision on which aircraft would replace the Bulldog would be made within a matter of months, and here we are a year later and no final decision has been taken.
As the Under-Secretary of State for Defence will know, the evidence that we are able to deduce from the confidential competitive bidding system is that two aircraft have been proposed by the two contractors who have bid for the contract. One is the Firefly and the other is a German aircraft manufactured by Grob, which is to use a factory that, I understand, currently has no work and is empty. There have been suggestions and innuendo that Grob has benefited from some hidden subsidy. I do not know. I do not make that allegation. I simply want to say this to the Under-Secretary of State for Defence.
Over the past year or so, the armed forces have taken delivery through FRA Serco Hunting of 25 Firefly 260 aircraft. They fly 90 sorties a day through the joint elementary flight training scheme and we understand that the aircraft is proving extremely reliable and an excellent elementary flight training aircraft for military pilots.
§ Mr. Gerald Howarth (Aldershot)
Is my hon. Friend aware that, last Monday, I had the opportunity of flying 279 the aeroplane at Farnborough? As a former University Air Squadron pilot, I am the sort of chap who will be flying the Firefly. It is an extremely good aeroplane. It is not viceless, but it is important that an aeroplane that is used for elementary flight training should give the student pilot the opportunity to understand that an aeroplane can, in some circumstances, be vicious.
§ Mr. Greenway
I was aware of that and I am grateful to my hon. Friend and other Members for their support.
The aircraft speaks for itself. Our armed forces' experience of the aircraft suggests that there is no reason why it should not replace the Bulldog.
§ Mr. Greenway
I am grateful to the hon. Gentleman for his support. He mentioned the fact that the United States air force bought more than 100 Fireflys five years ago, for which the company involved won the Queen's award for exports. There have been three fatalities involving the aircraft in the United States, but I understand that every one was due to a lack of proper training by the flight instructors at one air base in the United States. Where the flight instructors have been properly trained, the aircraft has proved entirely satisfactory, so no one should suggest that there is anything fundamentally wrong with the Firefly. It is proving to be an excellent aircraft in our armed forces.
There is also the jobs factor. Already Slingsby Aviation has had to lay off staff because of a lack of orders. This is a niche market. It stands to reason that air forces throughout the world will buy these aircraft only from time to time. As I have said, Slingsby Aviation has supplied to 11 other countries and there are potential orders in the middle east, but, not surprisingly, countries there are looking with interest to see what our Government do. If the RAF does not invest its confidence in the Firefly aircraft and place an order for the 60 that are needed through one of the two contractors, all under the private finance initiative, those countries are bound to ask: why should we? That is an important point.
I do not want to press the Under-Secretary of State for Defence too hard because Ministers both in the previous Government and in this Government have understood the job implications of the decision, but I want him to be in no doubt that, this week, Slingsby Aviation has announced a further 20 redundancies. If the decision is not in its favour, I guess that, within two months, a further 42 staff will be made redundant. That will mean that all the people that Slingsby Aviation needs to build the aircraft will have been sacked.
That is the key point that the hon. Member for Chorley made. We have to protect our capability. Whether it is in building and manufacturing armaments that are occasionally needed by our armed forces in conflicts throughout the world, or the basic equipment with which we train our pilots, the argument is precisely the same.
I hope that Ministers will take control of the situation and intervene. Let us have an early announcement in favour of Firefly because, if we do not, the factory, 280 which has built an aircraft that is in service throughout the world, including the United States of America, will close and the capability will be lost. And for what? We might save a few pounds in the initial contracts, but I suspect that, over 25 years, the alternative would prove more expensive, not least because the Firefly is compatible with the joint elementary flight training scheme: it is used for all the elementary pilots trained in this country. That surely speaks for itself. I urge the Under-Secretary of State for Defence to take note of what I have said and to make an early decision in favour of Slingsby Aviation.
§ Mr. Robert Key (Salisbury)
I congratulate the hon. Member for Chorley (Mr. Hoyle) on seeking and on being successful in obtaining the debate, which is on an important sector of the British export industry. I note with care not only what he said about Royal Ordnance, but his wise words about keeping peace around the world.
It would help us to debate this whole issue more deeply if we could strip away the secrecy from the strategic defence review. For example, it would help if we could hear a little more about the foreign policy base lines because, until we do, we cannot begin to speculate on the future of amphibious capabilities, anti-submarine weapons, warfare tanks, regimental systems or anything else. I know that the Minister wants consensus and I dare say that that would be a very good thing, but we cannot go that far until we know what is going on in his mind. It is good to see him here again for another debate on this important issue. I am sorry that he could not fit in a visit to the IMDEX naval exhibition at Greenwich where many British shipbuilders were exhibiting—
§ The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar)
I must correct the hon. Gentleman. I did attend the exhibition and visited a number of stands.
§ Mr. Key
I am grateful for that information. Many people in the industry were not aware that the Minister had been there, and I was going to say that I know he has a tight schedule. I wanted to echo his colleagues who said that we must ensure that naval interests are not neglected. Thousands of companies which are members of the Defence Manufacturers Association and the Society of British Aerospace Companies keep hon. Members very well informed on these issues. They keep an eagle eye on what we do and say in the House, and rightly so.
Let us not forget that the industry is crucial, employing 415,000 people and generating more than £5.5 billion worth of exports. As my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) rightly said, we all have constituency interests in employment in defence, but that must not be the driving force. However, I pay tribute to the skills and experience of our world-beating British defence work force, to the scientists and engineers and to all the other staff behind them. It is easy to forget all those who make the industry tick, at whatever level they may serve. They have all created and assured the UK's dominant position in world markets. Their success is of direct benefit to the UK economy as a whole and to Britain's defence budget and defence capability.
What exactly is the Government's policy towards such a strategically and economically important section of British industry? I am concerned that there is a lacuna at 281 the moment. I noticed that a degree of complacency was beginning to creep into this excellent debate. We will not be doing the defence industry a favour if our speeches become nothing but self-congratulatory eulogies.
The Foreign Secretary announced in a blaze of publicity the existence of what he claims to be a new ethical foreign policy which would result in tougher guidelines on the export of defence equipment. I remind the House that the UK has had an ethical foreign policy for 50 years, since the United Kingdom signed up to article 51 of the United Nations charter—and for many years before that, for that matter. The Foreign Secretary's announcement was a relaunch, to put it charitably.
By October, however, the Foreign Secretary was being told by the Prime Minister to lay off arms sales. I welcome the fact that the Labour party is coming to understand the importance of defence exports, but are the Government going to offer any recompense to companies that have lost orders or had their reputations damaged as a result of the delay in the issuing of export licences? An industry survey last month repeatedly found that there were still enormous delays in the processing of open individual export licences, applications and renewals as a result of theludicrous over-bureaucratic requirements for end-user statements.The situation has worsened noticeably in recent months, with desk officers rejecting end-user statements on grounds that the industry regards as farcical.
In case the Minister should think that I am a recent convert to these arguments, I must say that I am not. I have been pressing the issue for some time, including with my colleagues in the previous Government. I ask the Minister to consider what I said on 14 October 1996 in the debate on the defence estimates. I said:Subject to the usual inspection and audit, and to severe penalties, there could be a self-licensing system for some exports. A grading system could be introduced in which grade A would involve the sale of non-offensive products to non-offensive countries, such as smoke grenades to Norway, Denmark or Canada; grade B would involve offensive products to non-offensive countries, such as high explosives to NATO countries; and grade C would embrace the sale of offensive products to special countries, which would require special treatment. In none of those cases would licences be granted to prohibited countries such as Iraq or Iran."—[Official Report, 14 October 1996; Vol. 282, c.5421It is time for another look at the matter. The Department of Trade and Industry claims to have been examining it for years, but nothing ever seems to get as far as Ministers' desks—it is time that it did. I hope that the Government will implement the Defence Manufacturers Association's suggestion that a standard end-user form should be introduced.
I hope that the Minister will pass on this information to the Foreign Secretary who amazed us on 25 November when he said in the House that he was not aware of any delay in the processing of export licences. On 28 October, the Minister warmly offered a generous apology to the House and to me because he had not heard about the increasing delays in export licensing. I understand that things are getting better, and I am delighted to hear it. However, a month later the Foreign Secretary had still not heard about the delay, although we are told that there is a foreign policy-led review. I also hope that the Minister will be able to tell us that additional manpower has been deployed to support the export licensing process.
282 We do not believe that the defence diversification agency is as necessary as the Government think it is. If it is to have any hope of success, the Secretary of State for Defence and the President of the Board of Trade will have to collaborate much more closely than they have been doing. It is important that we know—I should be grateful if the Minister could let us in on this—whether the Department of Trade and Industry has had a significant input into the strategic defence review. Has it submitted proposals? If so, how will they affect the defence industry.
It is tremendously important that we do not erode the defence science base in this country. I understand the concern felt by hon. Members of all parties who appreciate the need for the greatest technology to be moved into the civil sector as well the defence sector, but we must remember why that science and technology has been developed in the first place.
Our defence industry is being forced by the Government to ride out a period of unprecedented uncertainty. It started on 1 May and will not end until the Government reveal the results of the strategic defence review. In a written answer on 10 July, the Minister of State for the Armed Forces stated thatprocurement plans will …be considered as part of the Review, including projects already on contract."—[Official Report, 10 July 1997; Vol. 297, c.531.]Where does that leave the companies that are considering laying down expensive production equipment? Are they to go ahead and see their project cancelled, or wait, and thus delay the in-service date of essential equipment which, as we know, is one of the major nightmares of the industry? Does the Minister believe that the payment of cancellation costs is an appropriate use of taxpayers' money? Would those cancellation costs come out of the defence budget or out of the contingency reserve of the Treasury? These are the questions being asked by the industry.
In addition, defence companies, like British industry as a whole, are labouring under the difficulties caused by the Chancellor's mishandling of the economy. The strong pound and rising interest rates make British exports more expensive to foreign purchasers, and our competitors reap the benefits. The changes announced to company taxation by the Chancellor in his pre-Budget statement last week also had a detrimental effect on financial planning and project management in the defence industry.
During the change-over period in the method of payment of corporation tax, British industry will have to pay £2 billion more in taxation. Defence companies in particular have long lead times on projects and large capital expenditure on equipment, an investment which in some cases is not repaid for a decade or more.
The Chancellor has shown what he thinks of the defence industry by switching funds from defence and nuclear programmes to other Labour ideological idols—all this before even stage 1 of the strategic defence review has been published. The Secretary of State for Defence has capitulated to the Treasury by admitting thatwe cannot realistically expect more funds for defence".That leads one to question why the Government are holding a defence review at all if they have already decided that defence will not benefit from the comprehensive spending review.
The Minister without Portfolio said on "Question Time" recently that while the Government would stick to Conservative spending plans, they would be moving funds 283 from Department to Department—perhaps from vital national security programmes to his dome. Bearing in mind the fact that the Chancellor has already shown that defence is not one of his priorities, should we expect the Government to continue raiding the defence budget, as they did recently under the guise of a "fine" to pay for the Chancellor's 10p tax band? We then had "smart procurement", which I fear is another soundbite policy. I do hope, however, that the newly created National Defence Industries Council will facilitate new dialogue and not merely be another talking shop.
I realise that the important element of the new policy is to encourage further European collaboration on defence projects. Conservative Members fully support policies that will lead to more cost-effective defence products, but I am concerned that such a policy could result in a "buy European at any cost" policy and the erection of a fortress Europe in defence procurement. Have the Government taken note of the comments made by Terry Dambusch, the United States ambassador to the Netherlands, at a recent defence exhibition there? He expressed concern that the formation of a western European armaments organisation and the Organisme Conjoint de Co-opération en matiere d' Armamént signal the beginnings of projectionist national preference rules.
The result of such a policy would surely be to encourage isolationist sentiment on Capitol hill and damage attempts by United States companies, such as Lockheed Martin—a company with much investment in this country—to ease the American military's policy of buy American. A transatlantic defence trade war would put at risk international defence procurement partnerships, and it would result in higher prices for military equipment world wide and a lack of UK access to US technology.
We should therefore strive to include rather than exclude United States defence companies from the European defence market, especially when the United Kingdom is trying to become involved with the joint strike fighter project.
We should always try to involve potential partners at an early stage in the development cycle. International co-operation can be successful only if it is begun at the developmental phase. Too often, co-operation begun after that phase will generally result, as all hon. Members know, in a product that is delayed, expensive and unable to meet all operational requirements.
As we end this year, I look forward to the Government ending uncertainty in the defence industry by drawing their strategic defence review to a rapid conclusion and by promoting genuine international co-operation within that global industry. The United Kingdom defence industry is a great one. There is great support for it on both sides of the House, and I look forward to many more debates on the subject. The time is coming, however, when the Government will have to give some answers.
§ The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar)
I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on securing this debate and on his vigorously presented case on behalf of the defence industry and its employees, especially those involved in the Eurofighter and future large aircraft programmes and the aerospace industry.
As the United Kingdom industry's biggest single customer, my Department is acutely aware of how important our decisions are to our suppliers. As the right 284 hon. Member for Kensington and Chelsea (Mr. Clark) rightly pointed out, the prime responsibility of the Ministry of Defence is to obtain equipment that is fit for its purpose at a proper price and is suitable for the operations of our armed forces. We must also be mindful, however, of the impact on industry and of industry's future ability to supply our forces. It is for that reason that we have instigated the widest possible consultation process with defence industry employers and trade unions, ensuring that they are fully aware of our needs, and we of theirs.
We are similarly very conscious of the fact that the British defence industry has to operate and be competitive in a contracting international marketplace, which is now dominated by vast American defence conglomerates.
Let us, however, be clear about the matter. Despite the reductions that the industry has faced, defence is still very big business. Nationally, the defence industry involves 11,000 companies that employ well over 400,000 people, which is 10 per cent. of the UK's industrial manufacturing work force. The industry exports some 30 per cent. of its total output. In 1996, it won more than 25 per cent. of the world market for defence orders, which was second only to the United States. That is a proud record of British achievement.
I very much took on board the points made by the hon. Member for Salisbury (Mr. Key) and welcome his comments about improvements in the licensing system. The Government certainly understand companies' concerns. As my hon. Friend the Minister for Small Firms, Trade and Industry outlined in her written answer of 25 November 1997, every effort is being made to reduce the processing time involved in considering export licence applications. We are not being complacent about the matter, and we are in regular contact with industry to ensure that further progress is made and that British industry is not disadvantaged.
In the north-west, as my hon. Friend the Member for Chorley keeps reminding me, the defence industry is extremely important. It supports directly or indirectly about 70,000 manufacturing jobs, involving an estimated 600 companies. Although we rightly acknowledge the importance of prime contractors such as British Aerospace, with its major presence in the north-west, we must also stress the key role of the many subcontractors, many of whom are world leaders in their field.
Nevertheless, the big contracts are also extremely important. Like my hon. Friend the Member for Chorley, I am delighted that, last week, the German Bundestag approved funding for Eurofighter production. The project will, of course, be an immense benefit to the UK defence industry, particularly in the north-west.
§ Mr. David Borrow (South Ribble)
I very much welcome confirmation of the Eurofighter order. I wonder, however, whether my hon. Friend the Minister will be prepared to make a few comments about the links between the civil and military sides of much of the defence industry? In my constituency, for example, Leyland trucks—which is perceived as a civil manufacturer—produces military trucks and is partly dependent on defence orders. In British Aerospace, the links between the civil side—for example, vis-à-vis Airbus and the FLA—and the military side are also very important. Decisions made by the Ministry of Defence therefore have 285 important consequences for non-military industry. Those links, and the links between the MOD and the DTI should be emphasised in this debate.
§ Mr. Spellar
I thank my hon. Friend not only for his intervention but for the strong interest that he has taken in the subject since being elected to the House and for the strong way in which he has championed the industry. He is absolutely right that maintenance of the industrial base and supply chain and the interaction between the civil and military sides of many of those companies is an important feature of the defence industry. We are mindful of that feature, and we certainly take it into account in our deliberations—not least those on the strategic defence review.
In the more general context of the SDR, the House will be aware that, in May, my right hon. Friend the Secretary of State announced that we would be implementing an SDR—the major reappraisal mentioned by the right hon. Member for Kensington and Chelsea. I tell the hon. Member for Salisbury that, in the past few months, the Secretary of State has made keynote addresses—not least that at the Royal United Services Institute—that have clearly indicated the directions in which policy is going. I think that most hon. Members have welcomed such indications.
I hope that my hon. Friends are in no doubt about the importance that the Government attach, in the context of the strategic defence review, to improvements to our procurement processes.
In the defence policy debate, on 28 October 1997, I listed the goal of the smart procurement element of the review. We want faster, cheaper and better defence procurement through development of a range of modern, streamlined procurement techniques. Achieving our goal will allow us not only to keep up with technology but to work in a more integrated way with industry, to meet the requirements of modern armed forces.
As our work has proceeded, it has become very clear that we have to take a wide-ranging view of defence procurement. Procurement is not only about the way in which contracts are placed, but about the way in which requirements for equipment are drawn up, the way in which technology is harnessed, and the way in which the problems of maintaining equipment during its life are addressed.
We are examining how the MOD's procurement policies work, and 1 very much take on board the point made by the right hon. Member for Kensington and Chelsea about the need for interaction with the operational requirements side of the business. We must also, however, specifically tie in our policies with the part that industry has to play. A vital component of that work will be to re-examine the way in which the MOD and industry can work together to secure value for money and to ensure timely delivery of world-class equipment for our armed forces.
On 13 November 1997, my right hon. Friend the Secretary of State announced a further extension of that work, to examine more fundamentally the organisational structures supporting the totality of the procurement cycle, in which we are again working closely with industry. I take the point made by the hon. Member for Salisbury 286 about the active role played by the National Defence Industries Council in the process. We will examine the smart procurement partnership—a section of the review that I am overseeing. That is further proof, if any were needed, of our recognition, in government as well as in opposition, of the benefits to the UK of a strong, capable and competitive defence industry. Ours is a commitment to deliver measurable improvements to our procurement performance and value for money to the customer, the armed forces and the taxpayer.
The key theme that is emerging is that, without in any way relaxing the necessary, tight commercial discipline of the relationship between the MOD and industry, there is a need to work together in a more systematic and integrated fashion. We need to see ourselves as partners, each with a stake in undertaking procurement better. The work that we have put in place will examine not only the roles that all relevant parts of the MOD play but the contribution that industry can make. I take the points made by my hon. Friend the Member for Barrow and Furness (Mr. Hutton) in that respect. It is essential that full account is taken of best practice across the international scene in industry and other procurement organisations.
This new and constructive relationship marks a step change in the way in which the MOD and industry work together, and will make an important contribution to tackling our procurement problems. As hon. Members have mentioned, it will enable industry to plan better on the basis of a more transparent approach and make a more long-term response.
Industry, for its part, has stated that, on the basis of such an approach, it can deliver considerable improvements in the cost of projects, especially in that vexed problem of the time scale required for bringing equipment into service. We shall work together to achieve the means of putting that commitment into practice. It is an ambitious agenda, but it underlines our determination to tackle hard problems in the strategic defence review.
I turn to industrial restructuring, which is in many ways at the heart of this debate. When winding up the defence policy debate on 28 October, I said:On the future of the UK defence industry in the global marketplace, one of the policy principles underpinning the strategic defence review is the Government's commitment—previously made in opposition—to a strong, capable and competitive UK defence industry."—[Official Report, 28 October 1997; Vol. 299, c. 806.]A strong and capable defence industry is very important to the nation and our economy. Not only does it help to meet the nation's defence needs, but it employs hundreds of thousands of people, has a healthy trade surplus, as I have mentioned, and provides the sort of highly skilled, high-technology jobs that we want to encourage and which are the key to the Government's commitment to rebuild Britain's manufacturing base. The industry also has a commendable record of training at all levels.
We must widen the focus of the debate to consider the defence market in a broader context than just the United Kingdom. That has to an extent been forced on us by the creation in the United States of the defence giants, Lockheed Martin, Boeing, McDonnell Douglas and Raytheon Hughes. It is also a natural progression, as collaborative projects become much more common and technological demands of such projects increase. Europe needs internationally competitive companies to enable us to compete and collaborate with the American giants.
287 The Government have a legitimate interest in the future of the defence industry. As its principal customers, the decisions that we make inevitably have a considerable impact in shaping the marketplace in which the industries and companies operate. The failure to acknowledge that was one of the core weaknesses of the previous Administration's procurement policy.
We also recognise the evolution in the industry and the need to diversify. That was strongly brought out by my hon. Friend the Member for Barrow and Furness, who went on to bid for the headquarters of the defence diversification agency to be sited in his constituency. I shall put that bid with the considerable number of others that I have received on each occasion that I have spoken about the agency. My hon. Friend made a strong point about Barrow's commitment to the defence industry and its strong reliance on it.
We said on diversification in our manifesto:We support a strong UK defence industry, which is a strategic part of our industrial base as well as our defence effort. We believe that part of its expertise can be extended to civilian use through a defence diversification agency.In meeting the needs of our armed forces, the MOD has made a substantial and significant investment in advanced technology. The hon. Member for Aldershot (Mr. Howarth) represents a considerable number of personnel who have been involved in such investment through the Defence Evaluation and Research Agency.
§ Mr. Gerald Howarth
I thank the Minister for his comments. In considering the diversification agency, will he acknowledge that the Defence Evaluation and Research Agency is already very conscious that it is the possessor of much valuable technology that has application in the civilian field and that it is working extremely hard and producing results? In a sense, would not the defence diversification agency replicate what the DERA is already doing?
§ Mr. Spellar
I do not wish to pre-empt the outcome of the Green Paper on the defence diversification agency. The hon. Gentleman will know that we have already acknowledged the considerable role played by DERA and our intention to build in best practice in our application of the defence diversification agency. This is about applying the fruits of investment and technology in the civil sector of the industry, spreading the technological processes and skills that have been developed for defence into new civil markets, which can strengthen the industrial base—and, indeed, the defence industrial base—as well as contribute to Britain' s improved economic performance.
The Government are obviously alert to the problems associated with broader restructuring. We want the process of restructuring to continue. After all, as my right hon. Friend the Secretary of State has said:Europe's defence industry must rationalise or die.The shape of any restructured industry is a commercial decision for companies, but the role that the Government can and will play is to establish the necessary international framework and agreements to facilitate change. We can and will continue to establish a clear policy framework in which industry can make sensible decisions on how to restructure.
As my hon. Friend the Member for Chorley is aware, collaboration between nations on major procurement projects, such as Eurofighter and the future large aircraft, 288 will become increasingly important. In future, and in order to facilitate such collaborative projects, OCCAR—I am delighted that the hon. Member for Salisbury (Mr. Key) pronounced it in full, which spares me from doing so—the four-nation armament structure created by France, Germany, Italy and the UK, will offer a real opportunity to realise the long-term benefits of collaborative projects through improved management. We look forward to the excellent work that it will be undertaking.
Obviously and rightly, due to the interests in the north-west, my hon. Friend the Member for Chorley stressed the position on Eurofighter. The Government remain firmly committed to the Eurofighter programme and have made that position clear on a number of occasions in the House and elsewhere both before and since the election. I certainly recall the Adjournment debate that my hon. Friend secured in July, in which we said that Eurofighter would form the primary component of the RAF's fighting capability. We are all pleased to have heard the good news from Bonn last week that the Bundestag voted for the eurofighter programme. That positive development means that Germany is committed to future phases of the programme. We are now consulting our colleagues in Germany, Italy and Spain with the aim of signing the intergovernmental arrangements known as the memoranda of understanding for the production and in-service support phases of the programme.
My hon. Friend the Member for Chorley mentioned the future large aircraft. As he knows, the Secretary of State announced on 31 July that we would join our partners in issuing a "request for proposals" to Airbus military company for the future large aircraft. Although the Airbus military company has not yet been formally incorporated, the request for proposals was issued on a provisional basis to the potential partner companies on 4 September. I should however stress that neither the UK nor any of its partners is at this stage committed to a purchase. Indeed, our decision in July made clear the need to maintain competitive pressures in order to ensure best value for money. The companies involved—Airbus and British Aerospace, which are world class and regularly compete successfully in the civil market—have a clear opportunity with the FLA to show that they can develop a world-class contender for the military market.
The hon. Member for Ryedale (Mr. Greenway) mentioned the Bulldog replacement programme. He rightly pointed out that we are not buying new aircraft and plan instead to buy flying hours from a contractor. The contractor will provide the aircraft and be entirely responsible for maintenance and a range of other support services. As the hon. Member rightly said, the aircraft being considered are two variants of the Slingsby Aviation Firefly and the German Grob. The Firefly is a good aircraft. Slingsby Aviation has exported it to several countries, including the United States. The Ministry of Defence is strongly supporting those export efforts. The RAF is familiar with the Firefly, which is used by the joint elementary flying training squadron. The final decision has not yet been made, but I assure my hon. Friend the Member for Chorley that the points that he has raised will be taken into account. I shall have to write to hon. Members about the points that have been raised about Royal Ordnance. Those considerations are part of our deliberations.
289 I assure my hon. Friend and the House that the Government are committed to a strong, capable defence industry. Tomorrow's defence industry will be different from today's, but we are convinced that our world-class industries and their employees will be equal to the changes that they face. The Government will be backing them.