Defence Equipment

HC Deb 26 April 1999 vol 330 cc47-117

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

5.5 pm

The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar)

Following the Prime Minister's statement earlier this afternoon, I am sure that I have the support of the whole House in beginning this debate on defence equipment by paying tribute to our service men and women who are currently deployed on NATO operations in the Balkans. They are, once again, earning not only our admiration, but that of the whole world for their dedication, courage and professionalism. The fact that so many of our young service men and women are deployed on a variety of missions in the Balkans brings home to us, yet again, how important it is to ensure that they are provided with the equipment they need to do the jobs that we ask of them— we take that responsibility very seriously.

A recurring feature of debates about defence equipment has tended to be long, but by no means comprehensive, lists of new equipment that we are buying or are considering buying. That is natural, as is the considerable concern expressed by individual Members of Parliament about programmes that are important to workers or companies in their constituencies. I hope to address today some of the most topical and significant of those programmes.

However, I will also outline some of the steps that we have taken to improve the process by which we supply our front-line forces with the tools that they need to do their job. This must be a seamless process from cradle to grave. It includes not only specifying and purchasing equipment from manufacturers, but maintaining and managing that equipment throughout its life. In parallel, we are also reforming the way in which we run our construction projects and services, on which we spend some £1.5 billion a year. We are drawing heavily on the recommendations made by Sir John Egan in his "Rethinking Construction" report, and taking forward the initiative led by the Deputy Prime Minister and the Department of the Environment, Transport and the Regions. We intend that the Ministry of Defence will be clearly recognised as a best-practice client in construction.

The theme that unites all those reforms is that we identify best practice in Government or the private sector, here or overseas, and work it into an acquisition process that delivers solutions to defence requirements faster, more cheaply and better. We started that process in opposition and, in consultation with industry and trade unions, and with good consultancy support, we developed those ideas and carried them through into a blueprint for modernisation in the strategic defence review. It is yet another item on our agenda for modernising government, which will deliver more responsive and effective public services for Britain in the new millennium.

The SDR involved a fundamental reappraisal of our defence roles, re-evaluating from first principles what we will require from our armed forces in the new millennium. The outcome was a comprehensive and coherent account of our plans for the future capabilities of the armed forces.

However, as my right hon. Friend the Secretary of State said when introducing the debate on the strategic defence review last autumn: it is not enough to set the right course. What really matters is to see that course through."—[Official Report, 19 October 1998; Vol. 317, c. 971.]

In that context, I start by focusing on smart procurement. One of the key differences between this and previous attempts to reform defence procurement—which we have drawn on freely—has been the creation of an implementation team to drive the changes through. That has been mirrored in defence logistics and the SDR as a whole.

When we announced the outcome of the review to the House last July—[Interruption.] Does the right hon. Member for Bridgwater (Mr. King) wish to intervene? What a shame—I was preparing an excellent riposte.

Mr. Michael Colvin (Romsey)

On the issue of smart procurement, will the Minister confirm that the anticipated savings over the three years of SDR are £2 billion? Are the Government on target to make those savings?

Mr. Spellar

Later in my speech, I will reveal how well we are on target to make those savings—indeed, we hope to exceed that figure.

When we announced the outcome of the review to the House last July, we promised to modernise defence by making a number of significant improvements in the way in which we do business. We emphasised our determination to obtain maximum value from every pound of taxpayers' money that is spent on defence. That means equipping, training and supporting the armed forces as cost-effectively as possible.

The reforms launched by the smart procurement initiative—a key element in our review—were long overdue. Members on all sides of the House have become tired of hearing in recent years of cost overruns and delays on major defence projects, leading to waste for the taxpayer and depriving our armed forces of the equipment that they need.

Of course, it would be wrong to suggest that every procurement programme went badly. For example, the recent acquisition of a capability to launch cruise missiles from our fleet submarines has been a notable success. The contract was let in 1995; a demanding timetable was set down, and successful test firings took place in November 1998, on the exact day that had been specified three years earlier. The House will know that HMS Splendid has been employing the system operationally over the past few weeks in support of operations in the Balkans.

Mr. Harry Cohen (Leyton and Wanstead)

Will the Minister state how many British cruise missiles have been fired in the current conflict over Kosovo, and whether it is likely that we shall have to purchase more such missiles?

Mr. Spellar

No, for reasons that I suspect my hon. Friend and others will understand, I shall not state how many cruise missiles have been fired.

I would not wish to suggest that the defence procurement task is easy. Many of the projects in our equipment programme are at the leading edge of current technology. They often involve complex and hard-fought competitions between some of the world's largest companies. In some cases, their costs run into billions of pounds. That makes us all the more determined to achieve the goals of the smart procurement initiative.

We examined how, over recent years, industry had changed the way in which it managed its relationships with suppliers. We recognised the advantages of partnership over confrontation which, with an atmosphere of greater transparency and trust, we hope will deliver improved performance and shared benefits.

That means that there will be more investment in the early stages of projects, with trade—offs between military requirements, time and costs, to enable more rapid, less risky development. Projects will be managed by integrated project teams—IPTs—with an empowered team leader. Those teams will include all stakeholders, including industry, except during competitive phases. We anticipate that some team leaders will be appointed from industry, through open competition. There will be more use of partnering arrangements with the private sector, including the private finance initiative. We shall exploit new procurement techniques, including incremental acquisition.

Clearly, a new organisation was required to implement such a radical programme of change. That will mean a single customer for the equipment programme in MOD headquarters, bringing together the staff who identify new equipment requirements and those who allocate resources for them. IPTs will bring together all the skills necessary for the successful running of a project. Those teams will be led by an empowered team leader with the authority to make trade-offs against performance, cost and time, within boundaries set by the customer. Other key features include more investment in the early stages of projects and a flexible, streamlined and modern approach to the running of the procurement organisation.

We have achieved a great deal since last summer towards reaching the goals of smart procurement. On 1 April, on schedule, we launched the Defence Procurement Agency. We have piloted the new processes and structures on 10 projects. We have formed integrated project teams made up of specialists responsible for every aspect of acquisition activity, operational requirements, scientific analysis, procurement contracts, finance and integrated logistics. I stress that those teams will have representation from industry except during competitions.

As a result of the pilots, we know that we are on track to deliver the £2 billion of savings over 10 years which we promised would be achieved through smart procurement.

Mr. Tam Da!yell (Linlithgow)

Before my hon. Friend leaves the subject of scientific analysis, will he tell the House what scientists say about the use of depleted uranium in armour-piercing shells?

Mr. Spellar

That is not part of the acquisition process and is not a matter for those teams, but I understand that our scientists have published a paper on the use of depleted uranium which is in the public domain. If my hon. Friend has any questions arising from that, I am sure that our people would be more than happy to reply.

The IPTs have also identified significant opportunities to get equipment into service faster, or—for equipment already in service—to improve its availability and reliability. For example, the type 23 frigate IPT is looking to reduce the length of an upgrade programme by about 30 per cent. The VC 10 IPT has already identified initiatives to achieve a 10 per cent. increase in serviceability.

During April, we have launched the first wave of IPTs covering another 23 projects or groups of projects in the Defence Procurement Agency and in the new Defence Logistics Organisation. Other projects will migrate to that new structure over the coming year in two further waves, with about 150 teams forming in all—about 90 in the Defence Procurement Agency and 60 in the Defence Logistics Organisation. Given the success of the pilots, we can expect further significant savings, faster procurement and improved availability.

Smart procurement is also about a new relationship with our suppliers. Industry's involvement at an early stage will encourage its participation in the key process of trading off time, performance and whole-life costs. It will help us to produce solutions to military requirements that are better tuned to industrial and technological realities, so that we do not pay an unnecessary premium or introduce unmanageable risk to achieve the last small bit of performance.

Let me clarify what I mean by "our suppliers". There is understandable concern among small and medium-sized companies that this process will involve the large project integrators, but not them. On the contrary, we believe that the real benefits of smart procurement will come only if there is real partnership throughout the supply chain. We shall make that very clear to industry because we recognise the huge contribution that small and medium enterprises make to the competence of our defence industry, and to the whole economy.

Competition will remain at the heart of our strategy to obtain best value for money, but it will be used flexibly. Our aim is to foster an enhanced partnership with industry, reduce risk, encourage innovation and increase the competitiveness of a defence industry that generates about £5 billion in export orders for the United Kingdom each year, and last year achieved 26 per cent. of world exports in that field. Such a programme is a great opportunity for the British defence industry and for its highly skilled work force, on whom it depends.

However, smart procurement is also about being more willing to accept that not every programme that we initiate will progress as planned—and being more willing to change our plans and approach, if that is what success requires, before making the major financial commitment to new projects.

In that context, many hon. Members will be aware of our increasing concerns over the progress of a programme that we inherited, the common new generation frigate programme—a major collaborative project with France and Italy. The project comprises two elements: a medium-range air defence system known as the principal anti-air-missile system—PAAMS—and the warship on which to deploy it, known as Horizon.

The PAAMS project, in which Matra-BAe Dynamics is a key industrial partner, has made excellent progress. Detailed proposals have now been received from industry and, subject to national approval processes by the three nations concerned, we have decided with our partners to move quickly to place the contract for the development of PAAMS.

However, the partners have now concluded, in light of the industrial proposals that we have received, that it would not be cost-effective to pursue a single prime contract for the warship. The three nations will, however, continue to build on the tri-national project work already carried out, and will pursue opportunities for co-operative procurement in equipping those vessels.

Mr. John Wilkinson (Ruislip-Northwood)

The hon. Gentleman is making an announcement of immense industrial importance because he is saying that the tri-national Horizon programme has essentially folded, although the missile system for a future vessel could be common. Has he considered the employment aspect of that? Is he now hopeful that British yards—in pursuing, I presume, a national solution to build the hull and related systems—will have a greater opportunity for work in this country? From the outset, work share was an inherent difficulty in the programme.

Mr. Spellar

I thank the hon. Gentleman for his welcome for that announcement, although we have always believed that British warships would be built in British yards. I accept that one part of the programme made much greater progress than the other. That has enabled us to initial the PAAMS part of the programme. On the Horizon side—the ship side—we are still building on the work that was undertaken. We shall do so within national programmes, but still working on the tri-national project work and reaping the benefit of the work that has been undertaken on that.

Mr. Menzies Campbell (North-East Fife)

Perhaps I should begin by apologising for not being present when the Minister began his speech. I was engaged elsewhere. As has just been said, the Minister has made an announcement of considerable importance. Following the failure of the NATO frigate for the 1990s programme, two consecutive programmes designed to produce common procurement for naval vessels have not been successful. Will the Minister say a little more about what he means by national use of existing work? Are we talking about a new design or an adaptation of the Horizon design in so far as that had been progressed?

Mr. Spellar

We are waiting for industry to respond to invitations to come back with proposals to construct the ships to carry the extremely effective PAAMS equipment. We inherited the programme, with the difficulties that have become clear. The hon. Member for Mid-Norfolk (Mr. Simpson) will not know about this issue because he was not a Member in the previous Parliament, but many of us will recall the debates that took place. We believe, in agreement with our partners in France and Italy, that we have arrived at an effective and positive resolution of the difficulties, and one that we are able to take forward.

As my right hon. Friend the Secretary of State—

Mr. John Maples (Stratford-on-Avon)

rose—

Mr. Crispin Blunt (Reigate)

rose—

Mr. Spellar

I shall return to the point in a moment.

As my right hon. Friend has commented: We now have a very good result for the navies and industries of the three nations, and for European defence. The PAAMS missile system will provide a powerful air defence capability for the Royal Navy which will be simply the best in the world and will be effective well into the next century. The advanced technology and the employment which this multi-billion pound project will provide will help to keep Britain in the front rank of the aerospace and the electronics industry.

Mr. Maples

The Minister talks about a successful outcome, but it is not. It is not a successful outcome for future multinational projects and it is disappointing. It would be interesting if the Minister were to go into a little more of his reasoning and explain why he thinks that collaboration has been successful on the anti-air-missile project, but not on the ship. One would think that in some ways, building a ship was rather easier than building an anti-air-missile system. Why does the Minister think that collaboration has been successful on one aspect of the project and not on the other, and what lessons are there to learn for future potential multinational projects?

Mr. Spellar

The key lesson to be learned is that joint collaboration requires joint work on all sides. That ties in very much with the theme that I was developing earlier. The essence of modern procurement requires a good working relationship between the customer and the supplier. I think that the working relationship on the supplier side on the PAAMS project was possibly much better than on the shipbuilding side. There are lessons to be learned and we shall be drawing on them in the near future when considering how we can be more effective on multinational procurement.

As the hon. Gentleman knows, we estimate that about 40 per cent. of our future equipment orders will be placed on a collaborative basis. We need to draw lessons from failures and from successes in deciding how we proceed with future programmes. However, we have managed to achieve an effective result that is good news for the Royal Navy, and we shall be able to move forward with the programme.

Mr. Blunt

What is the expected in-service date of the ships and the missiles? Is there any chance of the missiles arriving before the ships?

Mr. Spellar

Conservative Members were responsible for the early stages of the programme. They resolutely refused to listen in debate after debate when questions were raised to the effect that the programme was going wrong, and took no action. We have taken over the programme and have achieved an effective resolution of it, so I find it extraordinary that they want to make such a meal of the matter. I should have thought that Conservative Members, as a matter of decency, would want to pass this by and move on to some other area—they were absolutely responsible. I anticipate that we shall try to build and equip the boats at the same time, and we are looking at an in-service date of towards 2006.

Mr. Menzies Campbell

I am sorry to press the Minister, but the announcement has considerable significance. What are the consequences for capability in the meantime? The vessel was designed to replace the type 42s. Will we have to stretch the lives of some of the type 42s; if so, with what consequences for capability?

Mr. Spellar

The right hon. and learned Gentleman is exactly right—we will have to stretch some of the operations of existing vessels. That is precisely the problem that we inherited and we have managed to get it sorted out. I should have thought that Conservative Members would be congratulating us on that and, as a matter of decency, they should be reticent about their role.

I want to leave the House in no doubt that we remain fully committed to the principles and practice of collaboration, which is increasingly important in our forward equipment programme. Our membership, with France, Germany and Italy, of the joint equipment organisation known as OCCAR presents a real opportunity to establish improved collaborative practices that deliver value for money.

Hon. Members will know that we and our partners have placed the counter battery radar programme, known as COBRA, under the supervision of OCCAR. We shall continue to pursue common objectives in OCCAR with our partners.

Mr. Tom King (Bridgwater)

The Minister has raised the question of collaborative projects. Does smart procurement include security of supply? I declare my constituency interest in Royal Ordnance, but I also make a serious national point. If there is one lesson to draw from the present events in the Balkans, which follow the Gulf war and the Falklands war, it is how different each of those actions was, that our partners in each were totally different and that it is impossible to predict which countries could be considered to be a certain, secure and willing source of supply in any future difficulty that we might face. In respect of munitions and the point that has been made about Royal Ordnance, what consideration has been given to ensuring that we have not only security of supply, but security of resupply, if we need to reorder during an emergency?

Mr. Spellar

As the right hon. Gentleman will know from his experience, resupply in such circumstances is nearly always from stock rather than from reproduction. He will know from his own time in office that that was certainly the case within the time scales of nearly all the operations that we have experienced. He will also recognise that there has been a considerable reduction in demand for munitions—not only in the United Kingdom, but right across the world.

That reduction is due partly to the reduced size of the armed forces, but also to improved training techniques. For example, there is greater use of simulation. At peak, we were ordering £300 million of munitions; now we order £80 million—worth. Our experience has been replicated and munitions firms across Europe—and, indeed, across the world—face a similar situation. Therefore, there will be a greater degree of international rationalisation between companies and between countries.

The right hon. Gentleman is absolutely right to draw attention to questions of security and assurance of supply. Inevitably, the restructuring in the industry cannot involve only the companies, although they will play a prime and initiating role in the process. Governments must also be involved in the equation so that effective rationalisation, which is inevitable given the changing pattern of the industry, is combined with considerable security and assurance in this respect. I think that I have described the situation fairly accurately to the right hon. Gentleman and he will be aware of it from his experience.

Mr. King

When the Minister says "assurance", is he relying on assurances by Governments that, all things being equal, they will guarantee that their firms will supply to meet our requirements? As he knows, I had the experience in the Gulf war of a fellow NATO country that declined to supply us with the ammunition that we requested because it did not support the action being taken to liberate Kuwait. If we are talking about governmental assurances, the Minister might find that, in certain circumstances, overriding national interest in the country concerned will result in its assurance not being honoured.

Mr. Spellar

I should point out that that assurance is also mutual and many of those countries will also be dependent on us. That is a further part of the equation. I think that the right hon. Gentleman understands that the changing nature of the industry is forcing all countries to look at a greater degree of international rationalisation and interdependence.

I have spoken in some detail about our smart procurement initiative. However, delivering effective equipment to the front line is not just about buying new kit; it also means ensuring that equipment is well-maintained and reliable. It means ensuring that equipment is in the right place at the right time, together with the ammunition, spares and technical back-up needed to support it. We need a taut, efficient and responsive supply chain that stretches, as they say, from factory to foxhole.

That means adopting a truly "whole-life" approach to managing our equipment. Those responsible for procurement must work closely with those responsible for supporting it. We must ensure that the whole-life costs of equipment are properly considered when procurement decisions are taken. We also need to be able to make better-informed decisions about technology insertion to keep systems current, and about spares and maintenance to keep them fit to fight.

We have seen a revolution in the way that industry manages its own supply chains and in the capability of logistics businesses in the private sector. In the automotive industry, for example, the improved organisation of the supply chain has been the engine of tremendous gains in productivity. The logistics industry has seen a similar transformation. Many of those businesses need to have a global reach, just as our armed forces do. We have looked long and hard at world-class best practice and we are bringing the lessons learned to bear on our own organisation.

What I am talking about is no less than a revolution in defence logistics. The reforms lie at the heart of our modernising programme and their success is fundamental to the success of the strategic defence review overall.

The process will be greatly facilitated by the appointment, at the start of this month, of General Sir Sam Cowan as chief of defence logistics to head the new Defence Logistics Organisation. However, the CDL's job is not simply about ensuring that whole-life costs inform our procurement decisions, important though that is. It is also about delivering support to the front line in the most cost-effective manner.

Much has been achieved in recent years, with better rationalisation and co-operation between the services' logistics areas. I pay tribute to the logistics staffs for what has been achieved. However, the creation of a CDL represents a step change. The Defence Logistics Organisation that he heads brings together the organisations of the Chief of Fleet Support, the Quartermaster General and the Air Member for Logistics into a single entity. It will be the largest joint organisation in defence, with some 41,000 staff and a budget of nearly £5 billion a year.

The task of reorganisation is enormous and will not be completed overnight. It is being tackled in two phases. Phase 1, completed on 1 April, was to create the essential elements of the core headquarters. That has enabled the CDL to assume budgetary and management control of the current logistics areas, and to plan the change management task necessary to achieve phase 2.

The time scale has also seen the creation of three new defence-wide support organisations: the Defence Aviation Repair Agency, the launch of which I had the pleasure of attending on 7 April; the Defence Transport and Movement Agency; and the Defence Storage and Distribution Agency.

The DLO will look to harmonise systems and achieve greater efficiency by adoption of best practice across the whole area. A key strand will be the integration of similar systems. That, in turn, will provide the opportunity for strategic management of all logistics support. In short, it will achieve better, more effective support through the application of sensible processes and common practices. That will be a change of the greatest magnitude.

We shall, however, retain the single service logistics units at the front line. That decision recognises the particular nature and characteristics of single service operations at sea, on land or in the air. The challenge is to blend logistics support seamlessly into the front line.

We also need to improve the procurement of logistics support to the front line. That is a major task, and smart procurement is again very relevant. We recognise the wealth of expertise and experience in industry in procuring and managing logistics. We shall harness those skills in our project teams. We shall look to partnering approaches, where appropriate, to ensure the most cost-effective delivery of logistics support. We also need to ensure that much better use is made of advanced information technology.

Mr. Andrew Lansley (South Cambridgeshire)

I am sorry to interrupt the Minister in the middle of his explanation of logistics matters. Before he concludes, will he help me on the issue of future procurement? Have he and his colleagues had the opportunity to reflect on the potential value to our armed services of the airborne stand-off radar? Does he have any information on the prospects for that procurement? Can he assure the House that he will take fully into account the value of the UK-developed Racal radar system in circumstances such as Kosovo, as it is able to identify potential targets with greater precision?

Mr. Spellar

I thank the hon. Gentleman for that intervention. I shall come on to individual equipment programmes, but it is right that hon. Members should intervene in support of the companies and work forces in their constituencies, and the excellent work that many of those companies are undertaking.

Before I deal with equipment, I shall return to the logistics side. Our stockholdings will need to be reviewed further. The aim will be to move towards a demand-led system, based on the assumption that stocks should be held only when they cannot be regenerated within the readiness time of the forces that they support. Accordingly, our target is to reduce the book value of non-munitions holdings by £2.2 billion by April 2001; and we further intend to rationalise our stock procurement to achieve savings of £130 million a year from 2001–02 onwards. For that, we need to develop better forecasting techniques, and if we are to reduce stocks safely, we require improved lead times from industry that match our readiness needs.

The hon. Member for South Cambridgeshire (Mr. Lansley) will be pleased to know that I shall now turn to some of the individual programmes that I spoke about earlier. Each of the services can look forward to vastly improved equipment capabilities as the plans we laid out in the SDR are brought to fruition. For the Royal Navy, the valuable flexibility offered by aircraft carriers has recently been demonstrated by the deployment of HMS Invincible from the Gulf to the Adriatic. Carriers allow us to project military force rapidly and over long distances. The strategic defence review concluded that we should replace the current generation of carriers and their aircraft in about 2012. It also concluded that the future carrier force should comprise two larger carriers. Modern ship upkeep practice means that there will not be lengthy refit periods for these vessels, as is the current practice, and we should therefore be able to achieve the same availability from these two vessels as we do from the current three.

We have already issued invitations to tender for the assessment phase of the future carrier programme in January to six potential prime contractors. We expect to place a contract with up to three companies in the autumn, and the ships will be built and outfitted in the United Kingdom. Contrary to the suggestions we have heard previously from Opposition Members, the programme is running to schedule and with the full commitment of the Government.

The new carriers are a key element of our future defence plans. We are encouraging the sensible use of the latest technologies and innovative ideas to ensure that carriers are acquired on time and to cost. Future carriers will be capable of deploying air power in the form of the joint Royal Navy-Royal Air Force future carrier-borne aircraft. This new aircraft will fulfil a wide range of military tasks. A variant of the US joint strike fighter remains a strong contender, but other options are also being considered, such as a naval variant of Eurofighter, Rafale, the Fl 8E/F and an upgraded Harrier.

We are pressing ahead with plans to triple our sealift capability through the acquisition of additional roll on/roll off vessels for the joint rapid reaction forces. In the meantime, our strategic sealift requirements will continue to be met by the chartering of Royal Fleet Auxiliary Sea Crusader and RFA Sea Centurion, which are proving to be tremendous assets. Centurion continues to transport heavy equipment in support of operations in the Balkans. The provision of a six-ship ro-ro capability will significantly improve Britain's ability to move its forces rapidly to deal with crises anywhere in the world.

On 31 March, we issued an invitation to tender to four companies seeking bids to provide those services. The four companies are Novomar, the Maersk Company, Andrew Weir Shipping Ltd. and the Sealion Consortium, which includes Kvaerner Govan. The House will be aware of the difficulties the Govan shipyard faces in the wake of the announcement by Kvaerner that it is to dispose of its shipbuilding interests. We are, therefore, glad to have been able to shortlist their consortium for the sealift competition. We are, of course, co-operating with the task force and keeping in close touch with the Scottish Office, to see if there are ways in which we might assist.

Mr. Wilkinson

I am sure that hon. Members on both sides of the House are interested in what the Minister has said about Kvaerner Govan. The Govan yard built the hull for HMS Ocean, and is one of the few shipyards in the United Kingdom capable of building the hull for a big aircraft carrier.

Can the Minister tell us whether Swan Hunter on the Tyne is back in the business of receiving naval requests for tender? Is it to be considered, or are we down to Barrow and Harland and Wolff if Kvaerner is not bought by a company that wants to proceed in naval shipbuilding?

Mr. Spellar

The hon. Gentleman should not forget Cammell Laird in Birkenhead. Those are the yards that are the main contenders; then there are the companies that have been invited to tender for the role as prime contractor—systems-integrating, weapons-integrating companies. There is, in fact, quite robust competition, as a considerable number of yards are potential builders of the carriers.

Mr. Wilkinson

What about Swan Hunter?

Mr. Spellar

As far as I am aware, Swan Hunter is a potential bidder, but the companies concerned will have to decide whether they wish to upgrade their yards and take part in the competition, given that they have the basic capability.

Let me now deal with the Army side. The SDR placed great emphasis on our information, surveillance, target acquisition and reconnaissance capability, known as ISTAR. That capability is needed to provide the fast, detailed, accurate intelligence that is essential for rapid decision making in complex circumstances.

The competition for the airborne stand-off radar contract—mentioned by the hon. Member for South Cambridgeshire—is now in its closing stages. As I think we all know, the fight for that contract has been conducted intensively by three determined bidders. United States prime contractors have been prominent, but scores of capable British companies have been involved with the three consortiums. The decision is receiving close ministerial attention and, as some hon. Members may know, my right hon. Friend the Secretary of State for Defence gave each consortium an opportunity to present its proposals to him personally last week.

Mr. Michael Jack (Fylde)

I am grateful to the Minister. I hope that he has not drowned in his glass of water.

About four weeks ago, during the business slot on the "Today" programme, a representative of the Raytheon corporation clearly intimated that the corporation thought that it had won the ASTOR contract. In that context, it was discussing the potential creation of additional defence jobs in Belfast. Did the Minister receive any reports of that broadcast, and Raytheon's assertion of its position? If so, did he investigate the source of the stories, and can he assure me that Raytheon was speculating?

Mr. Spellar

I did not receive a report about the programme. If such a report had been submitted, it would probably have been lost in the welter of reports on the various companies involved in that and other competitions which, understandably, drew attention to the industrial benefits that would result from their particular projects. Given the right hon. Gentleman's constituency, he will know that companies rightly focus on that.

As I said earlier, the Government are anxious to maintain the country's defence industry capability, but, although it is inevitable that companies will highlight that aspect, we are still evaluating all the programmes. Having received a number of representations from companies, my right hon. Friend the Secretary of State invited each consortium to make a final presentation. Decisions are being considered, but, as the right hon. Gentleman would imagine, there are currently other pressing matters on Ministers' minds.

Mr. Barry Jones (Alyn and Deeside)

My hon. Friend will know that my constituents who are employed by Raytheon have a crucial interest in the decision that the Department might make shortly. He will also know that we had hoped to hear of a decision in March—understandably, that date slipped—and that, clearly, no decision will be made this month. Will he tell my constituents when a decision might be made? He will know that there is great interest in the matter in my constituency.

Mr. Spellar

The answer is "shortly". I pay tribute to my hon. Friend's regular—incessant, repetitive—campaigning on behalf of his constituents, and to the way in which he constantly presents their case to the Government. He was equally active in that campaign in previous Parliaments, and in making his constituents' case to the previous Government. He certainly ensures that the very strong case for the excellent plant in his constituency never ceases to be in the public eye, and I congratulate him on that.

Mr. Lindsay Hoyle (Chorley)

There is concern across the country about who will be chosen for the airborne stand-off radar programme. In considering the matter overall, however, will my hon. Friend take into account not only the United Kingdom's technological base and abilities, but United Kingdom jobs?

Mr. Spellar

My hon. Friend rightly says that we have to consider the entire range of the UK defence industry's capabilities, including its future health and ability to compete for future contracts. We should be clear about the fact, however, that our defence manufacturing industry is thriving and is internationally competitive. As I said only last month, our industry has 26 per cent. of the world market for defence equipment. Moreover, hon. Members who have been demonstrating their support for various programmes represent many of the companies that have achieved precisely that success.

On the Air Force side, hon. Members will know that, last September, we signed a contract for the first tranche of production aircraft for Eurofighter, which will start to enter service in 2002, under a contract tautly linking payments to achievement of a demanding set of milestones. Eurofighter is a world-class aircraft—which is further demonstrated by the considerable potential that it is showing already in the export market.

I am sure, looking around the House, that many hon. Members will also be interested in our plans to deal with the shortfall in our strategic airlift capability that was identified in the SDR. We already have 25 Hercules C 130J aircraft on order from Lockheed Martin to replace the first part of our current Hercules fleet. There have been difficulties with the programme, as many hon. Members will know, and the in-service date has slipped to next spring. However, the programme is now on track, and we are being paid liquidated damages by the prime contractor to offset the additional costs of running on our current fleet.

The remainder of our future requirement for large transport aircraft is the subject of a competition that we are running in conjunction with some of our European partners. Bids were received in January for the Airbus consortium's A400M, as the future large aircraft is now known; for the Boeing C17; and for a further tranche of C130Js. We aim to be in a position to make a decision—in consultation with potential European partners—by early next year.

Such a procurement will take time, however, and our need for enhanced strategic airlift is urgent. We are, therefore, running a parallel competition for short-term strategic airlift to bridge the gap. We have asked for proposals for lift capability equivalent to four C17 aircraft, and received a number of bids in January, in parallel with bids for the longer-term procurement. Evaluating the long and short-term proposals together will enable us to identify the most cost-effective overall package to meet our needs.

Today, as ever, there is a range of other programmes about which I have not been able to speak. Nevertheless, I hope that I have mapped out our strategy, and our plans for ensuring that we supply our front-line forces with the equipment that they need, in a timely and cost-effective way.

The strategic defence review has provided the blueprint for our armed forces for the future. As I have made clear, however, the planning phase is over, and we are steadily rolling out the programme. We recognise and appreciate that that entails a tremendous amount of hard work for service men and for civilians in the Ministry of Defence, and for our partners and suppliers in industry. It involves fundamental change in the way in which we buy our equipment—in our processes and organisation. Changing the organisational arrangements is the relatively easy part. Changing the culture, which is a much more challenging enterprise, is the key to success.

Our armed forces deserve to have the right equipment and logistics support at the right time, at the right place and at the right cost. We are determined that that is what will be delivered.

5.50 pm

Mr. Robert Key (Salisbury)

The Opposition always welcome the opportunity to debate defence issues on the Floor of the House, although I dare say that the timing of today's debate—in the midst of the Kosovo crisis—was as unexpected for Ministers as it was for the rest of us. We recognise the immense pressure on Defence Ministers and entirely understand why the Secretary of State is not present this afternoon. However, so far it has been a disappointing debate as to content. I must gently remind Ministers that their Government control the business of the House and, if it were altogether too much to have such a debate, they should have said so.

We also welcome the first defence debate in the new format under which we shall consider, in three separate debates, people, policy and procurement. The House will recall that I first suggested this in the debate on the Royal Air Force on 23 April 1998, at column 997 of Hansard. At the time, in an optimistic surge of enthusiasm, Labour Ministers were working on their strategic defence review. The Labour party had abandoned its objections to nuclear defence and taunted us with the force and budget reductions that we had made in government, in step with all our NATO allies.

Labour Members mocked us for those defence cuts, but they want the British people to forget the facts. The first fact is that the Labour party not only supported those cuts, but begged us to go further in pursuit of the elusive post-cold-war peace dividend. The Labour Government then cut defence deeper than we had ever dreamed of doing.

Even before the strategic defence review, the Secretary of State for Defence had capitulated to the Treasury's demand for a £500 million cut in the defence budget to fund national health service winter spending in 1997.

The Government started the strategic defence review with the proposition that their great, no-holds-barred, welcome all-corners, thinking the unthinkable, foreign-policy-led review would, in practice, result only in defence cuts. The Secretary of State made that very clear at the strategic defence review seminar in Coventry on 11 July 1997. It was quite clear at that seminar that the Secretary of State knew that the pressure was on him to cut the defence budget. It then went into free-fall in the comprehensive spending review. He lost the argument with the Chancellor of the Exchequer and the Prime Minister did not ride out on his white charger to save the defence budget. This year, Labour slashed defence by £;800 million or 3.6 per cent. and will do so again over the next two years by a further £400 million-an additional 2 per cent. That was not enough, however. In addition to those savage cuts, and as the only possible way of meeting his commitment to the Chancellor of the Exchequer, the Secretary of State for Defence then imposed efficiency savings of a further 3 per cent. a year across the board for all three services.

I take off my hat to the Navy, the Army and the RAF. They worked themselves to the bone preparing the strategic defence review, which delivered a great deal of military common sense. However, there was no common sense in asking the military to deliver the outcome of the strategic defence review with a sharply declining budget and a fresh round of efficiency savings. All three services had been living with efficiency savings for year after year. By 1997, the Navy, the Army and the RAF had reached the point at which there were precious few efficiency savings to be made; indeed, the only savings that could be made would lead to inefficiencies.

Ms Rachel Squire (Dunfermline, West)

Will the hon. Gentleman give way?

Mr. Key

I had better give way to the hon. Lady, but I bet that she will say exactly what she said last year.

Ms Squire

I am delighted that the hon. Gentleman gives such significance to what I say in any and every debate that he can remember exactly what I said last year. I take my hat off to his portrayal of the 28 per cent. cut in the UK's armed forces that was undertaken by the Conservative Government in the 1990s and their reduction in the Army, Navy and RAF by up to a third, which left the forces feeling that they had been cut to the bone—[Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord)

Order. The hon. Lady must be allowed to make her intervention.

Mr. Key

Of course the hon. Lady must be allowed to make her intervention and I look forward to hearing it again next year. She said exactly the same last year and no doubt she will say it again next year. The answer is exactly the same. If she thinks that our reductions were so terrible, why did she call for more at the time and why have the Government whom she supports made further cuts?

We knew that we had reached the point at which savings would often lead to inefficiency. That was why the then Conservative Secretary of State for Defence, Michael Portillo, announced a period of stability for the defence budget. New Labour hoped that the world would believe that it had put on a glittering new military uniform, but, two years on, we see it for what it is—the emperor's new clothes.

Mr. Colvin

My hon. Friend referred to the 4 per cent. cut in the defence budget over the three periods covered by the strategic defence review, but he has not told the House how much further the budget will be cut if the savings on smart procurement, the sale of assets and greater efficiency are met. Does he know what that figure is?

Mr. Key

My hon. Friend is absolutely right. I am coming to that, but we have already had a clue. We are told that there will be £2 billion of efficiency savings over the next 10 years, but we need to know when an efficiency saving is an efficiency saving and when it is a cut. I shall return to that point, but today I seek three commitments from the Minister. I should be grateful if the Minister of State would address them in his reply to the debate, and I invite my hon. Friends to listen to his answers.

First, the cost to the UK of the Kosovo conflict must fall not on this year's already depleted defence budget, but on the Chancellor of the Exchequer's reserves. Estimates of the cost of the Kosovo conflict vary enormously. Of course, there is no formal mechanism for apportioning costs between NATO members. In the UK, it is a matter of negotiation how much the Treasury will contribute over and above the current defence budget, but, given that the Government have already decided to slash the contingency reserve, it is doubtful whether that modest pot of gold will be enough to cover the costs.

The overall cost to the British taxpayer will include spending by other Government Departments, notably the Department for International Development, the Home Office and the Department of the Environment, Transport and the Regions. We acknowledge that those spending commitments are inevitable, but it is my duty to stiffen the Minister's resolve to protect the defence budget.

Assuming that Milosevic is removed by the Serbian people and the Serbs join the democratic nations of Europe, the wider international community realises that there will be massive costs in physical and social reconstruction over many years in Kosovo, Serbia and the seven neighbouring countries.

Mr. Tom King

I am glad to hear my hon. Friend's firm support for the Ministry of Defence in ensuring that it is properly reimbursed for additional costs that our foreign policy—I do not criticise it—will involve. Does he recall that there was a significant difference in respect of the Gulf war, when the first decision of Baroness Thatcher was to make sure that the Chancellor of the Exchequer was not on the War Cabinet? I am sorry to say that that precedent has not been followed.

Mr. Key

Yes. I was discussing the matter with my hon. Friends only recently. I hope that Ministers have duly noted that point.

Our Prime Minister is seeking to keep up with President Clinton. Indeed, press reports in the United States suggest that he has rather overtaken him as the hawk. However, President Clinton has just asked Congress for $6 billion extra to spend on the Kosovo conflict and has already announced a 10 per cent. increase in the United States defence budget. That increase is about the same size as our total defence budget.

Secondly, will Ministers guarantee for the benefit not only of Her Majesty's forces but of our national and international defence procurement industry that the cost of Kosovo will not be taken from defence equipment programmes, that we will see neither the cancellation of promised purchases big and small—from aircraft carriers to new boots—nor the slippage into the future of new equipment purchases that are needed now?

We have heard about the decision on the airborne stand-off radar being delayed again, but the Minister did not give the reason. Will he say whether there are any reasons, apart from the Kosovo conflict, for that delay? We need that procurement now.

Thirdly, will the Minister revisit the strategic defence review?

Ms Squire

Will the hon. Gentleman give way?

Mr. Key

No, not until next year.

We have already been told not to take the SDR as gospel but to regard it as a set of guidelines or, as a senior military man put it to me over the weekend, as "one for the Library."

Revision by stealth of the plans for the Territorial Army were already evident last week, in an answer that can be found at column 400 of Hansard for 19 April. When will the Government acknowledge that chapter 10—entitled "Resources"—the last substantive chapter of the strategic defence review, should have been chapter 1? Its contents are exactly as the Treasury intended. When will Ministers realise that it was never credible that the chapter on resources should be only one page long? Half that page is taken up with a picture, and just 15 lines of text are devoted to financial detail. That is just the tip of the iceberg, and the Government must be careful that it does not sink the strategic defence review.

Another real problem is determining when an efficiency saving is a saving and when it is a cut. In paragraph 396 of the eighth report from the Select Committee on Defence, the Chief of the Defence Staff told the Committee about the effect on the Ministry of Defence of the sustained efficiency programme over the past decade. He described "hollowing out", and the debilitating effect of constant raids on the Army budget when he was Chief of the General Staff. Efficiency savings targets had been passed down the line from top-level budget holders to base-level budget holders. He had had to tell the Prime Minister that the targets were "challenging". Other chiefs of staff also told the Committee that they were a "very stiff challenge".

The Select Committee concluded that the practical effect of the 3 per cent. target was that various real-terms cuts totalling £2 billion would have to be made in operating costs subsumed in the efficiency baseline. It reported that the Ministry of Defence expected operating costs overall to fall by only 2.5 per cent. a year in real terms, so some items of "operating" expenditure might rise.

The conclusion of the Select Committee, printed in bold type, was: Provided sufficient efficiency measures are identified to score against the 3 per cent. target"— they are usually found in budget setting before the year starts— the MoD will be able to live within its operating costs"— that is, non-procurement— budget. It is important, however, that the Ministry of Defence secures genuine efficiency improvements.

Mr. Blunt

Does my hon. Friend welcome, with me, the evidence given by Mr. Colin Balmer—the deputy under-secretary at the Ministry of Defence in charge of efficiency savings—to the Committee at its last evidence sessions? He intimated that the Ministry of Defence would produce a list of efficiency measures so that the Committee and the House would be able to come to their own judgments as to whether all the measures taken in pursuit of efficiency savings were either efficiency savings or cuts.

The Minister for the Armed Forces (Mr. Doug Henderson)

indicated assent.

Mr. Key

Yes, that is good news. I notice too, from the Select Committee's forward programme, that it will be taking evidence on that matter. I look forward to that.

Whatever the statistical explanation, in every single part of the Ministry of Defence's organisation, from basic research to front-line forces, there is a real struggle going on to make ends meet.

Mr. Blunt

I beg my hon. Friend's pardon, but the Minister for the Armed Forces gave a nod of assent at the end of my intervention. It would be appropriate to ensure that that is put on the record.

Mr. Key

I am grateful to my hon. Friend. I noticed that nod, but the Minister is a cheery fellow and often nods at me. That has nothing to do with the strain that he is under at present.

Time after time, I have been told—as I am sure have other hon. Members—that the 3 per cent. savings are simply unachievable. In some areas, it is clear that it will be impossible to deliver the changes required in the strategic defence review and at the same time to live within budget and deliver 3 per cent. savings. That is the stark truth, but it is what the Secretary of State signed up for in the comprehensive spending review last July.

Mr. Menzies Campbell

Is the hon. Gentleman aware that the problem is compounded by the fact that much of what is spent in defence budgets is the subject of existing contracts taken out with private firms, which will be unwilling to accept 3 per cent. less for those contracts? So the 3 per cent. savings have to be found in the remaining portion of the budget, rather than the whole. Does that not make the consequences much more acute?

Mr. Key

Yes, of course. The right hon. and learned Gentleman is right, and the current arithmetic includes one-off sales of assets, revenues from which are very dubious. I am astonished that the Treasury even countenances the idea that such estimates, which will be crucial to the Ministry of Defence's spending, can be included.

The celebrations for the 50th anniversary of NATO, held over the past few days in Washington, have been sombre. That is entirely appropriate in the circumstances, but we should celebrate the organisation's achievements. As a nation, we should be confident about its future. NATO is about human values, democracy, the power of ideas and military power. For each member state, new and old, it is also an expensive commitment.

I have criticised the Government for their current and future cuts to the British defence budget. Apparently, they intend to pursue defence and foreign policies that have already gone beyond the remit of the strategic defence review. Following the Washington summit, NATO has announced new guidelines for the alliance's force posture. We welcome the statement, in paragraph 52 of the summit communiqué, that the size, readiness, availability and deployment of the alliance's military forces will reflect its commitment to collective defence and to the conduct of crisis response operations—sometimes at short notice—distant from their home stations and in areas that lie beyond the allies' territory.

When the Minister of State winds up the debate, will he clarify the role of the Western European Union? Paragraph 30 of the communiqué after the Washington summit states: We are relieved that the European security and defence identity will continue to be developed within NATO. The communiqué states that this process will require close co-operation between NATO, the Western European Union and, if and where appropriate, the European Union. In paragraph 30, it describes the European allies acting by themselves under the political control and strategic direction either of the Western European Union or as otherwise agreed.

What is meant by "if', "where appropriate", or "as otherwise agreed"? Unless Ministers say something more positive, we must assume that the future of the Western European Union has not been settled. If so, that would be a significant failure on the Government's part.

The Prime Minister's statement this afternoon compounded the confusion. He said: The Alliance stands ready, as the EU defines its defence arrangements, to make NATO force planning, NATO assets and NATO headquarters available for EU-led crisis management operations, subject to the necessary approval of the North Atlantic Council. I entirely understand why the bit about the North Atlantic Council's approval was put in. That is especially important for allies such as Turkey, which are so important to the alliance. Yet the Prime Minister made no mention of the Western European Union. Do we assume that he has written it off, and that it is Government policy to subsume it within the European Union? I hope that Ministers will clarify those points later.

NATO countries already face defence budget constraints, but does the Washington announcement at the weekend mean that they will have no option but to consider increasing defence expenditure as a percentage of their gross domestic product? The average defence expenditure of all NATO countries as a percentage of GDP fell from a high of 4.8 per cent. in 1985–89, to 2.8 per cent. in 1997, the last year for which figures are available. The United States bore the greatest burden, with a high of 6.3 per cent. and a current total of 3.6 per cent. The United Kingdom spent 5.2 per cent. of GDP in 198084—, and we now spend 2.7 per cent., although that total will fall to 2.4 per cent. over the next three years. European members of NATO peaked at an average of 3.6 per cent. in 1980—84, and that fell to 2.2 per cent. in 1997.

Mr. Dalyell

Against the background of protests against the Yugoslavian war in 40 German cities this weekend, and given that the Greens are part of the German coalition, can the hon. Gentleman see the German Government telling their people that they will increase the defence budget because of the war against Serbia? Is that real?

Mr. Key

The hon. Gentleman should direct that point to his own Government. There is no doubt that the solidarity shown in Washington is most impressive. It may be that 40 cities demonstrated in Germany, but I suspect that 40 cities in the United Kingdom were horrified by what is happening in Kosovo and dipped into their pockets for the people of that sad, war-torn part of the world.

I do not suggest that the figures that I have given reflect any lack of commitment to NATO or its ideals. However, the Kosovo operation will teach us the hard way that we get what we pay for, a concept well known at Abbey Wood. I pay tribute to Sir Richard Walmsley, chief of defence procurement, and all his team at the Defence Procurement Agency, which replaced the Procurement Executive on 1 April. We also wish success to the new chief of defence logistics, General Sir Sam Cowan, who faces the massive task of creating a fully unified tri-service logistic structure by 1 April 2000.

When the United States military introduced its smart procurement initiative some years ago, it was inevitable that Britain would follow suit. We have done so. In the United Kingdom, the smart procurement implementation team has worked hard to create integrated project teams. I believe that the Minister said that 10 IPTs—I thought 11—were set up last year. Another 23 were created on 1 April. Around 40 will be created in September and 80 more will come on stream in January 2000.

It is said that the pilot IPT leaders have already identified major cost and time savings, as I saw when I visited Abbey Wood recently. However, the pressure on them has been immense, and only time will tell whether savings materialise. The new acquisition cycle has replaced the Downey cycle, with anticipated streamlining of procedures. More important are increased financial delegations to two-star and one-star levels. The real proof will lie in the empowerment of individuals such as the leaders of the IPTs.

Is it really sensible that projects that may span 20 or 30 years may be led by military personnel on short, three-year postings? They will be dipping in and out of the job. I was glad to hear the Minister say that some IPT leaders might come from industry, but there will be similar problems if they are not appointed for significant periods.

Little progress is apparent in several areas, including partnering arrangements with industry. As the Minister said, that is a central plank of smart procurement, but is not defined either by the Ministry of Defence or industry. Without progress, there will continue to be cynicism in industry about the MOD's real intentions.

A more important concern is the lack of evidence of definable progress in the building of clear customer-supplier relationships in the MOD. The suppliers are clear enough. Before fielding equipment, the supplier is the chief of defence procurement, and afterwards it is the chief of defence logistics. The customer before fielding is expected to be the deputy Chief of Defence Staff (Systems), and after fielding, the customer will be the appropriate commander-in-chief.

Both suppliers are full members of the all-important equipment acquisitions committee, however, and they will task themselves as well as accepting their own work. Even more extraordinary is the fact that no customer will be a member of that committee. The vice-Chief of the Defence Staff will be on the committee, but the commander-in-chief will not, and nor will the deputy Chief of the Defence Staff (Systems). That seems to suggest that the tail will wag the dog. The top structure is not yet right in the MOD, and I urge Ministers to address that point.

Significantly, the Minister omitted any mention of the Defence Evaluation and Research Agency. We all understand the way in which business arrives on the Floor of the House. The wishes of Departments are by no means always heeded by the Whips. I dare say that the Ministry of Defence would not have wished today's debate to take place in the midst of the Kosovo crisis. I am prepared to give Ministers the benefit of the doubt because they expect next week to publish their proposals and preferred options for DERA in a document that will invite comments to inform their final decision. We hope that the Secretary of State will reach that decision before the House rises in July. There will by then have been a full two years of uncertainty for DERA and its staff and for the whole defence equipment industry. It is time to end that uncertainty.

The House is well aware of the serious concerns expressed over the past two years about the way ahead for DERA. The Minister for Defence Procurement has made it clear that total privatisation is not an option. It would not be fruitful to speculate on what the new document will say, but the Government must expect detailed scrutiny of their proposals. The UK is highly dependent on access to United States technology and, to a lesser extent, to French technology. It is essential that future changes at DERA do not jeopardise that access.

The USA and France retain their research programmes in Government-owned facilities. Of course they will be concerned about allowing access to their research for commercial enterprises. If access is denied, there will be a penalty out of all proportion to the short-term financial gain.

The future of DERA is not only a Ministry of Defence issue, or even an internal UK issue; it is a collaborative, export and global positioning issue. The equipment industry sees DERA as having a crucial part to play in the success of smart procurement. Its advice to the MOD must be independent, impartial and based on scientific expertise gained from active participation in research. That need not necessarily be in every area of research, but it must be enough to maintain a capability and to generate technology in defence-only areas so that it continues to create intellectual property and other items to trade.

Where core research and Ministry of Defence advisory business end up will be crucial to confidence in the new DERA. Many would prefer to see that part of the DERA function remain firmly in MOD ownership, and funded by the MOD. Since 1995, when DERA was established as a next steps agency, there have been many difficulties in its relationships with small and medium-sized enterprises. Those difficulties have arisen from concern that DERA represents unfair competition where it bids in cases in which commercial companies are also invited to bid. DERA has also sometimes been involved in the bid assessment process, although it has itself bid. Many have been unconvinced that Chinese walls have worked properly. There have also been concerns about intellectual property rights.

The Minister knows that mutual trust is crucial. Significant parts of DERA could, most people agree, be sold to raise money without risk in order to beat off the Chancellor. However, much of DERA could be privatised only at great risk to the blue sky and applied defence research programme, future defence capability and exportable technology. I should be grateful if the Minister would confirm that we can expect an announcement on the future of DERA next week.

There has been much talk of military technology, and there is another side to it. In Ethiopia, Somalia, Sierra Leone, Rwanda and, of course, Kosovo, it does not take much for evil men to wreck lives and nations. The man with the knife, the bullet and the bomb is still deadly. Nations with conscript forces may not only face low morale and inefficiency in the face of conflict, but may procure defence equipment with little regard to the costs of manpower. That may be one reason why the Horizon frigate project failed.

Troops without the highest technology also have a vital role to play. In many circumstances, there is still no substitute for ground troops. It is quite feasible that we shall continue to see different tiers of technology in the NATO alliance. At present, Britain is clearly within the first tier, along with the USA.

Information warfare and its consequences are slowly being addressed by the MOD and other Departments. However, I believe that we are not devoting nearly enough time or resources to that problem. Where is the initiative on enhanced defence of critical national infrastructure which we were told on 13 January would be announced shortly?

In the first technological defence tier, digitisation is the name of the game. If we are not up with the United States, we will not be able to operate alongside our principal ally. To put it bluntly, on the digitised, three-dimensional battlefield, where there is no barrier between land, sea and air, if we do not come up on United States screens as a friend, we will be an enemy force. The digitised battlefield is probably only five years away.

The prevailing MOD culture seems to suggest that we should not move too quickly until we know which system works—that we should wait a little before we decide. So, what are Ministers doing while we wait? We should be expending a huge effort and a huge amount of money on research in that highest of technologies. It is not in our interests to allow the technology gap to grow wider between the United States and the United Kingdom. That is another reason why DERA is so important to the national interest.

We should also be concentrating on the reliability of defence systems where we are still lagging behind. The process of incremental acquisition will certainly help where upgrades are planned during the lifetime of a procurement process. However, the basic lesson of experience must be that equipment will often be used in circumstances entirely different from those for which it was designed—such as frigates that were designed for the north Atlantic being in service in the Gulf without adequate air conditioning.

Whether we are talking about new aircraft carriers or new assault rifles, if the Government intend that United Kingdom forces and all their equipment are to operate worldwide in all conditions, the design and the financial consequences must be recognised. Of course, if the best design and the best technology are to be combined, it is most likely that commercial firms making commercial decisions will produce the best answers. It follows that it is less likely that Government meddling will produce anything but second best.

The British defence industry does not need to be reminded that what were already American giants by European standards have now successfully restructured. It does not follow that the best, or even the only, answer is for Governments to force European defence companies into arranged marriages. Nor does it make much sense to force European companies to merge at the expense of the two-way street in US-UK defence procurement and, potentially, at the cost of losing out on the highest technology in the world on the other side of the Atlantic.

A number of my colleagues intend to mention individual procurement projects. I have briefly mentioned a few. I am not at all sure why the Navy is reported to be so happy with the outcome of the strategic defence review—it needed three carriers and is promised two, and it needs more frigates urgently. The SDR effectively ignored the importance of anti-submarine capability. Given that the best anti-submarine weapon is another submarine, the Royal Navy cannot have been happy that it needed six Astute class submarines but got only three. There will be huge relief that the principal anti-air-missile system is to go ahead. The common new generation frigate project has been a failure as far as the hull is concerned. The Royal Navy needs new frigates now, so the Minister has said that the Government are waiting for industry to come up with something.

I congratulate the Ministry of Defence press office on its statement on the future anti-aircraft missile system. The statement is a masterpiece. The Secretary of State is quoted as saying that there would be a collaborative approach to meeting … respective requirements for the warships … Although it would not be cost-effective to pursue a single prime contract … the three countries will build on the tri-national project work already carried out"— it might be more appropriate to say that they will save something from it. The press release continues: We have now a very good result for the navies and industries of the three nations"— a bit of optimism— and for European defence"— and also two wasted years. Hopefully, we will get some collaboration over the equipment of ships.

I felt cross at the Minister's attitude, which seemed to be, "It's all the fault of the previous Government." He has had two years to get this right. Which country dragged its feet? It was either France or Italy. Will the Minister tell us which country sunk the project? There have been two years of slippage in the in-service date from 2004 to 2006. British shipyards told me a year ago that they were raring to go on a new frigate hull. Ministers have sat around for a further year.

Will the Minister assure me that any new frigate procurement will include gyroscopic satellite decks for the reception of satellite television for British frigates? I understand that only aircraft carriers have that facility and that frigates cannot pick up CNN, BBC World or Sky News, which is a real problem in this day and age of instant communications. I am told that it is a question of cost, but, given the cost of the armaments being used in the current conflict, allowing the crews of our ships to watch satellite television is surely not too much of an expense.

Can the Minister tell us whether his right hon. and noble Friend the Minister for Defence Procurement will make an announcement in another place about the Horizon project? We look forward to the announcement of a way forward for a future transport aircraft. I will not repeat the arguments that have been so well aired in previous debates. Recently, Russia and Ukraine made a bid to offer a westernised version of their jointly developed Antonov AN70 to France, Germany, Italy and Spain, following continued interest from Germany. The patience of Airbus, Boeing and Lockheed Martin is indeed commendable, but when will generosity in the face of caution turn to despair in the face of incompetence?

The United Kingdom has faced a potential threat from ballistic missiles for the best part of a decade. For some years, the UK has been prepared to be the passive partner in the development of a defensive system. We have spent some hundreds of millions of pounds. Time is running out. We had expected to see much more about ballistic missile defence in the strategic defence review, which acknowledges the threat to the United Kingdom and to UK forces deployed overseas, yet the Government apparently remain committed to "monitoring developments". We have not got time for that.

Allied forces in the Gulf were subject to ballistic missile attack, and a recent report by the former United States Secretary of Defence, Donald Rumsfeld, underlined the threat posed by China and North Korea. The Government are dangerously out of step with their allies on the issue. The United States has three operational ballistic missile defence systems and is spending huge sums on theatre and national defence systems. The Government must understand that they need to commission work in that area so that the United Kingdom at least has partial ownership of the necessary systems and British defence companies are at the cutting edge of new defence technologies.

I have been the Member of Parliament for Porton Down for the past 16 years. It has been a privilege to represent that defence scientific community, both military and civilian, and to have observed not only the huge scientific advances that have been made, but the contribution that United Kingdom expertise and technology have made to monitoring chemical and biological weapons in Iraq.

Incidentally, I am most grateful to the colleague who has passed me a message telling me that he wants me to continue speaking for another 45 minutes.

Earlier this month, the Ministry of Defence generously sent me on a briefing mission to the middle east, where I was left in no doubt of the importance of protecting the British military and our allies working together in theatre from the potential effects of weapons of mass destruction. Back in the United Kingdom, I warmly welcome the establishment of a defence, nuclear, biological and chemical headquarters at Winterbourne Gunner, which will control both the defence NBC centre and the new joint Army-RAF NBC regiment at RAF Honnington, which will include elements of the Territorial Army and the Royal Auxiliary Air Force.

I remain concerned, however, about the United Kingdom's strategy for coping with NBC threats to the UK mainland. Disrupting civil society directly by information warfare is a concept that has received wide and mature public recognition. Disruption of civil society by chemical and biological weapons delivered by terrorists or rogue states is a real threat, but it has not been handled adequately, in stark contrast to the experience in the United States of America.

Today's debate on defence equipment is important. Clearly, it comes at an inconvenient moment. It has been necessary to criticise the Government for some shortcomings and to probe, cajole and spur them on to greater things, as I know that my right hon. and hon. Friends, as well as other hon. Members in all parts of the House, will do. However, let there be no doubt that Her Majesty's loyal Opposition fully support our service men and women and the scientific, industrial and administrative civil servants who support them. We are proud of the hundreds of thousands of civilians who work in the defence industries as well. Above all, we think today of those undertaking military activity on our behalf, whether in the Balkans, Northern Ireland, Cyprus, the middle east or anywhere else. They know that they can count on us.

6.29 pm

Mr. Barry Jones (Alyn and Deeside)

I apologise for the state of my voice, but it will guarantee brevity. I was glad to listen to the hon. Member for Salisbury (Mr. Key). His was a furious gallop through a crowded field, but I listened carefully to what he said about matters concerning NATO.

I congratulate my hon. Friend the Under-Secretary of State for Defence on his cogent and sometimes typically combative speech. I think that his statements on smart procurement were important. I am sure that Ministers will deliver those necessary savings. Best value is also very important. Surely my hon. Friend was right to say that a revolution is taking place in procurement and logistics.

We are debating equipment, but the weaponry of war, however brilliant and sophisticated, is useless kit without well-led, well-trained and well-motivated soldiery. I pay tribute to our fliers over Yugoslavia and to our naval and ground forces adjacent to Kosovo. The prime quality of the British military presence is surely discipline. In what other national armed force is there such discipline, patience, professionalism and resolution, whether in Northern Ireland, the Gulf, the Balkans or the Falklands? I do not know how many of my constituents are engaged in the Balkans, but I wish them all well and thank them for their contribution.

I back my right hon. Friend the Prime Minister's statement today all the way and agree that a moral issue is at stake. We cannot stand aside and ignore the nightmare of Kosovo.

My constituency contains RAF Sealand, which has 1,600 people on site. It is an amalgam of skills and discipline. It is Well led, in the best RAF Sealand style, by Group Captain Nigel Bairstow. There is a mix of the civilian and the uniformed, chiefly civilian. It played a distinguished part in the Falklands war and the engagements in the Gulf. I have no doubt that it will always rise to any challenge to keep our front line in the air with precision and safety. The board of management and the work force are collaborating well, as they always have. They do that to maintain at all times the equipment that is required for our fliers.

The Minister made a well-received visit to the unit in the spring. Several years ago, we at RAF Sealand won the in-house bid against all corners, not without a protracted struggle. The reward we ask is to settle down for a long-term role. Our work force want stability and certainty in their employment and agenda. If we have that, we can face the new century with confidence. I respectfully put that point to Ministers and hope that they will respond later.

The Minister mentioned smart procurement. British Aerospace, the major employer in my constituency, tells me that, with other parts of the defence industry, it is working closely with the Ministry of Defence to develop that concept further, believing that it will offer significant benefits to the services, the taxpayer and the industry. The Defence Procurement Agency was created on 1 April, as was the Defence Logistics Organisation. Those are fundamental changes to the Department's structure. How will Ministers ensure that the cultural changes necessary to achieve a new style of management are achieved?

Raytheon Systems has a significant presence in my constituency, with a 200-strong work force and the service centre for the world-renowned Hawker jet, whose fuselage it still manufactures. My Raytheon constituents and I campaigned long and hard to win the MOD's airborne stand-off radar—ASTOR—competition. As I said in an intervention, the inevitable slippage in the announcement of the competition winner has understandably made all of us on Deeside and at the Raytheon factory at Broughton edgy. If we won that competition, Deeside would receive a big boost to its employment and skills base. Wales would benefit hugely from such a success, because Raytheon, with ASTOR under its belt, would become a world centre of excellence. Our school leavers would be able to train for some of the best and most demanding jobs in Europe.

Wales needs more skills-based industries. We gave Britain and the world our very best in steel and coal. Those industries have disappeared or contracted and we are working very hard in Wales generally and in my constituency to make new economies. We need more employment and more skills. If we won this big competition, Wales and my constituency would benefit hugely. I sincerely believe that the work force, led by Billy Mullin, the stewards' chairman, and Peter McKee, Raytheon's UK managing director, can meet any challenges that the Department wishes to place their way.

I understand that, if Raytheon were to win the ASTOR competition, it would involve some 108 United Kingdom companies, create 2,500 technical jobs throughout the country and, with exports, add another 4,000 jobs over time. Mr. Mullin, who leads the work force, believes that Raytheon, with its experience of 100 aircraft types, has a proven capability to integrate such a complex system. That capability would be transferred to Raytheon in Broughton in my constituency and provide a much needed United Kingdom systems capability, some 400 jobs and a long-term future in high-technology aircraft systems integration. I hope that we are successful.

Another huge employer is British Aerospace, particularly through Airbus, for which great company 3,800 people in my constituency work. Airbus has planted its golden feet on the banks of the River Dee, and the prosperity of north-east Wales is underpinned by that expanding and successful company. Every time I see the huge twin-engined jet transporter that we call a Beluga thundering down the runway to take off for Toulouse or Hamburg with 70 tonnes of wings, I know that there are good prospects for my highly skilled constituents.

We want to make a further contribution to our country and to Europe. The positive collaboration of the works director, Bill Travis, and works convenor, John Hamilton, and his senior stewards, is instructive and augurs well for the future. I want to discuss the A400M, the military airlifter, to which the Minister referred. A400M is now the official Airbus designation for what was the future large aircraft and is its bid to the MOD to meet the second tranche Hercules replacement programme. I understand that the bids are being assessed by the MOD.

Airbus believes that its bid is competitive in every respect and that the A400M is the only aircraft that can fully meet the European staff requirement agreed by the nations involved. If Airbus won that competition, the wings of the heavy-lift A400M would be made in my constituency. In order to ensure that the UK has a significant part of the manufacturing programme, I ask that the 40 to 50 aircraft commitment made by the previous Administration be retained. My hon. Friends on the Treasury Bench may consider confirming that commitment during our debate.

As Airbus has delivered more than 2,000 civil aircraft to customers worldwide and is offering to manage the programme on a wholly commercial basis—unlike other military aircraft programmes—it is fair to say that the A400M project is completely consistent with the Government's determination to achieve smart procurement.

I promised brevity, so I conclude by pointing out that, in relation to these matters that concern my constituency, it is only right and proper—certainly, it is most honourable—for an hon. Member to express a point of view of behalf of his constituents, and to be their advocate in the mother of Parliaments. Sometimes, it is said that Executives—of whatever political party—are overmighty. It is certainly true that the role and standing of hon. Members are in constant flux and change rapidly, but the bedrock of our activity, as I see it, is to be an advocate for a community. I make those points to Ministers most sincerely and thank them for hearing me out.

6.42 pm

Mr. Michael Colvin (Romsey)

It is a pleasure to follow the hon. Member for Alyn and Deeside (Mr. Jones). I certainly accord with the sentiments that he has just expressed. I do not think that I have ever taken part in a debate on defence or procurement in which he has not spoken up on behalf of his constituents.

Back in 1976, I was not a Member of Parliament, but gave the Conservative party a hand while we were in opposition. During debates on the nationalisation of the aircraft industry, we identified no fewer than 465 constituencies with an aerospace interest in relation to factories. It is significant that, after the mergers of so many companies—especially in the defence and aerospace fields—the number of facilities has fallen. However, about two thirds of hon. Members still have an interest in aerospace and the defence industries. It is a pity that more of them are not in the Chamber today, to speak on behalf of the communities that they are sent here to represent.

My hon. Friend the Member for Salisbury (Mr. Key) was correct to refer to the way in which our defence budget has been cut by about 4 per cent. and to say that it might be cut by a further 4 per cent. during the three-year period, if the savings are not met on smart procurement, the sale of assets and greater efficiency. He might also have referred to the impact of the growing cost of procurement on the overall budget. At present, it is significant that £10.2 billion is spent on procurement out of the total defence budget of £22.2 billion. From those current figures, given in the pocket aide memoire supplied to us by the Ministry of Defence, we see that 46 per cent. of the defence budget now goes on procurement. That is higher than the original amount of £9.8 billion budgeted for 1998-99, which was only 44 per cent. of the total budget. That share is greater than that for last year, when the percentage of the budget allocated for procurement of equipment was only 43 per cent.

Those figures prove a point that many of us have realised for a long time: inflation, in terms of the equipment that we have to buy for our armed forces, grows at a faster rate than general inflation. If, with a shrinking budget, we are spending an ever higher portion of that budget on procurement, there is less to spend on personnel. That is important, because there is a shortage of men and women in the armed forces; there is a recruitment and a retention problem. If the proportion of the defence budget spent on personnel is to shrink, there will be implications for recruitment and retention.

Mr. Doug Henderson

indicated dissent.

Mr. Colvin

The Minister shakes his head. Perhaps, he would like to read the aide memoire provided by his Department—I have it here. I assure him that the figures that I quoted were correct.

I congratulate the Government on the good idea of introducing separate defence debates on procurement and on personnel. Procurement is fundamental to the overall strategy for the security of the realm. The matter was addressed by the Defence and Trade and Industry Committees about four years ago. We found that the United Kingdom could no longer supply certain crucial items of equipment that were required for our armed forces. I think that it was then our lack of ability to supply semiconductors that triggered the original concern. Our first report, published in 1995, contained a great deal about collaboration throughout the defence industries and about research and development—indeed, one section of the report was on that subject—but little about the restructuring of Europe's defence industries.

That is why the same two Committees decided last year that the question of the reorganisation of our defence industries should be revisited. The Committees produced another report on "Aspects of Defence Procurement and Industrial Policy"—a mark 2 version—in which the emphasis was entirely different. Our report echoed some of the comments made by the Minister in his introductory remarks; it emphasised the importance of the defence industries to the UK economy. In particular, we addressed the question of security of supplies. We must be able to supply our armed forces with the equipment that they require; we must not be dependent on other countries. Our report drew attention to the fact that more than 400,000 people worked in those industries and stated: in 11,000 companies, 10% of the UK's industrial manufacturing workforce. The industry exports 30% of its output, and in 1997 won 23% of the world defence export market. The industry is remarkably successful. It has been exercising not only the minds of Members of this House, but those of Members of the European Parliament. I pay tribute to Mr. Gary Titley, a Member of the European Parliament who was the rapporteur for the committee that reported to that Parliament on this subject. The Western European Union has also studied the matter; last December, its members considered a report on the restructuring of our defence industries. I want to address that aspect of procurement. It was rather skated over by the Minister, but it is fundamental and should be recorded during the debate, because it provides a background to the points made by hon. Members on defence projects in which they might have a constituency interest.

During the past decade, our European defence industries have been influenced by three broad trends. First, since the end of the cold war, our defence budgets have been cut by about a third in real terms. That is common to all countries in the west. Secondly, although the volume of the global arms trend has shrunk, the defrosting in international relations has made arms markets hugely more competitive. Before 1990, defence exports faced numerous political restrictions. Soviet defence industries had a closed market with their communist satellites. For reasons of security, the USA was often unwilling to license its most advanced weaponry for export beyond its immediate allies in Europe and the far east. That left much of the third-world market open to European manufacturers. Now, most of the rigidities in the post-second world war arms market have been removed. There is almost a free-for-all, in which the traditional arms exporters, unfettered by political limitations, fight in savage competition with newcomers in gradually declining markets.

US defence industries, actively backed by the Pentagon, now sell throughout the world; Russian and Chinese exporters offer cut-price products in their mad scramble for foreign currencies; formerly isolated states, such as Israel and South Africa, developed indigenous industries to be self-sufficient and now bid for most foreign contracts; and the new defence industries in the far east are expanding. When we do succeed in selling abroad, the arrangements often include offsets for local assembly and other technology transfers, which will result in new competitors emerging in defence sectors that were previously the domain of western and former Soviet states.

The third trend is that defence inflation continues to run ahead of average inflation, especially as defence equipment becomes more complex. It has become impossible for any country, with the exception of the United States and perhaps, to a limited extent, Russia, to develop, manufacture and acquire unilaterally a full range of high-technology weaponry.

Falling defence procurement has caused a loss of defence jobs: 600,000 jobs have gone in the EU over the past 10 years; and in the United States employment in the military and space sector has halved, as it has in the UK.

National reactions to the global decline in defence orders have been mixed, but the United States has led the way, with dramatic consolidation of manufacturers and restructuring of the industries. For Europe, more joint ventures and new cross-border mergers are really the only way forward. In the US, the notorious "last supper" cut the number of prime contractors in the aerospace sector from 22 to only four; and two, if not three, of those four are bigger than the whole of western Europe's aerospace industries put together.

Those mega-mergers in the United States have been supported by the Pentagon through the controversial practice of reimbursing military contractors for some of the costs of mergers and rationalisations: for example, Lockheed Martin has requested $1.7 billion in reimbursement payments for its consolidation activities. My question is whether those pay-offs for lay-offs constitute fair international competition. Direct reimbursement for merger costs is not policy in Europe, but should it be?

We should also bear it in mind that US defence spending is twice as high as that of the EU countries combined. That means that the reduced number of US defence manufacturers can survive on US procurement spending alone, so any exports gained are an added bonus. US companies can often undercut their European rivals, which might eventually eliminate foreign competition. We also have to reckon with the pork-barrelling power of American congressmen fighting their constituency corners. We in Europe must adapt our defence industries and procurement policies to enable ourselves to stand up to American competition without creating a fortress Europe. I applaud the Government's having always made that point, and I reinforce it today.

There is no shortage of western European co-operation on specific projects—I believe that most of our current collaborations are with France, with some 33 different defence projects on-going jointly between the UK and France—but we urgently need more permanent commercial mergers, so I applaud the decisions by British Aerospace and GEC-Marconi to merge, and by GKN-Westland and Agusta to get together.

However, such mergers raise an important point touched on by my right hon. Friend the Member for Bridgwater (Mr. King) when he spoke about security of supply. Once a cross-national boundaries merger takes place, if one of the countries happens to be at war and needs supplies but the other country takes the view that it does not want to be involved in any way, a problem arises because the second country can effectively veto supply of the necessary equipment. I understand that there is a letter of intent signed by the countries involved in OCCAR. Will that letter of intent in respect of supply from one country to another to guarantee security of supply become anything more? Is it to become a memorandum of understanding? Might it eventually be enshrined in a treaty? Surely, that is what we want so as to be absolutely certain that the availability of supplies in a time of crisis is guaranteed.

On the question of restructuring, Governments must do their part, especially legislatively, to create the political and economic environment in which such international grouping and cross-border mergers can take place. However, privatisation is a prerequisite. We all know that France has most to do in that respect, and attempts are being made by officials of the French Government to persuade politicians that privatisation is the right way forward. They have a long way to go, but, until privatisation has occurred, the cross-national boundaries mergers that we want will not be possible—certainly not any involving France, which is a considerable hurdle, as it is the UK and France that have to take the lead in Europe.

At the ministerial meeting in November 1997 in Erfurt, an ad hoc group within WEAG—the Western European Armaments Group—was tasked with drafting a master plan for the creation of a European armaments agency within the WEU framework. Most people would agree that the poor old WEU, which is always desperately seeking to justify its existence, does have a role to play within the defence industries, and it has been effective in making the case and becoming a driving force behind restructuring. The draft master plan was sent to national armaments directors last August, and three questions remain to be resolved among the states concerned.

The first is the problem of "juste retour": states involved in collaborative programmes usually call for a fair industrial return on their respective investments, and the principle of "juste retour" applied on a programme by-programme basis considerably hampers implementation of programmes. The aim of a European armaments agency would be to favour "juste retour" being applied over all programmes, rather than to individual programmes. Although that might be acceptable to countries with large shares of programmes, those with less extensive participation might be worried about their not obtaining a satisfactory return.

Secondly, what arrangements are to be made for exchange of defence technological know-how? Should it be pooled in the armaments sector? How do we accommodate the different categories of status of the 28 WEU nations?

Thirdly, what degree of autonomy should be delegated to the European armaments agency, and what decision-making powers will it have?

We have witnessed the creation by France, Germany, Italy and the United Kingdom of OCCAR, which will enter into force by ratification by national Parliaments. It will be a programme-led organisation, but what will happen when the United States is a partner in the defence programme being undertaken? Will that be permitted and what powers will the US have within OCCAR if it is?

I stress the importance of Europe-wide thinking in planning the restructuring of our defence industries. The countries of central and eastern Europe, especially the three that have just joined NATO—Poland, Hungary and the Czech Republic—have established defence industries, and cross-border mergers with them will facilitate interoperability and hasten standardisation within NATO.

The bulk of Soviet armaments were manufactured by Russia and the Ukraine, with about 10 million people involved in those industries. They will continue to have an aggressive export policy, but privatisation in those countries has been chaotic and there has been a brain drain to the west. Domestic armaments orders are scarce, but those industries, with their high added value, are precisely the sort that those countries should be trying to retain and develop to solve their economic problems.

I think the European Commission should be asked to extend the Konver programme to facilitate that. It could include collaborations and mergers across the continent of Europe and, incidentally, make it easier for British companies to sell into central and eastern Europe. As I said earlier, when sales are made, the question of offset and assembly in the purchaser country often arises. If the industries do not exist, how on earth can they provide the offset facilities?

I said before that we must never create a fortress Europe or forget that the north Atlantic alliance underpins our security. However, the two-way street in European defence sales and procurement across the Atlantic is outrageously unbalanced by 6:1 in America's favour. The United Kingdom fares better: the balance is about 2:1. We get the lion's share of American business, and long may that remain so. Our European partners do not do well and that 6:1 imbalance must be rectified. We must do everything we can to try to restore balance, but we will stand a far better chance of achieving our goal if the European industries, united through commercial mergers, provide the critical mass necessary to maintain a leading technological edge at low unit cost. If we do not muster the political and commercial courage to achieve that outcome, at the end of the day, we will have no alternative in this country but to buy American.

7.1 pm

Ms Rachel Squire (Dunfermline, West)

I shall comment briefly on specific procurement issues and pick up on some of the important issues covered by the hon. Member for Romsey (Mr. Colvin).

I think that it is appropriate to begin by mentioning the people who design, develop and produce our defence equipment. It is a tribute to them that, in spite of years of procurement delays on so many bids and rationalisation of the industry that halved its work force in this country in less than a decade, we still have a defence manufacturing industry that is viewed as a world leader and as an industry that is worth doing business with globally.

I should also pay tribute to the people who use that defence equipment. Our armed forces personnel depend for their lives on that equipment not letting them down when they need it most. As we speak, thousands of members of the British armed forces and the forces of our NATO allies are relying on that equipment to ensure that they return safely to their barracks and posts.

A central aim of the strategic defence review was to ensure that our armed forces are equipped properly. They must be able to undertake a wide variety of military tasks from peacekeeping to high-intensity conflict. That requires equipment that is inherently flexible. I highlight the area of research and design, which comes long before the production stage. Equipment is designed sometimes for military and sometimes for civilian use. More often, dual-use technology is designed for use in both civilian and military spheres. That is certainly the case in the avionics and aerospace industries.

Although it is not strictly a Ministry of Defence initiative, I welcome the Government's recent decision to retain the civil aerospace research and development budget in the Department of Trade and Industry for another year. I hope that will continue as the programme has spin-offs for military research and design.

I am extremely sorry that the hon. Member for Salisbury (Mr. Key) has left the Chamber because I am about to say something truly memorable: I agree with some of his remarks about the Defence Evaluation and Research Agency. I hope that that body will continue to be the MOD's main source of honest and independent scientific and technical advice of the highest quality. I admit to having a direct constituency, as well as a wider, interest in DERA as part of its operations is located at Rosyth. I share some of the concerns expressed by the Defence Committee report and by the industry.

DERA was created to gather scientists and engineers from a full range of areas to work for the MOD. That collaboration of minds was intended to foster the exchange of technical information and to provide a method of forming the multi-disciplinary teams that are vital to today's research process. I am concerned that we risk losing some of our best British brains if we over-commercialise DERA.

Mr. Colvin

I am delighted to hear that the hon. Lady has read the Select Committee report specifically about DERA. During our visits to the United States, we discovered that it is enthusiastically embracing co-operation in research and development. That initiative would be undermined if DERA lost the impartiality that it enjoys as a public sector body.

Ms Squire

The hon. Gentleman must be able to read my mind because that is my next point. DERA is trusted as an organisation with integrity. It has developed very good relations with the US Government, in particular, and we recognise that it has access to aspects of US research and development that is not available to other NATO allies.

Mr. Gerald Howarth (Aldershot)

I agree entirely with the hon. Lady's remarks about DERA, whose headquarters are located in my constituency. Has she spoken to DERA senior management, who face very real difficulties? DERA's funding has been cut by about 10 per cent. and some of its potential research projects may be put out to the private sector. How may that problem be resolved to preserve DERA as a vital resource in the national interest?

Ms Squire

I have not received that much co-operation from DERA senior management recently. I have attempted to visit DERA at Rosyth to obtain an up-to-date picture of its operations, but I have made little progress in that regard. While I have read the Defence Committee's report, I do not claim to have full knowledge of the fine details of DERA's operations. Therefore, I cannot offer the answers that the hon. Gentleman seeks.

It is important that we maintain DERA's reputation and high standards. DERA at Rosyth will contain the Scottish wing of the Defence Diversification Agency. I am keen to harness its skills and innovative ideas in translating military technology to civilian use and encouraging jobs in that area. Like Conservative Members, I hope that there will soon be an announcement and a report stating how the MOD views the future direction of DERA and confirming that there will soon be security for the highly skilled engineers and others who are involved.

On specific procurement projects, my hon. Friend the Member for Alyn and Deeside (Mr. Jones) has mentioned ASTOR and argued extremely well in its favour. To my knowledge, ASTOR has been considered by the MOD for more than 20 years, so it is a little rich for Conservative Members to say that the Government are causing the project undue delay. I have been inundated—as, I am sure, have other hon. Members—with strong arguments from all the three main bidders about which option the Government should choose. All three have points in their favour relating to retention and support of British jobs and the consolidation of Britain's leading radar technology. I do not envy Ministers in having to make that decision, but like other hon. Members, I hope that it will be announced shortly.

Mr. Michael Foster (Hastings and Rye)

Does my hon. Friend agree that the Wizard project has an advantage because when it becomes the market leader, as it inevitably will, the industrial benefit from the jobs that it will create will be significantly greater than that offered by the other bidders?

Ms Squire

I sympathise greatly with my hon. Friend's arguments for one of the bidders, but I have said to all the firms that they have a strong case, so 1 shall not, at this stage, come down in favour of a particular one.

Hon. Members would think that something was seriously wrong with me if I did not mention Rosyth dockyard. I recently had the pleasure and honour of opening an excellent example of Scottish engineering. It seems appropriate that, as we move into the next century, I performed that duty while in the background stood an example of Scottish engineering from more than 100 years ago—the Forth rail bridge. The new engineering project at the dockyard is a world leader; it is a seismic docking cradle for submarine refits which will withstand an earthquake of point five on the Richter scale. The dock gates also utilise innovative concrete caissons. I pay particular tribute to the Babtie Group and Babcock Defence Ltd and all the designers and engineers who were involved in that project. I pay tribute also to the Minister for the Armed Forces and the Secretary of State for Defence for committing themselves to the allocated programme that was set out by the previous Government. That commitment means that HMS Spartan is, at this very moment, sitting in that seismic docking cradle, providing hundreds of jobs at the dockyard.

I cannot resist pointing out that the project is a prime example of the benefits bestowed by a United Kingdom Government on a Scottish manufacturing work force. It is notable that, once again, the hon. Member for Banff and Buchan (Mr. Salmond) and his colleagues are absent from a defence debate.

I have a question for the Minister about Rosyth dockyard, which I am sure will be of interest to those involved in the procurement process. Is the Kosovo conflict likely to lead to a delay in procurement decisions? At Rosyth, the sonar 2087 programme and the alternative landing ships logistics programme are of particular interest.

On the subject of the shipbuilding and ship refitting industry, like other hon. Members, I was sorry—but not surprised—to hear about the demise of project Horizon. I congratulate the Government for making a decision on that, rather than putting it off as the previous Government did. I hope that the decision will provide additional work opportunities in the British shipyards that we all support. We are keen that they should have a future.

I thank the Minister for the Armed Forces and his colleagues for their interest in and assistance to the troubled Kvaerner Govan shipyard. They have tried to encourage all interested parties to give the shipyard a future.

My impression, when reading of some new technological developments, is that the days of "Beam me up, Scotty," are not far off, but, unfortunately, I am already too ancient to be the first captain of the starship Enterprise. There seems to be widespread agreement that technology has always shaped the battlespace. The battlespace of the future will require—as, to some extent, the present battlespace does—mobility, rapidity of reaction, dispersal of troops and equipment and disengagement of fighting. Technology and its application must be a high priority. It is vital that our armed forces have equipment that gives them a technological edge over any potential opponents.

As we know from struggling with our office computer hardware and software, information technology changes extremely rapidly. That presents difficulties to the Government, particularly the Defence Procurement Agency. I welcome the introduction of the long-overdue smart procurement initiative in 1997 and the establishment of the agency. I particularly welcome the fact that procurement policy will allow equipment to be upgraded instrumentally, which is one way of trying to keep pace with the developments in information technology.

I welcome the Under-Secretary's mention of the integrated project teams, which are also long overdue and may help us to keep up with information technology. I stress to him the importance of examining all the ways in which we can keep pace with that technology and ensure that our troops on the front line have the best technology available. I know that the MOD has produced a technology strategy, as has the national defence industry. I welcome the Department of Trade and Industry's involvement in the group for aeronautical research and technology in Europe—GATEUR. By such actions, the Government are recognising the crucial importance of information technology to military command, control and communications, and the dual nature of its use.

Increasingly, it seems that the in-phrase to describe that area of information technology, warfare and systems is the revolution in military affairs which has been the subject of considerable debate in the United States. It is said that it could result in more effective coalition operations if there is compatibility and inter-operability. Therefore, we can scarcely talk about defence equipment, the industry that produces it and, ultimately, the effectiveness and security of our armed forces and of the United Kingdom without talking about international co-operation and collaboration. That means, as the hon. Member for Romsey said, and as the Select Committee reported, that the defence industry can rarely now go it alone.

We shall all continue to argue for defence jobs in our constituencies, and to argue that we must always retain a core defence manufacturing capability for strategic reasons; but, as the excellent joint report on defence procurement by the Defence and Trade and Industry Committees, published in July 1998, said in paragraph 22: There are likely to be few cases in the foreseeable future where the UK would wish to operate alone militarily and, with globalised markets, retaining a self-sufficiency in strategic capabilities is becoming an increasingly difficult and expensive option. The key to retaining access to strategically important technologies and manufacturing capabilities, in an era of increasingly rationalised industry and collaborative programmes, is to ensure mutual inter-dependence. That must be a key theme.

Those two sentences alone have far-reaching consequences for our defence exports, for defence industry rationalisation in Britain and in Europe, equipment interoperability and, ultimately, for defence capability. One cannot consider any of those areas in isolation from the others. It is a very complex area.

Other hon. Members want to speak, so I shall not mention OCCAR and WEAG, ably discussed by the hon. Member for Romsey. However, we must accept that such projects will be affected by the background against which they operate—the enlargement of NATO and of the European Union.

In the strategic defence review, under the supporting objective headed "Equipment Programme", it merely says in one line: to procure equipment which most cost-effectively meets agreed military requirements. That sounds simple and straightforward; yet, as I have learned in my time in the House—and, I hope, have shown in some of my remarks—the area is complex and has implications that go far beyond British shores.

I end as I began, by talking about the people and about my hope—which is shared by other hon. Members—commitment and determination that the defence equipment that is currently being used to deal with the Kosovo crisis will, first, ultimately achieve an end to the brutal butchery of Milosevic's regime; secondly, ensure that more than 1 million refugees can return to live, without fear, in their own country; and finally, and very importantly, enable all our service men and women and those of our NATO allies to return to their own homes and families in safety.

7.24 pm

Mr. David Heath (Somerton and Frome)

We have already had an interesting debate. I agree with the right hon. Member for Bridgwater (Mr. King) and the hon. Member for Romsey (Mr. Colvin) that this tri-service debate is of great benefit to our deliberations and shows that jointery can take place even in the Chamber.

I am grateful to Labour Members for having avoided the use of the term "joined-up government" throughout the debate so far. It is always nice to hear these catch phrases, but perhaps we may be spared them once in a while.

As has been said, we have a unique opportunity to debate the vital subject of defence procurement, against the backdrop of the unfolding scenario in Kosovo. That has advantages and disadvantages, but it means that what we are talking about moves from the theoretical immediately to the practical. I join the hon. Member for Dunfermline, West (Ms Squire) in paying tribute to the men and women who are serving with our forces in that theatre and to those who perform the equally crucial job of providing support for those forces.

I start by discussing two financial matters. The first is the implications of the Kosovo conflict. I accept that we have an incomplete picture at this stage, and I would be the last to suggest that an accountant should ride on the back of every fighter, working out the cost, but by 8 April, it was estimated that the conflict had cost £17 million, not including used ordnance. That figure is likely to increase rapidly. Paul Beaver of Jane's Defence Weekly estimates that the costs are running at £2 million a day and are set to rise.

The Government have stated their intention, in accessing the contingency reserve, to ensure that the defence budget is not directly harmed as a result, but a very considerable sum is involved. I have it from a source as authoritative as the Liberal Democrat Treasury team—and I certainly would not wish to argue with them—that the total cost might be as much as £1 billion, plus equipment replacement costs. That takes a very considerable chunk out of a £1.2 billion contingency fund. There is a significant risk that, consequently, the Ministry of Defence will seek all of the normal means available to stretch its budget. We are talking about virement, and about slippage within capital procurement costs. Our involvement in Kosovo—or in the region—is unlikely to end in the short term, and we are likely to have an on-going commitment, which will be an expensive option. That must mean that although the strategic objectives of the strategic defence review have probably been reinforced by the conflict, the financial assumptions that underlie the SDR must be revisited, because it is no good ploughing ahead with a strategy based on a specific financial scenario if those resources are no longer available.

The second financial factor, which will interplay with the first, is the success or otherwise of the smart procurement initiative. The Under-Secretary uttered profuse expressions of hope that it would all turn out all right. I should like a little more evidence that it will.

Let us recall the Public Accounts Committee report published in December 1998. It analysed the National Audit Office report on defence projects during 1997. Cost overruns averaged 9.1 per cent. of approvals. Time overruns averaged 37 months. I have to say, as a former leader of a local authority and member of the Audit Commission, that if that sort of thing were happening in programmes within my control, I would be extremely concerned—but it has become the norm in defence procurement.

Those figures are very difficult to reconcile with the aim of saving £2 billion over the next decade. We spend £9 billion a year on defence equipment, so a £2 billion saving over 10 years is about 1.8 per cent. of overall spend. If we set that against a 9.1 per cent. overspend on each project, one dwarfs the other. The possibility of the smart procurement initiative not releasing the funds that are expected is substantial. That is a proper concern.

We might have been better informed had this debate taken place in a few weeks' time. We should then have had the National Audit Office report on major defence projects for 1998, and we could then have tested the hypothesis that new structures were in place that reduced the overspend and made projects more manageable. However, we do not have that information. That is an accident of timing and I accept that Ministers are probably not responsible for that. Nevertheless, it means that we cannot support the theses that have been put forward by Ministers with hard facts. We shall have to consider the consequences for the strategic defence review if there is a lack of achievement.

I shall move on to specific programmes. I appreciate that there is a tradition in this place that Members use these debates as an opportunity to trail the enticements of their specific constituency interests before Ministers in the hope that they will bite. I reassure the Minister that I do not intend to do that. That is not because I have any lack of confidence in the defence contractors within my constituency. I appreciate that GKN Westland's and Thomson Marconi's merits are transparently obvious to the Ministry and do not need amplification by me.

What are the early lessons from Kosovo? First, we saw that British high-level bombing missions were hampered in the early stages by cloudy conditions. Can the Minister assure me that the Brimstone anti-armour missile—I believe that its in-service date is 2001—will rectify that problem and will not suffer in the same way? Given that the strategic defence review's pledge is to decrease book-value stocks by 20 per cent.—I think that we have had that confirmed this evening—will the ordnance that is being used be replaced at lower stock levels than at present? If that is the case, is that wise, given the future commitments that we may have? Should we not be increasing stocks rather than depleting them?

While we are talking about stocking levels, let us consider spare parts for both fixed-wing and rotary-wing aircraft, which are in short supply. How much longer are we to require our maintenance crews to cannibalise aircraft to keep other aircraft in the air? What is the effect of the SDR's reduction of stock on that situation?

We have already had a substantial debate on the contract for the ASTOR project—namely, airborne stand-off radar. As we know, the contract has not yet been let, although we are told that it is receiving close ministerial attention. I wonder to what extent the experiences of Kosovo have informed that consideration by Ministers. Have the operational, interoperability and industrial participation benefits been properly evaluated? Indeed, have operations in Kosovo clearly demonstrated the need for ASTOR and its value to our forces in future?

Earlier this year, we had Phoenix entering service—an unmanned missile used for reconnaissance purposes. Has it been deployed in Kosovo? If not, what is the theatre in which it is to be deployed? If it has been deployed, how does its performance compare with the American and German systems?

The aircraft carriers are close to my heart. We have a renewed commitment that they remain a fundamental part of forward planning. Give the logistical difficulties of relying on other allied nations for rear area deployment, Kosovo has underlined the need to have such a platform if we are to extend our reach. Can we be absolutely sure that nothing in the financial consequences of Kosovo or other decisions that may be taken elsewhere in government will delay the in-service date of 2012 for the two carriers?

Can we see an early decision on future carrier-borne aircraft? I am aware that other options are being considered. It seems that those who will fly the aircraft feel that there is no sensible option other than a short-take-off, vertical-landing version of the joint-strike fighter. The sooner that the Government make that decision, the better.

The Under-Secretary of State unleashed a small bombshell with his announcement on the Horizon frigates. It was a curious way of making a decision with such ramifications. Many questions have been raised. I felt that the Minister was a little reluctant to share with the House the assessed consequences of his decision—what it will mean in prolonging the life of type 42 frigates and the extent to which we can rely on that. What are the consequences of the Minister's announcement for the common foreign and security policy and the European maritime force? How does he reconcile the in-service date of 2004 for the principal anti-air-missile system—PAAMS—and the year 2006 for the commissioning of the frigates? What is to happen in the meantime, or do we assume that PAAMS is delayed by a further two years?

What future is there for TRIGAT, the third generation anti-tank guided weapon? We have chosen to receive the Apache Longbow helicopters with Hellfire missiles, not TRIGAT. However, as I understand it, we are still obliged to fund development. France and Germany have limited needs as well. If the TRIGAT programme disintegrates—that would not be an unlikely scenario given what we have heard this evening about other programmes—how will we maintain European development of anti-tank guided missiles?

I agree with the Minister that Eurofighter is likely to be a very successful aircraft. However, it will need beyond-visual-range air-to-air missiles. A decision has still not been made between the American and European bids. However, if the European bid—the Meteor bid—meets all our operational requirements, is there not a substantial argument for that rather than the American option? The hon. Member for Romsey is absolutely right to say that the so-called two-way street between America and Britain runs substantially in one direction. Indeed, there is no evidence of a two-way street. Perhaps it is better that we should have reliability and confidence in our own systems.

Mr. Colvin

There is a further reason for buying British in this instance, and that is the sale of the Eurofighter to third countries, which could well be stopped if it were equipped with the American version of beyond-visual-range air-to-air missiles. That would not be a very good reason for buying British.

Mr. Heath

The hon. Gentleman is absolutely right. There is a potential restriction on our sales at the diktat of the American Government. That is not an entirely acceptable position. It will be far better if we can ensure that we have a home-grown product that we can sell to those countries that we consider to be appropriate.

The replacement for Hercules and the A400M Airbus project have been mentioned. We have heard from the hon. Member for Alyn and Deeside (Mr. Jones) that they would have a substantial British manufacturing component. We have not yet heard from the Government whether they retain the commitment to 40 to 50 aircraft to maintain the full fleet of heavy lift. I hope that the Minister will be able to enlighten us.

We have heard a little about information technology introductions. One of the great problems is the propensity of IT companies to sell products that they have not even started to develop—so-called vapourware rather than software. We understand that this is a problem in defence procurement as it is elsewhere. However, what recourse do Ministers have in the construction of their contracts when systems that are being introduced appear not to perform the functions for which they are intended? I bring to the attention of the House the introduction of a back-room service—the payroll and exchequer computer systems for the Royal Navy. I understand that there are significant problems in getting them to do the job for which they are intended.

All those systems are based on private-public partnerships. As hon. Members know, we have no intrinsic ideological argument with that, but will they provide the contract flexibility that we will need—to which my right hon. and learned Friend the Member for North-East Fife (Mr. Campbell) referred—and will they provide value for money, given that they lock us into contracts that may, over the longer term, cost more to run? How should we reconcile that with the limited budget within the strategic defence review? Will those systems ensure the maintenance of this country's technological base, which is so important to our future development. As the right hon. Member for Bridgwater said, will they maintain the continuity of supply?

All systems that we procure for our armed forces must have effectiveness in a fighting capacity as their basic requirement.

Mr. Keith Simpson (Mid-Norfolk)

Will they work?

Mr. Heath

The hon. Gentleman is absolutely right, but we put further demands on our armed forces, as is being shown in Kosovo and elsewhere around the world. Their work has a humanitarian aspect. I ask the Minister to do everything he can, where possible and without in any way compromising the military effectiveness of what is bought for the forces, to build into the construction of ships or planes the appropriate machinery and the appropriate space so that such equipment can fulfil humanitarian functions as well, because they will become an increasingly large part of the work of our armed forces.

The Minister has a huge number of questions to answer at the end of the debate. I suspect that he will not answer them all, or we should be here for a very long time, and that he will write to me in answer to questions that he does not reply to specifically, but I hope that he will ensure that we maintain the basic thrust of the strategic defence review, that the budget lines follow the review's strategic intentions and that we improve the inter-operability of and co-operation between forces on the European continent so that we can achieve the best value for money and effectiveness for those systems.

I also hope that the Minister will ensure that, if we ask our forces to do extremely difficult jobs in dangerous circumstances, we and they are confident that their kit will do the job that we want them to do.

7.42 pm

Mr. Lindsay Hoyle (Chorley)

This is obviously an important debate for all hon. Members and one in which they can put their views across. Whatever hon. Members might say tonight, we should all be a little more honest and accept that, to be fair to them, the Government have given new hope to the armed forces following the failures of the previous Government. If Conservative Members were as honest as the Leader of the Opposition expects them to be, they would apologise for what went on previously.

We should be saying how well the Government have done so far, and even the Opposition must admit that they have been proactive and have engaged in the right way—by speaking to the experts and delivering on behalf of people in the armed forces. I am proud of what the Government have done so far. We are sceptical on some issues, but the majority of what has been done is good. We may worry about certain aspects, or not accept them, but we must look at needs.

BAe-Matra Dynamics, which is just down the road from my constituency, is an important player in the defence of this country and a major supplier that can give us a beyond-visual-range air-to-air missile—the Meteor, which we must go for. We must have the right equipment for Eurofighter and Gripen, and Meteor will fit both those aircraft. If we fit Meteor to Eurofighter and Gripen, not only will they be the most effective aircraft, but we will be free from United States export restrictions, which could be placed on us if we go for the opposition and manufacture under licence. We must always remember that.

We must also remember that Russia and China have strong capabilities. China might buy Russian expertise to develop a missile that could take out our aircraft and which could be sold around the world. Meteor, which is by far the most advanced missile in the world, would give us a cutting edge in technology and the air superiority we need. There is no doubt that Eurofighter could be the world's leading aircraft. There is no point in having that aircraft if we do not arm it with the best missile, and Meteor fits that requirement superbly. We have had the arguments and we have delivered on Eurofighter. Hon. Members on both sides of the House recognise the need for that aircraft. Jobs will be created in Lancashire and we need to ensure that there is no job reduction in its defence industry.

We also need to consider the need for the future large aircraft, which is essential. We are a few years from production, but we ought not to lose sight of the important role that it has to play. The FLA is important to the aerospace industry of this. country and of Europe. It would allow us to be at the top end of the world heavy-lift aircraft market and, if we do not go ahead, we will end up out of that market and will never be able to step back in. There has been a lot of support for the FLA on both sides of the House.

The alternative is looking for a stopgap, such as C17. The Royal Air Force wants it, but the question mark over the C17 is its expense. We are setting up a scheme in which we can look for a stopgap to be used for the next six to eight years. There is an alternative to the C17—the Antonov. People may ask why we would want to use the Antonov. The answer is simple: Antonovs were used 14 times in 1996, 10 times in 1997 and 16 times in 1998, so why are we worried?

It is important to recognise that the benefit of the Antonov is that it would be operated by a British company and flown by RAF crews, and would save 50 per cent. of the cost of a C17. Let us have a good competition, but a fair one, and let us judge our needs for six years. We should not lose sight of what we should be doing: delivering an FLA with Rolls-Royce engines and securing many jobs in the UK, which is important to us all. We must not lose sight of the fact that there is an alternative to the C17. I hope that my hon. Friend the Minister will take that on board and realise that the British-based Antonov, operated with RAF crews on board, is available to him.

The aerospace industry is important to Lancashire and to the north-west. We have good companies up there, such as Pendle Manufacturing and the Computer Science Corporation in my constituency, and the Lancashire Aerospace Society. Those leading companies have a role to play in the future of the aerospace industry in the north-west.

The headquarters of Royal Ordnance is also in my constituency. That important company's capability ought not to be lost. It should be able to supply ammunition as and when it is needed. The high explosives capability at Bridgwater could also be put at risk. We would be foolhardy to rely on overseas competitors after the previous Government's embarrassment with Belgium. Royal Ordnance has a part to play and should be supported. We must recognise that we need ammunition and ordnance to be supplied from this country and for this country.

Mr. Key

Does the hon. Gentleman agree that none of us disputes for a moment the ability of Somchem and Denel in South Africa to produce those products? It is simply that we doubt very much whether it is in Britain's long-term national interest to be unable to do so.

Mr. Hoyle

I have worries as well. Although Somchem and Denel in South Africa are reputable companies, they might not be able to deliver supplies when we want them. The UK should, therefore, have that capability. This Government must look back at what the previous Government did, because it was a disaster for the Royal Ordnance factories. The previous Government did not support them in their hour of need and we must now recognise that Royal Ordnance will take its last breath unless we support it. It has been strangled for 18 years and we now have the chance to give it a new lease of life. I hope that the Minister sees the benefit of having that capability within the UK, with the headquarters at Chorley.

Another matter that worries me is the trucks that are supplied to the armed forces. What could be better than Leyland Trucks, which has a good record on supplying the armed forces? I am afraid that a contract was given to Volvo. Although Volvo made many promises, 12 months after it had secured the contract, it pulled out. I presume that it will take production back to Sweden. Some will be in Poland, but that is not good for the UK. Indeed, I think that it is a breach of contract. We should be supporting the UK truck industry, which produces quality trucks built by a quality work force. It will give us a long-term commitment, which the UK has always had in the past. To have trucks supplied from abroad is worrying for the future because the supply chain could break down at any time. If we stick with companies like Leyland Trucks, we shall have the benefit of Multipart, which could make all the spares for the Ministry of Defence in Chorley. I hope that the Minister recognises the benefit to be gained from that.

Other speakers have mentioned the fact that helicopters and rotor-wing aircraft have a major role to play. GKN Westland is a wonderful company, which supplied and delivered EH101s to the armed forces. It is a superb helicopter with a long-term role. However, we must not lose sight of what is happening. When we signed up for a joint venture with Agusta, the Italian helicopter company, we were told not to worry because the Italian Government would take some of the helicopters. It never quite happens, does it? We always play our part, but get left high and dry by our partners. We should recognise that Westland has a long-term future and should invest in helicopters beyond the EH101. The building of the Apache helicopter will be under licence and that superior aircraft will give us a strong defence, as well as an attack capability. I look forward to seeing the role that those helicopters will play in the future. Aircraft carriers have rightly been mentioned, as they are an important theme of the strategic defence review. We were told that two new carriers were required and, hopefully, they will be delivered on time. However, an early order will stop wrangling in the House. It must be recognised that the carriers need to be big enough—well over 50,000 tonnes—because, if nothing else, that provides a floating land mass that can move around the world's hot spots. Obviously, the bigger the carriers are, the better their ability to carry all types of aircraft. Eurofighter should have a naval version, and the new aircraft carriers should be capable of allowing all our aircraft to be used on them.

We should remember that HMS Ocean is a wonderful ship, which is going through sea trials now. It was a brave commitment by the previous Government who, in the face of all that was happening in defence and all the cuts that were going on, ensured that HMS Ocean was built. However, we must learn from their mistakes not to do things on the cheap. HMS Ocean was built on the cheap and that is now proving costly—the anchor that had come from China fell off, so that was not a good start. We had problems during the sea trials, and the carrier is still having hiccups now. It is one thing to get value for money, but to build a ship like a Meccano model, shipping bits in from around the world, simply does not work. We can learn from that and I look forward to hearing a commitment from the Government on carriers.

Mr. Blunt

I have listened with great enjoyment to the hon. Gentleman's endorsement of huge aircraft carriers that can float all our aircraft—in addition to Cl7s. He is now discussing HMS Ocean. Can I take it that he supports an increase in the defence budget from the projected 2.3 per cent. of our gross domestic product in order to pay for all that?

Mr. Hoyle

I would be foolish to be drawn in by somebody who was an adviser to the previous Government and who made all the mistakes at that time. For the hon. Gentleman to try to tempt me with a bit of bait like that is quite ridiculous. Let us move on to more sensible matters that need to be discussed.

The textile industry is in dire straits. What better way to help it than to allow it to play an important part in equipping the armed forces? When one studies MOD policy on international procurement, one sees that that has been the theme behind it, but we have always wanted to ensure that there is a UK market. That remains healthy at 76 per cent., which is an improvement on previous years. Let us ensure that we give UK companies a fair crack of the whip when contracts are being awarded. It cannot make sense that uniforms are imported from Germany, Belgium, Italy, Spain and Canada. We should look for a supply base in the UK.

The number of contracts awarded to UK companies has increased. In 1996–97, 155 contacts were awarded; in 1997–98, 300 contracts were awarded: and in 1998–99, 358 contracts were awarded, so there has been an improvement for the British textile industry. It is an important manufacturing base and we should support it. Pincroft in Adlington in my constituency is one of the leading companies in the world for supplying camouflage for the armed forces, from New Zealand to the Falklands. Clearly, it is best placed to take up further contracts when they are being awarded.

I should also mention the Royal Marines and the fact that a fast response force is the way in which to proceed. The Royal Marines have a major role to play, but we must ensure that they have the best equipment and the best possible support from the MOD. Let us never do things on the cheap again.

It would be remiss of me not to mention the Territorial Army. Ultimately, the TA's equipment has to be stored and we must take a strategic view on that. We have made a slight mistake, especially as regards Chorley and the 101 TA battalion at Lancaster house. Even at this late stage, I urge the Minister to recognise that Chorley has a part to play. if buildings are to be knocked down—[Interruption.] I hear my hon. Friend the Member for Dunfermline, West (Ms Squire) grumbling. She should understand that the problem is bigger than she realises. She has not yet heard about this issue and I am sorry that she feels that she has to sigh, although she is free to do so if she wishes.

Although decisions have been taken, there is still time to reconsider what happens to Lancaster house, because it has a part to play in the future of the Territorial Army as well as the cadets. What has not been allowed for is the fact that everything that the cadets have now will be replicated. A new building where the existing building is demolished does not make much sense, and in addition, the shooting range used not only by the cadets of the Army and the Air Force, but by the sea cadets will be lost. A major cost will be incurred in trying to rebuild that. I urge the Minister to rethink the future of Chorley, because there is still hope there.

Obviously, the National Audit Office has been mentioned. I think that we have a part to play. I question the investigations that the NAO does. It should be more responsible and should act on behalf of Members of Parliament.

7.59 pm

Mr. John Wilkinson (Ruislip-Northwood)

It is always a privilege to follow the hon. Member for Chorley (Mr. Hoyle). He clearly cares about the defence of this country. He made his reputation in defence of his local Territorial Army unit, and he made a speech which showed a wide-ranging interest in a number of important equipment issues.

I regret profoundly the loss of the single-service days. Each armed force—each service of the Crown—merits at the very least a day that it can call its own in Parliament, in which we can have a structured debate about the issues that concern that particular service. Today, when we are at war with Serbia—although the Foreign Secretary does not allow us to use the phrase "at war"—I am sure that right hon. and hon. Members would have warmed to the opportunity of being able to pay tribute at length to the air crews of the Royal Air Force who are risking their lives on our behalf over the skies of Serbia and Kosovo, to the Royal Navy and to the Army personnel who have given humanitarian aid. The House should have a debate on equipment, but not at the expense of single-service days.

I shall deal with just one subject. I hope that hon. Members will not think me one-track minded if the subject is mobility. It takes a war to make us realise that our function is never to second-guess military decisions once battle is joined. Our role is to ensure that our service personnel have the budgets necessary to conceive, define, develop and procure the equipment necessary for success in war; to man, maintain and modernise it; and to sustain it successfully in operations.

One central theme is worth repeating again and again. It is relevant in peacetime operations, in crisis management, peacekeeping, war fighting and humanitarian relief alike: it is the essential need for mobility. I shall focus on air mobility, because it was featured in the strategic defence review and because the ability to concentrate force rapidly at the decisive point has always been crucial to success in warfare. As we are daily reminded by the misery of the Kosovars, being able to project dominant force rapidly can have a deterrent effect. We seem not to have been able to do so, whether for political or military reasons. A war has erupted and the Kosovars and many others are suffering immeasurably. Once conflict is joined, mobility is central to a war-winning potential.

The need for enhanced air transport, and specifically for strategic heavy lift, grows as our armed forces shrink steadily in size. As we have seen in the Kosovo crisis, the ability swiftly to deploy forces into theatre with their combat equipment and munitions is at a premium. Forces that now take three weeks to deploy to the Balkans from Germany and the United Kingdom would take about the same number of hours from take-off to landing into theatre.

I mentioned the strategic defence review of July last year because it identified as urgent the need for four Cl7s or their equivalent to improve our strategic air transport. The industrial responses to the invitation to tender for the Royal Air Force's short-term strategic airlift programme only went in at the end of January this year. A decision is not anticipated before the end of 1999. That leisurely time scale is not now tolerable. The Royal Air Force has been able to assess the C17 for years, and has had exchange personnel flying the aircraft with the United States air force. It has also assessed the other contender, the Ukrainian Antonov 124 100 series aircraft, which has been in service with Heavy Lift Cargo Airlines at Stansted for some time.

Furthermore, the delay in the Hercules C130K rolling replacement programme with the more capable C130Js, which are unfortunately not now due to enter squadron service until early next year, accentuates the Royal Air Force's lack of transport volume. The Kosovo war verifies the familiar argument that, as air transport aircraft have to operate into war zones, they must be flown and have their first line servicing performed by uniformed personnel who are subject to Air Force discipline.

For a long time, I have argued that Heavy Lift Cargo Airlines at Stansted should become, under the sponsored reserve concept, a designated Royal Auxiliary Air Force squadron. If the cost of buying or leasing the hugely desirable C17 aircraft, which has an outstanding tactical capability to operate into small airfields, is now prohibitive—I am not able to judge that, only the air staff or perhaps the Treasury can—I believe that the requirement to carry outsize loads, be they main battle tanks, multiple launch rocket systems, armoured fighting vehicles, helicopters, bowlers, bulldozers, munitions, artillery pieces, Bailey bridges, mobile radars, stores of all kinds, fuel or water, is so urgent that the Ukrainian Antonov 124 should be procured. I say "Ukrainian" advisedly because of the risk of political interference were Antonov 124 aircraft leased from Russia.

In size, volume and weightlifting capability, the Antonov 124 is a remarkable aeroplane, but only the air staff can judge its potential against the C17 and the potential of reserve crews to operate it. Suffice it to say that many more transport aircraft are operated by the air national guard and the United States air force reserve together than are operated by the regular United States air force.

Furthermore, the evaluation, in parallel with the short-term strategic airlift programme, of the future transport aircraft to replace the second tranche of some 30 remaining C130Ks should not just consider the relative merits of the C130J, the A400M and the C17, but should also provide the Government with a crucial opportunity to rationalise and optimise the Royal Air Force's military air transport fleet to secure the maximum economy of operation.

I make two passionate pleas. First, the projected in-service date of 2007 for the replacement of the second tranche of C130Ks is too late, as they are uneconomic aircraft and some will have been in service for almost 40 years after their first procurement by the Royal Air Force. The in-service date should be brought forward as far as possible. Early availability of aircraft should be a key factor in the competition; so should spares and support simplification, and the need to avoid the construction of politically rather than militarily motivated aircraft. The Horizon fiasco is a case in point. Collaboration is not an end in itself. What is needed is affordable equipment available to the services within the required time scale and to the performance outlined in the specification. The RAF's fixed-wing transport fleet should therefore have only two fixed-wing aircraft types, one of which must be a genuine heavy-lift aircraft.

The final aspect of this theme, which we shall soon find in the Balkans war to be one of the perennial verities of modern combat, is that the need for helicopters is almost infinite, especially in difficult terrain and against guerrilla and regular armed forces alike. I therefore welcome the modification of the RAF's Chinook fleet to mark 2 status, and the RAF's acquisition of the support helicopter version of the Merlin. The process needs to be accelerated, however, as does the procurement of a more modern fixed-wing fleet.

There is a premium on mobility in modern warfare. It is the message of my speech, and I am sure that, as events unfold in Kosovo, its relevance will become clearer by the day.

8.11 pm

Mr. Tam Dalyell (Linlithgow)

On one point, I strongly agree with the hon. Member for Ruislip-Northwood (Mr. Wilkinson). There is much to be said for the old-fashioned single-service debates that we used to have. I must confess that this is the 78th defence debate in which I have taken part. Those single-service debates were productive, and I think that the services welcomed them. In the first in which I took part, the post of Minister for the Armed Forces was occupied by Brigadier John Profumo—and a very good Minister he was to go to. I was brought up in these matters by the predecessor of the present Minister for Defence Procurement. I refer to George Wigg, with whom my first quarrel concerned his treatment of John Profumo.

As an 18-year-old, I served as a gunner operator—what the Guards call a "donkey walloper"—in the Scots Greys. Although I am strongly opposed to the action in Kosovo, I am neither a pacifist nor other than deeply concerned about our service men. Indeed, when I had the honour to stay with my former national service regiment for three days last year in Bosnia, I was made an honorary member of the mess. I say that because although some of us—including my right hon. Friend the Member for Chesterfield (Mr. Benn) and my hon. Friend the Member for Halifax (Mrs. Mahon)—have been labelled pacifists and heaven knows what, we are not. What we are against are ill-conceived military adventures with an uncertain outcome and an unclear purpose.

It is in that context that I want to ask a question that was put to the Prime Minister five times this afternoon—first by the Leader of the Opposition, then by the Chairman of the Select Committee on Foreign Affairs and then, very directly, by me, by my right hon. Friend the Member for Llanelli (Mr. Davies) and by my hon. Friend the Member for Halifax. The question was this: what actually happens if a Russian ship in the Adriatic, coming into, say, the port of Bar, is apprehended, it is found that there is oil on board, and the ship refuses to take the action—unspecified action—that is asked of it?

That question did not suddenly occur to us. On 25 March, I asked the Foreign Secretary: Will my right hon. Friend refer to relations with the Russians? I was talking to The Economist's correspondent in Moscow, Edward Lucas, who asked what would happen to Russian cargo ships or Russian aircraft that might be carrying arms to the Serbs. Are they likely to be intercepted by NATO forces? The Foreign Secretary replied—I will not give all his answer—that he was glad to have the opportunity to reply to my question. He added: I am confident that the Russian Government will not seek to break the United Nations arms embargo on Serbia. I know that voices have been raised in Russia urging that; but as yet we have had no suggestion from the Russian Government that they intend to supply arms to Serbia". Clearly, there is the possibility of oil being supplied. It is also clear that, whatever may be the negotiations between the Foreign Secretary and Mr. Ivanov, there are others in the background—General Lebed, Mr. Zugianov and, indeed, relative moderates such as Mr. Gadar—who may take a very different view. It is at our peril that we do not understand the anger of the Russians in this context.

I again ask the question that was asked this afternoon. What are the instructions to British ships? I suppose that this comes under the general heading of rules of engagement, but the blunt question is this: what the hell is a crew meant to do if it apprehends a Russian ship with the prospect of setting alight a serious international incident? That question deserves an answer.

Mr. Deputy Speaker

Order. I hesitate to interrupt the hon. Gentleman, but the debate is about defence equipment, and I think that he should direct his remarks more specifically to that.

Mr. Dalyell

I shall turn to another matter concerning equipment.

Mr. Gerald Howarth

Will the hon. Gentleman give way?

Mr. Dalyell

Of course.

Mr. Howarth

When I listened to the hon. Gentleman's exchange with the Prime Minister this afternoon, it was clear to me from the Prime Minister's answer that he was more than prepared to use some of the equipment that we have been discussing.

Mr. Dalyell

That means military action against the Russians, if I interpret what the hon. Gentleman has said correctly, and that prompts all sorts of questions. Once we embark on armed conflict with the Russians, we embark on a chain of unpredictability that I suspect was not bargained for when some of my colleagues started out on this adventure.

Let me return to the question of equipment. I also asked the Foreign Secretary: What is the position of the valuable contacts that my right hon. Friend the Foreign Secretary has had with the Russians over the Arctic fleet and the millennium bug? Has all that co-operation vanished? The answer was: I assure my hon. Friend that contact and co-operation will not come to an end through any wish on our part. I do not believe that there will be any wish for that from the Russian Government"— [Official Report, 25 March 1999; Vol. 328, c. 539-40.] As I understood it, we were supplying equipment.

This week's issue of New Scientist reports: Plans for Russia to cooperate with Britain to prevent a nuclear alert caused by the millennium bug have been put on hold because of the Kosovo conflict. The countries were to have exchanged information about early warning systems for nuclear weapons to pre-empt any problems that might be caused by the date change on 1 January. But a spokesman for Britain's Ministry of Defence says that all plans for Y2K cooperation have been 'placed on the backburner for the foreseeable future'. I ask Ministers what the position regarding Y2K co-operation is now. I understand from constituents in the university of Edinburgh who are involved that these are important matters, and that is it possible that the rusting Soviet Arctic fleet will create difficulties at the millennium.

I say that against the background of having been invited by the Foreign Office to a seminar on precisely this subject in the Locarno room there. One of those addressing the seminar was the governor of Murmansk. Anyone who heard him and the other Russian scientists there must be very clear that—given the end of December 1999—it is a perilous situation.

I come to another technical question, on the bombing of chemical factories. The Serb authorities have warned of an ecological catastrophe if NATO strikes a chemical plant—the Prima Iskra factory—near Belgrade. The Serb authorities have floodlit the factory, so that allied airplanes might see it clearly. The issue is the 180 tonnes of highly toxic hydrofluoride in the factory.

What is the policy of using equipment against chemical installations? As I understand it, real problems of pollution—in relation to chlorine, mercury, phosgene, sulphur dioxide, benzene and ammonia—are caused by the bombing. It will be perfectly satisfactory if the Minister would care to write to me with an answer to that question. However, I do hope that there is some policy on the folly of bombing highly technical installations in a modern society, with results that cannot be known.

I ask specifically about the Vinca institute, which is currently a very small nuclear installation. However, in 1984, the reactor—an 80 per cent. fissile highly enriched uranium reactor—was closed down. The core is still in it, as negotiations with the Chinese—who had the expertise to remove that particular core—have not been concluded. The fact is that, if any missile hits that type of reactor, regardless of whether it has been closed down—

Mr. Deputy Speaker

Order. Although this is an Adjournment debate, may I remind the hon. Gentleman of my earlier stricture? He should try to direct his remarks more directly to the subject of defence equipment.

Mr. Dalyell

I am asking what defence equipment is used against reactor cores that could be extremely Chernobyl-like dangerous.

I ask also about RAF Harrier GR7s having begun to use old-style bombs in their attacks on Serbian targets in Kosovo. As I understand it, on 10 April, jets were sent out for the first from their base in southern Italy carrying free-fall 1,000-lb bombs. Unlike the Paveway 2 laser-guided bombs used on previous missions against buildings, free-fall bombs rely on tail-fins.

I asked the Secretary of State for Defence how many free-fall bombs have been dropped in Yugoslavia in the past month, and what assessment he has made of the reliability of tail-fin guided direction. Today, he replied: A total of about 142 unguided bombs have been dropped by British aircraft in support of Operation Allied Force up to 22 April. They are assessed to have performed reliably and within designed specifications. That is not the story I get from Kenneth Aitcheson of Rescue—the archaeological organisation—which combed the websites for me and made various inquiries.

Those free-fall bombs have created havoc with the Serbian heritage. They have damaged the 14th-century monastery church at Gracanica, near Pristina. The monastery church has been damaged by several consecutive NATO bombings in the vicinity. During the most recent senseless attack, on the morning of 10 April, the village of Gracanica was bombed again. The monastery is one of the highest achievements of late Byzantine architecture, and is the masterpiece of the best painters, from the beginning of the 14th century, in the whole of the Byzantine empire.

Gracanica has existed over centuries, up to today. In 1993, it was inscribed on the tentative "List of the World Cultural and Natural Heritage", using the UNESCO criteria for cultural property. So much for the bombs accuracy.

What do those free-fall bombs do to the 13th–14th century monastery of the patriarchate of Pec, which was badly damaged? Repeated NATO bombing has destroyed the old city centre of Pec, and the log cabin complex at Locane, near Decane. It has destroyed the old trade centre of Djakovica, and Djakovica's Hadum mosque and Tabaks bridge, and the 16th-century church at Drsnik.

NATO bombing has damaged Kragujevac. On the night of 8–9 April, the centre of Kragujevac was severely bombed by NATO, and the 19th-century church was damaged. So much for the accuracy of those smart weapons. Other 19th-century buildings—the Amidza Konak and the Prince Mihailo Konak—were also damaged. On the night of 15 April, the centre of Kragujevac was bombed by NATO again, and the old Parliament—where the first meeting of the Serbian Parliament was held, in 1859—was damaged.

Also damaged were the 14th-century fortress at Krusevac; the 12th-century St. Nicholas monastery, at Kursumlija; and the Virgin church, of the 6th and 12th centuries, at Kursumlija. Also damaged was the Markova Crkva archaeological site, dating from the 4th–7th centuries. The site was bombed by NATO on the night of 1–2 April, and the early Byzantine church was damaged. Damage was done to St. Procopius church, dating from the 9th–10th century, at Prokuplje; the Kopaonik mausoleum of Josip Pancic; the Vojlovica monastery at Pancevo—

Mr. Deputy Speaker

Order. The hon. Gentleman is an experienced Member of the House. I think that he should come back now to the subject of defence equipment.

Mr. Dalyell

I was really pointing out that defence equipment that is supposed to be accurate is in fact inaccurate unless it is decided that the targets are monasteries and churches. It has not been explained to the House of Commons or to anyone else—it is the effect of bombs that are supposedly accurate, but in fact are not. So anyone who drops tailfin bombs from a great height will get into all sorts of difficulty.

Let us take as an example what happened at Nis, the second largest city in Serbia and one of the oldest prehistoric settlements. The centre of the town and the western surroundings were damaged during the third immense and violent bombing of the city of Nis on 5 and 6 April. Severe damage was inflicted on the Chevaliers barracks and the entire complex of the old Nis fortress, and the centre of the city. The ramparts and the objects within them were badly damaged. I take your guidance, Mr. Deputy Speaker, but I am entitled to ask the people who launched the attack what was their intention. Of course, that was not their intention, but it is the effect of their action. People had better not make claims that they cannot substantiate for bombs and equipment.

I do not blame the pilot as it is in the very nature of affairs that people flying planes at great speed and at great height have all sorts of concerns about being locked on to by lasers and cannot always be as accurate as they might wish. The so-called collateral damage is in the very nature of this kind of war—and we should be forgiven a bit of a horse laugh at the words "collateral damage".

A fortnight ago, the Secretary of State for Defence claimed that all bombing targets were approved by him and the Prime Minister. The Americans must have found that laughable. Why has the Defence Secretary not been challenged on that? Who has the say of life and death over the workers in the Zastava car factory? NATO was warned that 10,000 people were in the plant, yet it went ahead and bombed it. The people of the mining town of Aleksinac had nothing to do with Kosovo, yet they were bombed. We glimpsed the body of an old woman, her legs protruding from the rubble of her home. Who was responsible, or was her life merely collateral? Why did a NATO pilot fire his missiles at a railway bridge while a civilian train was crossing? We know that terrible things have happened in Kosovo, but the whole story is a matter of Balkan cruelty and there are two sides to it.

Mr. Wilkinson

Of course there are two sides to the story. Does the hon. Gentleman not realise that the weapon that destroyed the bridge and the train had to be launched at some distance from the target? When the pilot began his run and launched the weapons there was probably no train on the bridge. The train may have steamed on to the bridge and was hit. I do not know, but that could well have been the case, so please will the hon. Gentleman recognise the very extreme difficulties within which our aircrew have to operate and the limitations of war? They have no intention of causing collateral damage; they do their best and they should be supported.

Mr. Dalyell

I emphasised the difficulties faced by pilots flying planes at high speeds. I agree that certain things are inevitable, but what does that do other than strengthen the people who are parading in support of Milosevic—the very people who 18 months ago were parading against him? We have snuffed out the fragile seeds of some kind of democracy that were sprouting in the ground in Serbia. What does the bombing do other than make the Serbs more determined, just as the citizens of this city were determined during the Blitz?

Finally, I should like to ask a question about depleted uranium. I interrupted my hon. Friend the Minister in his opening speech and, understandably, he referred me to the report produced by the MOD in March. The summary of that report states that there are two types of hazard posed by the use of DU: a radiation hazard, although DU is a low specific activity material (as defined by the International Atomic Energy Agency); and a chemical toxicity hazard, which is similar to that posed by other heavy metals, such as lead. There are a number of ways in which some UK troops could have been exposed to DU during the Gulf conflict. However, it is judged that any radiation effects from these possible exposures are extremely unlikely to be a contributory factor to the illnesses currently being experienced by some Gulf veterans. Leaving the Gulf out of it, may we have a statement, either in writing or tonight, on whether the armour-piercing equipment which is related to DU specifications is being used and what account has been taken of the feeling among many Gulf veterans and many others that Gulf syndrome had something to do with the use of DU ammunition?

Finally, there is always the question, "What would you do?" I shall quote how Professor Sir Michael Howard, writing in The Times, ended his powerful lead letter. He wrote: The alternative is a negotiated settlement that Serbia can live with"—

Mr. Deputy Speaker

Order. The hon. Gentleman is really trying my patience now. This is not a general debate on the conflict in Kosovo; it is about defence equipment. He has listened to most of the debate and heard what kind of debate it is supposed to be. It is not about the conflict in Kosovo.

Mr. Dalyell

I end by begging my right hon. Friends to rethink their policy of "capitulation or else", because that will get us nowhere.

8.35 pm

Mr. Ken Maginnis (Fermanagh and South Tyrone)

It was said earlier that this was not an appropriate time for this debate, given that the Secretary of State and Ministers were preoccupied with Kosovo. I think that the present conflict in Kosovo and the recent events in Iraq mean that the debate is not untimely. I welcome the opportunity to contribute to this debate and to talk about how best to defend the United Kingdom's security interests and further the cause of peace around the globe.

Over the years, British armed forces have demonstrated their adaptability and flexibility. We in Northern Ireland have witnessed daily the courage and tenacity of our service men and women in support of the Royal Ulster Constabulary, which has prevented chaos and anarchy taking hold of the Province. We were reminded of that only a few weeks ago, when newspaper reports recounted how the IRA's most notorious sniper unit was finally captured in south Armagh, thanks to the bravery and skill of the Special Air Services.

Our service men and women have served Northern Ireland well. In turn, as hon. Members interested in British industrial history will acknowledge, Northern Ireland's shipyards and aerospace industry have made important contributions to the national economy in peacetime, and to national security in times of war.

However, neither the armed forces nor the defence and aerospace industries can afford to be complacent. Technology moves forward at a breathless pace. As we have noted, military campaigns are being conducted in different ways, and defence chiefs are utilising technological advances more effectively. The strategic defence review, and the Government's commitment to implement its proposals, together amount to an explicit recognition of that, as does smart procurement, the new shibboleth of Ministry of Defence policy.

Similarly, the aerospace industry has had to change and rationalise to compete. In Northern Ireland, Short Brothers has evolved from manufacturing complete aircraft to specialising in the production of major composite components—nacelle systems, missile systems and fuselages. Specialisation in those areas has brought renewed recognition of excellence. Shorts remains the largest manufacturing employer in Northern Ireland, with a work force of about 7,000 men and women.

In the light of the technological advances and the ways in which modern warfare is conducted, the Ministry of Defence announced plans to provide the British armed forces with an airborne stand-off radar capability—ASTOR. Few can doubt the efficacy of such equipment, which would have been of immense benefit to our forces in Iraq during the Gulf war. Given that the region remains unstable, it may well be a necessary asset in the future.

Let me digress for a moment. About a month ago, I accompanied an all-party group to the United States to look at the question of weapons of mass destruction. I was startled, to put it mildly, to discover that the Americans, after the futile experiment of star wars technology, were thinking in terms of an anti-missile defence system. That was stand-off in its worst possible form.

To my knowledge, weapons of mass destruction have not been mentioned tonight. We are in an age in which such weapons—nuclear, biological or chemical—need not necessarily be delivered by missile, but can be delivered covertly, in ordinary transport. There therefore seems little to be said for adopting an ultimate defence stand-off. There will be increasing pressure on democratic countries to ensure that production of weapons of mass destruction in those states referred to as rogue states are dealt with at source. More and more, I believe, the western world will have to police rogue countries close to the source of the danger.

I disagree largely with the way in which the hon. Member for Linlithgow (Mr. Dalyell) presented his case, but I have some concern that, as a member of NATO along with our American allies, we are moving towards a point that is morally hard to sustain as regards the intensity of bombing in Kosovo. I do not fail to recognise that we must disable the anti-aircraft defences of the Serbs, create logistical problems for them and deal with their fuel reserves before we commit troops on the ground. However, we face the problem that people on the ground in Kosovo, who are not yet benefiting from our intervention—

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman will not follow the same line as the hon. Member for Linlithgow (Mr. Dalyell).

Mr. Maginnis

Be assured, Mr. Deputy Speaker, that I have no intention of doing so. I am making this point as a basis for what I want to say about ASTOR. As a European nation, we are beginning to recognise that we shall, sooner or later, have to put ground troops into Kosovo. That situation will face us again and again in forthcoming decades if we continue to assume the role of policing the world. The importance of ASTOR capability is further underlined every day by television reports of what is happening in Kosovo. Ultimately, we may have to put in ground troops if we are to resolve the problems faced by the Kosovars.

Should ground troops eventually be deployed, an ASTOR system would offer long-range surveillance of enemy troop movements and facilitate the targeting of precision weapons, missiles and ground attack aircraft. ASTOR would also provide data that would enable more efficient management of refugee movements. Had ASTOR been operational now, accounting for refugees would have been more straightforward. Losing literally thousands of those refugees would have been avoided and, on that basis, humanitarian aid could have been distributed more effectively.

In Northern Ireland, we have a particular interest in the project. Shorts Bombardier, alongside Raytheon, is among the bidders for the programme. Raytheon has selected the Bombardier Global Express business jet as the platform for the radar. The Global Express is an all-new design. It was designed specifically for high-altitude, long-range travel. As it is a new aircraft, it has built-in growth potential, which will enable it to incorporate more functions as required. Moreover, when compared with its competitors, the Global Express has a longer range, superior take-off and landing performance and lower direct operating costs at higher cruise speeds. Significantly, the Global Express also has a higher mission reliability based on performance comparisons with its main rivals.

Global Express is a key programme for Northern Ireland. Shorts alone makes 25 per cent. of the aircraft, including the forward fuselage, engine nacelles, horizontal stabiliser and other components. About 700 jobs at Shorts depend on Global Express at full production. If the aircraft were selected for the ASTOR programme, 130 new jobs would be created in a three-year period, 30 of them in engineering design, thereby helping to retain a key capability.

The success of the Raytheon bid would also enhance manufacturing industry in other parts of the United Kingdom where help is most needed. More than 350 jobs in Scotland and 400 jobs in Wales depend on the success of the bid. Seventy five per cent. of the ASTOR radar would be designed and manufactured in Edinburgh and Glenrothes, thus creating a new radar technology axis in Scotland, which will provide a new long-term capability. The mission system will be integrated into the Global Express at Broughton in north Wales. The "Celtic fringes" have always been at the forefront of British technology and intellectual expansion. The Raytheon project helps to recreate that dynamic.

Of course, there is a significant English constituency too. Motorola in Basingstoke and RSL in Harlow will provide the ground stations where the information produced by ASTOR will be analysed and passed to the commanders. Data links, which provide the sophisticated communications in ASTOR, will be produced by Ultra Electronics in Greenford, Middlesex.

The hon. Member for Alyn and Deeside (Mr. Jones) pointed out—I do not apologise for endorsing and reiterating the argument—that if Raytheon, which is transferring to the UK technology in radar, systems integration, communications, aircraft modification and manufacture, is awarded the contract, it will have repercussions to the benefit of the United Kingdom as a whole for decades to come. It will give the UK ownership of the entire Raytheon system and that augurs well for the future.

Our policy towards Iraq, which has been reiterated by defence chiefs in the past few weeks in relation to Kosovo, has demonstrated that Britain's security interests are, perhaps more than ever before, tied to the fortunes of the Royal Air Force. Increasingly, military intervention involves air strikes to diminish the capacity of aggressors to wreak war on defenceless civilians. Hence, it is scarcely an exaggeration to say that future British security interests are dependent on the success of the Eurofighter 2000. The United Kingdom is making a £16 billion investment in the EF2000, a massive commitment. It is essential that the aircraft is equipped with the best possible missile. Again, we in Northern Ireland have a special interest in the project. We believe that the Raytheon future medium-range air-to-air missile—FMRAAM—package offers the MOD the best possible solution.

It has been rumoured, and it was repeated tonight by the hon. Members for Somerton and Frome (Mr. Heath) and for Chorley (Mr. Hoyle), that if the Raytheon FMRAAM is selected to arm the aircraft, the United States will use it as a veto on Eurofighter exports. That argument neglects to acknowledge that the United States Secretary of State for Defence has assured the Secretary of State for Defence that that will not happen. He has promised that FMRAAM will not be used as a lever in any future competition between Eurofighter and rival US aircraft. The advanced medium-range air-to-air missile—AMRAAM—on which the Raytheon Shorts FMRAAM is based, has been exported to more than 20 countries throughout the world. Furthermore, the Eurofighter was designed at the outset to carry AMRAAM. The case for the FMRAAM solution is overwhelming, particularly as the rival missile has yet to be developed. In Northern Ireland, we hope that it will be chosen and that the MOD will show common sense when the time comes to award the contract.

The debate was inevitably overshadowed by events in Kosovo. We have been given an insight, if we needed it, of what future war will look like. It is therefore appropriate that we arm our service men and women with the best equipment possible. In coming weeks, as contracts are awarded, we hope that that will be borne in mind and that the MOD will select the Raytheon FMRAAM and the ASTOR solutions. As they are developments of existing technologically proven systems and offer a firm basis for the incorporation of future technological advances, we are convinced that both packages will enhance our defence capabilities and effectively meet future operational requirements.

8.53 pm

Mr. Harry Cohen (Leyton and Wanstead)

It is a pleasure to follow the hon. Member for Fermanagh and South Tyrone (Mr. Maginnis). I hope that he will excuse me for not taking up the issues that he raised, although I associate myself with his tribute to the workers of Northern Ireland, including those in the defence industry.

Defence procurement forms a large proportion of defence spending and is intimately linked with the roles that the armed forces are asked to fulfil. I agree with the hon. Member for Somerton and Frome (Mr. Heath) that it must be increasingly aimed at peacekeeping and peace support operations as well as war fighting. The armed forces have an important role in humanitarian aid and assistance and equipment procurement must reflect that.

I do not wish to focus on Kosovo, except to say that having British forces involved in fighting helps to focus the mind on what we should equip them with. Although I am not yet convinced that an invasion is the right idea, it is significant that the Government are purchasing 386 Challenger 2 tanks, but the British Army has no easy way of transporting to the Balkans tanks of that size. The Government recently announced that there will be four new roll on/roll off ferries, and that will do something to improve the results of years of Tory mismanagement of that issue. Furthermore, we need to consider a proper heavy lift capability. I agree with the comment made by an earlier speaker that we should not rule out the Antonov even as a partial solution to the heavy lift matter.

Year after year, billions of pounds have been spent on defence equipment by this country and other NATO countries, but NATO's military cannot perform its job in Serbia as quickly as we would like. We are told that the problem is the weather or the topography and that we cannot deal with the killers on the ground. In that respect, it seems to me that we have been slow to put the Apache helicopters into action.

I realise that all those matters will be reviewed. The Chairman of the Select Committee on Defence — of which I am a member — has said that all aspects of the war will be reviewed when it is over. However, in the past, there have been inefficiencies, wrong priorities and — in some cases —rip-offs on the part of the defence industry. That must change, and the Government are making a start to ensure that it does change.

One of the largest areas of procurement is Britain's nuclear weapons programme. What use is the fact that we have nuclear weapons in relation to the fighting in Kosovo? We could never use nuclear weapons against Serbia, or in any similar war. What is the point in keeping them? That is an example of wrong priorities. Procurement for the Trident programme is still taking place, and that money could be saved immediately.

During the Minister's speech, I raised the matter of cruise missiles. I understand from a Press Association report that we bought 65 Tomahawk cruise missiles from the United States for £190 million. On 15 April, The Herald reported that: The Royal Navy's only Tomahawk-capable nuclear submarine, HMS Splendid, has fired off six missiles. The tally for that burst of hi-tech fireworks alone is £4.5m. The BBC's website recently stated that: Each of the 100 cruise missiles already launched at Serb military targets by Nato costs more than £835,000. That is the cost of each one, and more than 100 have already been launched.

This is mainly an air war, so the military might consider it appropriate to fire cruise missiles. However, as my hon. Friend the Minister said, this country's cruise missiles have only recently completed the test procedures, and I think that it would be unwise to make heavy use of them in the Federal Republic of Yugoslavia. First, there must be some uncertainty about their reliability and, secondly, it would be a matter for concern if we used up all our stock quickly. There would be heavy replacement costs. We should exercise some caution in the use of cruise missiles, even if they seem to be appropriate.

Mr. Blunt

The hon. Gentleman might not be aware that US Secretary Cohen was reported to have criticised the Europeans today for the level and quality of their contribution to the Kosovo business. As I know that the hon. Gentleman is a great believer in the North Atlantic alliance and a member of the North Atlantic Assembly, he must surely believe in burden sharing. Does he not think that the United Kingdom should be doing its bit with cruise missiles, and that we should be reordering cruise missiles so that there are more of them in our inventory and we can take up our fair share of the burden?

Mr. Cohen

Our service men and pilots are putting their lives at risk. They are certainly doing their bit, and I would refute any suggestion to the contrary. For reasons that I have explained, I am not in favour of using up immediately our entire supply of cruise missiles, for which we have paid heavily and which we have only just tested, and having to order more, which would place a large financial burden on our defence budget.

Sometimes, insufficient attention is paid to rectifying faults that appear in defence equipment, an example of which is deficiencies in the safety release mechanisms on the turret cage in the Warrior armoured fighting vehicle. The cage is designed to prevent soldiers in the Warrior from becoming entangled in equipment when the turret turns. Last year, in a tragic accident, a young soldier, Private Craig Mason, drowned while on a night exercise on Salisbury plain. His Warrior overturned into a puddle, trapping him upside-down in the vehicle, and his colleagues were unable to operate the safety mechanisms to release the cage and allow him to escape.

I do not specifically blame those who designed the cage—it is not possible to foresee every eventuality and all conditions. However, it is important that, when such defects are discovered, they should be corrected at the first possible opportunity. I understand that a redesigned cage has been developed, but that no decision has been taken in respect of fitting it throughout the Warrior fleet. The Wiltshire Times of 16 April carried an article about Private Mason's inquest, the final paragraph of which stated: Following the incident, a prototype mesh harness system has been developed by Army technicians at Warminster to replace the cage in the Warriors. If it is successful, the Army's entire Warrior fleet could be refitted with them. However, as I said, it appears that the Ministry of Defence is dragging its feet in making a decision on that matter. I hope that it will stop doing so and fit the redesigned safety feature. British Army Warriors might be in combat soon and, if this country is to send troops into battle, it is vital that they have safe equipment.

Another reason for my concern about such problems is the emphasis in smart procurement on getting equipment into service early and updating it while it is in service. That sounds good and I support the principle, but, as the example of the Warrior illustrates, the record in practice is not good. Smart procurement was a change introduced by the Labour Government and it is hoped that it will increase the value for money obtained by the Government when purchasing defence equipment. However, there is a complicating factor that might make it harder to tell whether better value for money has been obtained.

The traditional means of calculating Government expenditure is to be changed. The new resource-based accounting system will be introduced for Government spending over the next few years and, in many respects, it will be an improvement on the existing cash-based estimates system. With the new system will come new rules and, for most Departments, a clear distinction for capital expenditure, which is welcome. However, for the Ministry of Defence, it is not clear exactly where that distinction will lie: a building refurbishment will clearly be capital expenditure, but the purchase of a Eurofighter appears to be counted differently.

There has to be more information from the MOD and the Treasury to make the accounts clearer, not only to Members of Parliament, but to the media and the public. There has to be clarity in defence expenditure, because every pound spent on defence is a pound that cannot be spent on health or education. That makes it extremely important that every pound spent on defence equipment can be justified.

I do not agree with the hon. Member for Salisbury (Mr. Key), who made the case for additional defence spending. My right hon. Friend the Secretary of State for Defence has pointed out that spending by the European members of NATO is 70 per cent. of United States spending on defence equipment, but they do not obtain anywhere near 70 per cent. of the worth—the bang —that the United States obtains from its spending. It is not a matter of increasing spending: our priority must be to ensure better value for money. We should look to doing that before we look to spending more money.

I pay tribute to the Government for initiating the strategic defence review, which was a remarkable effort. However, the review, which examined the defence of this country, should not be considered a one-off exercise. The world is changing quickly and we must keep our defence and defence procurement policies under constant review. We must ensure that our defence equipment is relevant to current requirements. Our policies should not be based on overkill, the last war or the cold war, as that would result in wrong priorities and wasted money.

9.6 pm

Mr. Gerald Howarth (Aldershot)

I think I bring a unique quality to the debate this evening, in that I am the only hon. Member to declare openly that I once worked for the Russians. I worked for a Russian combat aircraft designer, Sukhoi Design Bureau, in Moscow, and I hope that that experience has helped to inform my understanding of these important issues.

This has been an interesting debate, in that it has provided an opportunity to consider some very serious procurement issues. The Minister will be aware that many claims have been made on behalf of individual companies and contractors. It is entirely right and proper for hon. Members to make such claims. I join those who have praised the hon. Member for Alyn and Deeside (Mr. Jones)—who is not in his place—for the assiduity with which he prosecutes his case on behalf of his constituents every time he has the opportunity. He is probably more assiduous than most other hon. Members in that regard—although I do not wish to detract from their efforts tonight.

The headquarters of British Aerospace is located in my constituency of Aldershot. It will become the third largest defence contractor in the world if the merger with GEC-Marconi goes through. There is also the headquarters of the Defence Evaluation and Research Agency and many other small and medium-sized enterprises that contribute significantly to Britain's defence manufacturing capability, such as St. Bernard Composites—which makes the fan case linings for Rolls-Royce engines—Air Log, Cam-Lok, Weston Aerospace and IBM.

Defence equipment is a fantastic success story in this country. Although I welcome Labour's conversion to the importance of strong defence, I wish that Labour Members would give greater recognition to the contribution of Conservative Governments from 1979 to 1997. Thanks to them, Labour was able to promote its foreign policy objectives when it came to office. The Labour Government had at their disposal a sophisticated, state-of-the-art and capable defence force that they could deploy in time of trouble—as they are doing now.

I shall not advance tonight the case for any particular programme, but I think Ministers should consider carefully the lessons of the past. Their procurement decisions should not be informed only by the need to generate jobs in the United Kingdom; the equipment must be capable of performing the task and it must he available at a competitive price. I also urge Ministers to take into account security of supply so that, when the Government have procured the equipment, there will not stand between them and its deployment a foreign Government or company that is withholding supply, thereby limiting the United Kingdom's ability to deploy its forces.

It is important that Ministers take into account the continuing development of technological capability in this country. I well remember the late 1980s, when we were considering a new anti-radar missile. On offer were the HARM, high-speed anti-radar missile, from the United States and the ALARM. air-launched anti-radar missile, which was promoted by British Aerospace. I then had no constituency interest in defence, but I was in favour of the ALARM project simply because, if we had bought HARM, we would not have had access to the head technology. By developing our own technology, we made sure that we would later be in a position to keep up with the rest of the world and provide our Government with a British-made option.

The only specific reference that I shall make is to the BVRAAM—beyond-visual-range air-to-air missile—Meteor programme, in which British Aerospace is involved, and to which the same principle applies. If that weapon is procured, the technology will remain in the United Kingdom and we shall not then be subject to a potential veto from the US Congress.

My next point relates to the consolidation of the defence manufacturing base. I mentioned earlier that, if British Aerospace merges with GEC-Marconi, it will be the third largest contractor in the world. I am delighted that British Aerospace has chosen that option, rather than prosecuting the proposal to merge with DASA of Germany, because the arrangements proposed in the latter case would have transferred substantial ownership overseas. It is to the advantage of the United Kingdom that British Aerospace should merge with another British company to create the formidable power that the new, enlarged company will become. I hope that the Minister will comment on the progress in that merger, and state what part the Government are playing in ensuring that the competition authorities on the continent are supportive of it.

I do not support that merger for any chauvinist or jingoistic reason. Collaborative programmes were mentioned earlier in the debate and, although there is clearly an advantage in collaboration—indeed, it is, in many cases, a necessity—it carries costs. In a collaborative project, attempts must continually be made to keep all parties on side and stop the project running into the sand. The Typhoon Eurofighter project is an example of such a project. Ministers, particularly under the previous Government, had to go to Munich several times to stiffen the Germans' resolve, keep participants on board and keep the project alive. It is therefore to our advantage to maintain collaboration within the United Kingdom.

Collaboration between UK companies is advantageous also because our defence industry does not look only across the channel, but looks to neutral Sweden, where British Aerospace has teamed up with Saab, and to the United States. I shall turn later to the United States and the Defence Evaluation and Research Agency. The two-way street is extremely important, and the sharing of technology between us and the US is beneficial to the United Kingdom and our defence industrial base. That collaboration arises because we have a common interest and because the two nations that can be best relied on to defend freedom around the world are the United Kingdom and the United States of America.

I give the Minister a word of warning, which arises from a particular case. When Dowty, which is part of the TI Group, sought to acquire the Messier undercarriage business in France, it found it extremely difficult to do so. In the end, Snecma bid for Dowty in the United Kingdom. I am told that it offered such a ridiculous price that the TI Group accepted it, and so that capability could be transferred to France. We might therefore find that a specific capability was no longer available in the United Kingdom, and we might become dependent on the whim of the French Government.

I intervened in the matter, and I understand that the assurances that I suggested should be given by the French company and the French Government were secured. That nevertheless illustrates the argument by my right hon. Friend the Member for Bridgwater (Mr. King) that security of supply is important, and that we shall defeat our own purposes unless we are prepared to strive to ensure that security of supply.

My next point is a brief one about exports. When the Labour party came to office, much was said about a new ethical foreign policy and ethics in defence exports. That wrongly presupposed that there were no such ethics before. The previous Conservative Government were very strongly driven by ethical considerations in defence export capability. I emphasise, however, that defence exports are vital to our defence manufacturing base in this country.

If we were not to rely on defence exports, the unit cost of producing sophisticated kit in this country, solely for our own consumption, would be astronomical; we simply could not afford it. The extended production runs that are afforded by export orders enable us to reduce the unit cost of the equipment that is purchased by the British Government. That is beneficial to the British taxpayer and to industry, and the Defence Committee's analysis reveals that it saves about £350 million in amortising the costs of project overheads.

Defence exports have another benefit, which the House should take into account. They enhance the United Kingdom's influence overseas and provide us with that handle on overseas Governments which I wish to prevent their having on us. In the event that a change of Government happens in a country to which we have supplied equipment, we shall be in a position to influence that Government for the better.

We have been extremely lucky in the series of distinguished heads of the Defence Exports Services Organisation. Sir Charles Masefield was absolutely brilliant—an outstanding man—and I am delighted that Tony Edwards has succeeded him. The Defence Committee has investigated the latter and found him to have a totally clean bill of health, and I am sure that he will do a splendid job.

The Defence Evaluation and Research Agency has genuine difficulties. The hon. Member for Dunfermline, West (Ms Squire) mentioned some issues surrounding DERA; slightly unfairly, I challenged her, asking about the problems that it faces. I am sorry that she has not talked to the management of DERA, because I think that she should.

I have spoken to Sir John Chisholm, chief executive of DERA. He told me that, first, the Government are running down the amount of money made available to DERA; secondly, although there is some spin-off from defence research into the commercial world, a great deal of business is spun in from the commercial world and is adapted to the military world; and, thirdly, DERA is obliged to compete with commercial companies for Government defence grants and studies. The agency therefore has real problems. I believe that there is unanimity across the Floor of the Chamber—it is important that there should be—that DERA provides the British Government with that independent, high-quality scientific evaluative capacity by which to judge all the competitive projects that are presented to Government. I agree with Kevin Smith of British Aerospace that DERA's second purpose is to engage in that sky blue research that shows no immediate likelihood of producing a payback—for, if it did, the commercial world would be doing it—thus ensuring that we have the capability to stay at the forefront.

I cannot stress too strongly what has already been said about the link with the United States of America. I have said in the House before—I apologise for repeating it, but it is important—that we have access to United States technology and shared information in large measure because the Americans trust us. For some reason, they trust us because DERA is a Government agency. That is a fact of life. There is plenty of evidence to show that, rightly or wrongly, the United States is not happy in undertaking collaborative work with countries other than the United Kingdom. I therefore make a strong plea that, in the new public-private partnership arrangement that the Americans come to with DERA, those two key areas must remain within the public sector and under the aegis of the Ministry of Defence. To do otherwise would betray a vital British national asset.

9.21 pm

Mr. Keith Simpson (Mid-Norfolk)

This has been an interesting, but foreshortened, debate. Eleven Back Benchers have contributed to it. As several have said, the debate has been held against the background of a war in the Balkans. On these occasions, we usually have a discussion about the United Kingdom defence industry and employment, but that becomes very much second order against the military realities.

I welcome the first of the functional debates that will replace the single-service debates. I understand the point made by my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) that the single-service debates enabled us to discuss aspects of the Royal Navy, the Army and the Royal Air Force, but I believe that we are likely to get far more out of debates on defence policy, procurement and personnel.

It is unfortunate that we were not able to begin this series of debates without a debate on defence policy. One of the consequences has been that many hon. Members have ranged somewhat widely over many topics. With your indulgence, Mr. Deputy Speaker, I will probably follow suit. Unlike the spokesman for the Liberal Democrats, the hon. Member for Somerton and Frome (Mr. Heath), I believe that defence policy is crucial to our understanding what the Government are doing with their equipment policy.

The strategic defence review, which was published in July 1998, was already beginning to look a little frayed at the edges even before the current conflict against Serbia began. The strategic baseline has been challenged by events and by evolving Government spin. I remind the House that in paragraph 15 the SDR stated that it was to consider our defence requirements in the period to 2015. That is futurology indeed.

I remind the House also of the scale of effort that was laid down in the SDR. Basically, the armed forces of the United Kingdom could cope with one Gulf-style commitment or Bosnia commitment plus a second substantial deployment, but could not expect both deployments to involve war fighting or maintain them simultaneously for longer than six months. A resource constraint—money, manpower and equipment—on the number of operations in which we might get involved was therefore acknowledged in the SDR last July.

I suspect that that consideration is at the back of Ministers' minds when considering whether to deploy ground forces.

Mr. Ian Bruce (South Dorset)

My hon. Friend is touching on funding in the context of the strategic defence review. He will be aware of the disposals that the Ministry of Defence intends to undertake. He will know also that £700 million has been found in defence disposals to pay for the equipment that the Ministry wants to buy. Has he noted places such as the air station at Portland, where disposal is moving at a snail's pace? I suspect that that establishment will not provide any funding for the MOD, and that that will be the position throughout the country.

Mr. Simpson

My hon. Friend makes a good point. The Ministry of Defence is getting increasingly desperate about disposing of lands and properties, many of which are difficult to dispose of on the open market.

I remind the House that, in a written answer to me on 4 March, the Ministry of Defence said that 85.9 per cent. of the Army's Land Command had been committed to deployment on operations, or warned that it should he so deployed. A written answer to me on 22 April says that that figure has gone up to 89.8 per cent. Our land forces have already made an enormous commitment to overseas operations—not only in manpower, but in equipment. It would be helpful if the Minister would assure the House that the armed forces and their equipment, established by the SDR on those scales, are sufficient to meet not only current commitments, but future commitments that might arise as a consequence of committing ground forces in Kosovo.

The SDR also emphasised that membership of NATO will continue to provide the UK with its best insurance against all these risks. Most of us would agree fundamentally with that, but I remind the House that, even as the SDR was being debated on 20 October 1998, the Prime Minister was contradicting Defence Ministers by emphasising a European common foreign and security policy, which they were at pains to deny that night.

The Government emphasis on Franco-British defence co-operation in the St. Malo agreement of December 1998 and the statement arising from this weekend's NATO summit envisaging the European Union taking on a greater defence role stretch our defence policy at the margins, but the real question is, "What is the British defence industry's view on such co-operation?" I talk to people in the defence industry—they are ambivalent about our furthering relationships with European defence industries, and I do not blame them. They are primarily concerned not with political considerations, but with economic ones. The December decision by British Aerospace and Marconi to go ahead with a merger achieves vertical rather than horizontal integration, despite what many people consider to be the Prime Minister's pressure for the latter. Perhaps the Minister can confirm whether the United Kingdom or EU Governments have any objections to the merger's going ahead.

The Government are sending mixed signals to the UK defence industry. Is the integration of European defence industries still a key Government policy and is it still Government policy that international collaboration should be the basis for 40 per cent. of all future defence programmes? One obvious indicator was to have been whether contracts were placed for project Horizon.

Many hon. Members—including, I suspect, some on the Government Benches—were surprised and disappointed by the Minister's opening. statement, and it seems that we have the worst of all possible worlds: we will have the PAAMS missile system, but we may not get the hulls of the frigates on board which it is to he fitted. That is an odd decision, to say the least, and it does not sit well with Government policy on the European defence initiative. [Interruption.] The Minister dismisses that, but he should talk to people in the Royal Navy, not just to people in the defence industry. So far, there has been a stunning silence from the Royal Navy on whether it is fully behind the decision and believes that it will meet the Royal Navy's commitments in the future.

Mr. Wilkinson

Is not the situation even worse inasmuch as the French, not ourselves, lead on the missile system? The programme is led by Aerospatiale, so were are playing second fiddle in what should be an area of particular excellence for us. As my hon. Friend says, we do not yet know what vessel—a type 23 perhaps—will carry the missiles.

Mr. Simpson

My hon. Friend makes a good point; the Under-Secretary skated over it, but perhaps the Minister for the Armed Forces will give us some details.

It would be helpful—a number of hon. Members touched on this—if the Government published a balance sheet—not only of the value of two-way street defence contracts with the United States of America, but of defence contracts, either way, with our European partners. In that way, the House could assess the true value of defence co-operation, both across the Atlantic and with Europe.

Finally, we must consider the impact of the Prime Minister's Chicago speech this weekend—-the so-called "Blair doctrine"—outlining rules governing justified international intervention in humanitarian crises. Apart from whether our allies have agreed to that doctrine, the fact that Parliament has not even debated it—indeed, we have not fully debated the Government's foreign policy since they came to office in May 1997—and its impact on our resources, I want to consider one obvious procurement consequence. Such international interventionism in the internal affairs of sovereign states will persuade many countries to acquire weapons of mass destruction, particularly ballistic missiles.

Anti-missile defence was a notable omission from the SDR, as hon. Members have pointed out. Given the United States' decision to increase funding for missile defence and the likely consequences of the Blair doctrine, are Ministers in a position to tell us whether they will now consider anti-missile defence for the United Kingdom?

Mr. Spellar

What would the hon. Gentleman cut in the programme to pay for his proposal?

Mr. Simpson

I am amazed to see the Minister playing that rather fatuous game. Although I may wish that I were the Minister, he is the Minister. There is nothing in the strategic defence review. He is in a position to tell us whether he regards it as a priority. He does not appear to be taking the question seriously. Perhaps the Prime Minister did not consult him before making the Chicago speech. They talk about joined-up government, but one part of the Government does not refer to another.

Mr. Spellar

rose—

Mr. Simpson

I am sorry, but the Minister obviously does not have an answer.

Having discussed cuts, let us consider resources. I thank the junior Minister for leading me into this subject. As we said before and during the publication of the SDR, the level of defence spending is crucial to the Government's defence policy. In July last year, it was obvious that £1 billion had been taken out of the defence budget. As my hon. Friends have pointed out, the Chief of the Defence Staff has said that meeting the efficiency savings required would be "challenging". I suggest that, for "challenging", we should read "virtually impossible to achieve".

Like other hon. Members, I welcome the undertaking that the MOD's chief finance officer made before the Select Committee, which has now been confirmed by the Minister for the Armed Forces, that the MOD will publish regularly details of efficiency savings related to budgets so that the House can see whether they really are savings, rather than cuts. It is extremely difficult for the House, the defence industry or even MOD insiders to gain an accurate assessment of the constraints on the MOD budget or the long-term costing.

Given the real-terms cut in the defence budget, as outlined in the SDR, serious doubts have been expressed on both sides of the House about the MOD's ability to achieve 3 per cent. efficiency savings. Given the impact of the current military operations, the defence industry is rightly concerned about the equipment programme outlined in the SDR. As my hon. Friend the Member for Romsey (Mr. Colvin) said, the percentage increase in terms of defence procurement has been as much to do with inflation as anything else.

Can the Minister confirm whether any of the service equipment budgets are already overspent? Rumours have been going around the MOD that they are. If so, I am afraid that the weapons equipment budget will just not succeed.

Finally, may I touch on a point raised by my hon. Friend the Member for Salisbury (Mr. Key) and the hon. Member for Somerton and Frome concerning the cost of the operation in Kosovo? We should not be accountants or bean counters in terms of looking at the moneys to be saved when British armed forces are putting themselves in the line of fire. I have great sympathy for Defence Ministers in trying to square a budget and negotiate with the Treasury. I received a reply just now from the Chief Secretary to a question that I asked the Chancellor of the Exchequer. I asked: what representations he has received from the Secretary of State for Defence in respect of an increase in the defence budget. The Chief Secretary replied: My right hon. Friend, the Secretary of State for Defence, and I are keeping the additional costs of the Kosovo operation under close scrutiny. That is fair enough up to a point, Lord Copper, but the armed forces and, to be fair, Defence Ministers would like a proper answer from the Treasury.

As the Minister explained, smart procurement is the key enabler by which the strategic defence review intends equipment to be delivered on time and in budget. The Government announced smart procurement as if it were some philosopher's stone of defence policy. Will the Minister tell the House who within the Ministry of Defence is the customer envisaged by smart procurement? What is his appointment in particular?

Smart procurement, integrated project teams and battlefield contractor support mean that the defence industry is moving from being just a supplier to an active participant and stakeholder in defence policy. What will that do for competition policy, and who is ultimately responsible for its delivery?

Smart procurement, as Ministers have explained, needs high-class, high-quality personnel. Many of those people can be found inside the MOD, but others will be recruited, chiefly in competition with the defence industry. What action are Ministers taking to assess the necessary increase in pay structure of personnel involved in smart procurement?

The Government have over-hyped smart procurement. Efficient defence procurement has been a Government priority since my right hon. Friend the Member for Henley (Mr. Heseltine) was Secretary of State. Some of my more distinguished and older colleagues will remember the Labour party's fierce opposition when that policy was introduced. Few Labour Members, if any, spoke up in favour of it.

Ultimately, smart procurement will depend on overall Government policy, on the defence budget and on a changing MOD culture, which the Minister acknowledged. The Secretary of State is relying on the character and determination of the newly appointed chief of defence logistics, General Sam Cowan, to change the culture not only in the new Defence Logistics Organisation, but across the board in the Ministry of Defence.

I do not think that any of us are able or would wish to question either the patriotism or the determination of Ministers to deliver the equipment that they have planned. However, we suspect that the strategic defence review avoided difficult decisions on commitments and capabilities and was underfunded. It was certainly oversold in hype—good heavens, one would think that they were Richard Burdon Haldane. We want to consider the short and long-term issues involved in delivering equipment.

The war in the Balkans is testing current generations—or more accurately previous generations—of equipment. The previous and the present Government have rightly emphasised the need for equipment to be integrated, joint and multinational. Indeed, the criticism of the air campaign against Serbia made by the hon. Member for Linlithgow (Mr. Dalyell) has less to do with the equipment of the Royal Air Force and the skill of its pilots and more to do with the political constraints and a failure to recognise that it is rare for one service to be able to deliver the political objective on its own. The full thrust of the strategic defence review was about joint operations and joint procurement policy. If we have a single service policy, it is hardly surprising that it fails to deliver the political objective. I am sure that Ministers are aware of that.

I shall ask three brief questions on current operations in Kosovo. First, will Ministers reconsider the strategic defence review assumptions about security of supply as it relates to war maintenance reserves and stocks? My right hon. Friend the Member for Bridgwater (Mr. King) and my hon. Friend the Member for Aldershot (Mr. Howarth) raised that issue.

Secondly, given that the Army's expeditionary force logistical capability depends on savings made by cutting the Territorial Army, are Ministers confident that the logistical supply chain for the British element of the Allied Command Europe Rapid Reaction Corps is robust enough for any future ground operations? Thirdly, given the continuing role of the Royal Engineers —of whom I know Ministers think highly—are Ministers satisfied that the balance of equipment is sufficient for them to meet their operational role?

There are many unresolved questions regarding defence equipment. We have made our criticisms; I hope that Ministers will be able to answer to our questions, and prove to our armed forces that they take those questions seriously.

9.40 pm

The Minister for the Armed Forces (Mr. Doug Henderson)

We have had what could be described as a thin attendance in the House. The upside is that hon. Members on both sides of the House have had much more time to make detailed speeches. I suppose that, for the Minister responding, the downside is that so many questions have been asked that I shall probably fail to answer them all tonight, but I shall endeavour to answer as many as possible, and commit myself to writing to those whose questions I shall not be able to answer.

I endorse what has been said by all hon. Members: we praise the skill, dedication and courage of our armed forces who are currently deployed in the Balkans. People—our soldiers, sailors and airmen and women, and the civilians who support them—are the most. valuable resource that the Ministry of Defence has. I do not think that anyone in the Chamber would disagree with that.

Before I say anything else, let me make an announcement. This evening I awarded a contract to help the welfare of those serving in Macedonia, which will enable British service men and women deployed there to stay in touch with their loved ones at home. The contract will allow all 4,500 of our personnel in Macedonia to make one free 10-minute satellite call per week from one of the nine sites there, and will come into effect immediately. I have been keen to do something about that, and I am pleased to be able to make that announcement now.

Mr. Wilkinson

Will the Minister give way?

Mr. Henderson

I promise to give way after I have made a little more progress.

The job that British service men and women are doing in the Balkans throws a spotlight on them, and on the impressive professional qualities that they bring to the difficult and dangerous job that they are there to do. They are making a major contribution to NATO operations in the former Yugoslavia, providing forces at sea, on the ground and in the air. The current operation, however, also throws a spotlight on us. We must ensure that the skill and dedication of our forces are matched by the quality of the equipment that we give them with which to do their job. That equipment must be capable, to give us a technological edge over our opponents; it must be robust, to stand up to the extraordinary rigours of combat operations; and it must be flexible, to provide for the variety of demands that we ask our forces to meet. We must remember that they are involved in three different types of operation in the Balkans: conducting air operations from bases in Italy and from on board HMS Invincible, preparing in Macedonia for the difficult and dangerous task of peacekeeping in Kosovo, and providing compassionate and caring support for thousands of refugees in Albania.

Mr. Wilkinson

I am grateful for the Minister's statement about the telephone calls, which I am sure will be widely appreciated. Even more appreciated, however—especially by service men deployed to the Balkans from Germany—would be an upward adjustment of their overseas living allowance, which is budgeted for. Those service men were not to know that they would be sent to the Balkans, and their families could be in some difficulty. Will the Minister ensure that equity prevails in that regard as well?

Mr. Henderson

I assure the hon. Gentleman that I want to make certain that our troops are looked after properly, and that their conditions are comparable with any others in the Balkans—as they are. Much has been made of the overseas living allowance. That is related to the cost of living, not to the job that our troops are doing in any part of the world. There has been no change in that.

The fact is that 12 per cent. of service men and women's salary is intended to be used to deal with the unusual conditions in which they have to serve. The cost of living allowance is a quite separate matter. It is based on the cost of living in a country in which people are deployed and determined by comparing that cost with costs in the United Kingdom. If people are coming from the United Kingdom and our costs are lower, an adjustment will be made.

The hon. Member for Salisbury (Mr. Key) made some points on defence budgets. I should like to reassure him that the defence budget based on the strategic defence review will be shown to be a good deal when compared with any other deal struck between any other Defence Ministry and Government in the world. Admittedly, over a three-year period, the Budget sets a 1 per cent. reduction in real terms, but that is tied to a commitment that—when efficiency gains of 3 per cent. are made annually—any extra resources that are freed will be made available for investment in the priorities set by the Ministry of Defence and will not be taken back by the Treasury.

When we make the gains that we anticipate that we shall make—I am confident that we shall make such gains—additional real resources will be available to meet the demands placed on us in a changing world. That is the background against which any charges on Kosovo must be assessed.

There are standard procedures for dealing with additional costs accruing to the Ministry of Defence when forces are deployed, and the current procedures and regulations under the current Government are no different from those under the previous one. Procedures will have to be assessed in each Department incurring additional costs, and subsequent negotiations with the Treasury will determine how the costs will be met. In some cases, some of the costs will have to be dealt with under departmental budgets—including that of the Ministry of Defence—whereas, in other cases, there will be a charge on the reserve fund. The formula, which I believe is a reasonable one, has not changed.

Mr. Blunt

On international comparisons, the United States's defence budget is rising by 10 per cent., and the President has asked for the equivalent of an extra £6 billion for Kosovo. Therefore, the deal in the United Kingdom is not the best that could be struck anywhere in the world. The Minister said that the efficiency savings programme is not necessary to sustain the programme decided by the strategic defence review, and that those efficiency savings will be translated into extra investment in our defence programme. That is a significant comment. I do not believe that that is the case. I should therefore be grateful if the hon. Gentleman made absolutely clear the position on the £2 billion-worth of efficiency savings targets to be achieved, and if he will reconfirm now that all the efficiency savings—down to the smallest ones—will be listed and given to the House and the Defence Committee.

Mr. Henderson

I do not think that the hon. Gentleman was listening to what I said. I said that we anticipate that, annually, for three years, there will be 3 per cent. efficiency savings; that those have been taken into account in the budget agreed between the Ministry of Defence and the Treasury; and that gains above 3 per cent. will accrue to the Ministry of Defence. That is what I said. If there was any doubt about it, I have repeated it.

The hon. Member for Salisbury made much in his speech about the United States, as if, compared with other countries, it has dramatically increased the resources for defence. However, in the past four years—comprising two years under the previous Government, and two years under the current Government—the United States has not made such increases. In those four years, Britain has reduced spending by about 8.5 per cent., which has been the average reduction made by our European and NATO allies. In the same period, the United States has made a 17 per cent. reduction. Therefore, from 1994, the United States has been rebuilding from a much lower base—which makes a big difference in the calculations.

Mr. Ian Bruce

rose—

Mr. Menzies Campbell

Will the Minister give way?

Mr. Henderson

I said that only to put the situation in context. I am not saying whether the United States' actions were right or wrong. However, one has to bear in mind the context.

Several hon. Members

rose—

Mr. Henderson

I shall not take any more interventions on the matter. I want to move on, as many questions have been asked.

We were asked whether our current commitments were consistent with the assumptions in the strategic defence review. The answer is that they are. We are committed to the proposals in the strategic defence review and we are implementing them. In some respects, their implementation is absolutely consistent with what is happening in Kosovo. The principles that we enunciated in that document anticipated the situation that unfortunately has arisen in Kosovo. There are no closed minds and there never should be, but we are firmly committed to that review. The total numbers deployed in Bosnia and in Kosovo and those that may be deployed in a peacekeeping force are absolutely consistent with what was envisaged in the strategic defence review. In fact, they are fewer than we estimated.

I hope that Conservative Members who doubt the wisdom of the agreement between the Ministry of Defence and the Treasury in respect of efficiency are not suggesting that we should not strive for efficiency and look for better and more modern approaches to defence. If they are, we want to know about it.

Mr. Campbell

There is an important point about the relationship between the money provided for defence and the Government's commitments. I hope that we can avoid being partisan about the issue. A senior budget holder told me that a large part of his budget was already allocated through contract as a result of the privatisation of so much of what previously had been provided in-house. Therefore, he must find 3 per cent. efficiency savings on his overall budget out of about 40 per cent. of that budget. How is that individual supposed to fulfil the Government's commitments against the background of having to find 3 per cent. efficiency savings every year?

Mr. Henderson

I am pleased that the right hon. and learned Gentleman said that we should try to deal with such matters in a non-partisan way. I know that he endeavours to do just that and to consider the interests of the nation. I attempt to do the same, but sometimes I am denied the opportunity because of the way in which issues are raised.

On efficiency, I am absolutely confident that with a tough, systematic approach, we shall be able to achieve the goals that we have set ourselves. In some areas it will be possible to make much greater gains than 3 per cent., but in others it will be extremely difficult to make any gains at all. However, I am confident that we will be able to make the overall efficiency gains to which we are committed.

Mr. Bruce

Will the Minister give way?

Mr. Henderson

I really have to press on, although I may take interventions on other issues.

The hon. Member for Salisbury also mentioned the Western European Union. Let me make it clear that the concordat that was concluded in Washington related to capability, not institutions, within Europe. A number of signatories to NATO said that we must look at how things are done in Europe and at how to achieve the capability that we need. The decision did not relate to the institutions. The hon. Gentleman said that it was a failure that a decision had not been reached as to how the WEU would relate to NATO. the North Atlantic Council and the European Union. In my opinion that was not a failure but a strength. We must get the political principle and the military resource assessment right before deciding how the bureaucratic structures should relate to each other. I think that we got our priorities right. At a meeting that I attended in Washington about six weeks ago, there were still differences in NATO about emphasis, but this weekend there was unanimity and that is a major step forward.

My hon. Friend the Member for Dunfermline, West (Ms Squire) and the hon. Members for Romsey (Mr. Colvin) and for Aldershot (Mr. Howarth) mentioned the Defence Evaluation and Research Agency. There was some expectation that an announcement would be made about it, but there is still work to be done.

Mr. Bruce

Will the Minister give way on that point?

Mr. Henderson

No. There is no point in the hon. Gentleman pressing me. There is work to be done, and the House will be first to know of any decisions taken when it is complete.

I want to move on to questions raised by hon. Members who have attended the whole debate. My hon. Friend the Member for Alyn and Deeside (Mr. Jones) was as indomitable, brief and comprehensive as ever. He raised three important points relating to his constituency, but I believe that they are of major significance for the nation's defence. I shall try to pick up some of the other points raised as I deal with my hon. Friend's questions.

My hon. Friend the Member for Alyn and Deeside asked about RAF Sealand, and we all value the work that that important unit performs on behalf of the nation. My hon. Friend also asked about the ASTOR ground surveillance system, in which there is a great deal of interest. That system featured in points raised by the hon. Member for Fermanagh and South Tyrone (Mr. Maginnis), by my hon. Friend the Member for Dunfermline, West, and by several other hon. Members.

I can tell the House that the facility in the constituency of my hon. Friend the Member for Alyn and Deeside is renowned as a centre for excellence. No decision has yet been made, but it is a great tribute to our defence industries that there is a choice in the matter, as the relevant capabilities exist in different parts of the country and therefore are able to bring different excellences to the decision. The third point raised by my hon. Friend the Member for Alyn and Deeside concerned large carrier aircraft. The matter was raised also by my hon. Friends the Members for Leyton and Wanstead (Mr. Cohen) and for Chorley (Mr. Hoyle), and by the hon. Member for Ruislip-Northwood (Mr. Wilkinson). The point brings to the House's attention the essential role that air lift plays in the modern deployment of our armed forces. Anyone who did not believe that that was important six weeks ago certainly now knows that it is a crucial factor, as air lift capability has been required in a number of different ways.

We need to renew our present fleet of large carriers to maintain our air lift capability. We will therefore need four C17s, or their equivalents, in the period ahead. Bids are being considered, and I hope that the decision will be made by 2000. However, other, more long-term decisions will have to be made in relation to large aircraft. They will have to be made in the context of the needs in the Ministry and of the ability of British industry to meet those needs, and the requirements of a wider export market in the future. That big and crucial decision will have to be faced in due course.

My hon. Friend the Member for Dunfermline, West has a long record of participation in these important debates, whether we are debating matters on a single-service basis or in the more modern framework. She drew to the House's attention the importance of Rosyth dockyard, and the crucial work that it is doing as part of the allocated programme. I thank her for her kind words in that regard. It is absolutely important, for the needs of Scotland and of Britain, that the Rosyth yard should be able to carry out that crucial defence work.

My hon. Friend the Member for Dunfermline, West also asked whether Kosovo would lead to a delay in procurement. The answer is no: we are determined to modernise as we have proposed in the strategic defence review, and we shall press on with that, our additional commitments at the moment notwithstanding.

The hon. Member for Somerton and Frome (Mr. Heath) asked about ordnance stocks. I am running out of time, so I shall write to him in more detail, but I can tell him that we must make sure that we have the necessary stocks. The hon. Member for Romsey asked about the future security of supply, and I can say that we must also make sure that the supply is secure. We must be sure that we can always supply what we need, whether it be a replacement for ammunition stock or a major item of equipment.

The hon. Member for Somerton and Frome also asked about the air-to-air missile, which I agree is crucial for the Eurofighter. My hon. Friend the Member for Chorley was also interested in that matter, on which, as they may know, a decision will be reached later in the year.

My hon. Friend the Member for Linlithgow (Mr. Dalyell) once again referred to Russian shipping. In the short time available, I can give only the same reply that the Prime Minister gave earlier, but should be happy to discuss the matter with my hon. Friend.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.