HC Deb 24 July 2000 vol 354 cc777-89 4.17 pm
The Secretary of State for Defence (Mr. Geoffrey Hoon)

My right hon. Friend the Chancellor of the Exchequer announced substantial additional provision for defence in his statement to the House on 18 July, which marked the end of a long period of decline in the size of the defence budget, following the end of the cold war. For the first time in almost 15 years, the Ministry of Defence is committed to modest real-terms growth in each of the next three years.

The settlement provides substantial additional funding for defence in the current year. There will be an extra £200 million from the reserve to help meet pressures on the defence budget, and in particular to help address the main equipment lessons learned from the Kosovo campaign. For the next financial year, the Ministry's budget will increase by £427 million over the level previously planned, which means an increase of some 1.9 per cent. Overall, the settlement will provide £1,250 million of new money for defence, on top of an allowance for inflation.

This substantial injection of additional cash ensures that we will have the amount needed to deliver the major programme of modernisation set out in the strategic defence review, to invest in the new equipment required to ensure that our armed forces build on their enviable record of professionalism and success, and to improve their living and working conditions.

The settlement sends an important signal about the Government's intention to sustain the capabilities of the armed forces. This country has taken a leading role in NATO adaptation and in arguing for the development of European defence capabilities. The additional provision demonstrates that we continue to take those responsibilities seriously.

The settlement shows that we are also serious in our determination to look after service personnel and their families. I was delighted to be able to announce last week, with my right hon. Friend the Secretary of State for Social Security, a new policy on pensions for life, ensuring that in future war widows who remarry will retain the attributable benefits that they receive from the armed forces pensions scheme.

On the equipment front, I made a statement to the House on 16 May about the Government's plans to acquire new strategic lift aircraft and air-to-air missiles for Eurofighter. With this settlement, we will be investing in further new capabilities, not only increasing our own defence capacity but contributing to the improvement of those of NATO and Europe. In particular, our analysis of operations in Kosovo identified a number of important equipment capability lessons. The highest priority among those is the need for improvements in our ability to attack targets with precision, to bomb in all weather conditions and to improve the security of our communications.

In March I announced trials to integrate Maverick anti-armour missiles on Harrier GR7 aircraft, and for enhanced security for air-to-air communications on key aircraft types, including the Harrier GR7 and the Tornado GR4. Those trials have been progressing well. Subject to their satisfactory conclusion, and to satisfactory contract negotiations, we will therefore be proceeding with the procurement of Maverick missiles. Maverick is a proven, off-the-shelf precision guided missile that will greatly improve our capability to attack both mobile and static targets by day and by night. We can procure those missiles quickly and we expect to have an operational capability by the end of the year.

The air-to-air communications trials are almost complete. We will now go ahead with fitting the systems to a range of aircraft. Additionally, we have decided to procure as soon as possible a new precision guided all-weather bombing capability for the RAF. Global positioning satellite technology will allow us to overcome problems such as those caused by poor weather during the Kosovo campaign.

Early action on those decisions has been made possible by the provision of new money for defence. Let us be clear why the country is now able to invest more in defence: it did not come about by chance, but because the Government kept to tough spending limits while we stabilised the economy, sorted out the public finances, helped people back to work by a process of welfare reform, made tough choices and saw them through. All that helped to create the platform of stability on which we can now build the necessary investment for the future.

The settlement also confirmed another key element of our previous plans. Subject to the satisfactory conclusion of the public-private partnership for the Defence Evaluation and Research Agency, the defence budget will benefit from the receipt of a further £250 million in the next financial year. I can confirm today that we have decided to proceed with that public-private partnership.

In July 1998, as part of the strategic defence review, the Government concluded that the future for DERA could best be secured by harnessing the opportunities offered by a public-private partnership. That approach will give DERA the freedom to flourish, to develop its business and to exploit the wealth of knowledge that it has built over the years to the benefit of the wider UK economy. Those new opportunities should have a positive impact on job prospects, and the organisation will be capable of attracting and retaining staff with expertise in areas that are also in demand from other private sector companies.

On 17 April, I announced a period of consultation on a document describing our proposals. Stakeholders, including the Defence Committee, have acknowledged the improvements that we have made over earlier proposals. They have welcomed our willingness to listen to their views. The overall response has been positive, with the majority of stakeholders recognising the need for change and endorsing our proposals as a sensible way forward. The US Administration have also welcomed our new approach.

Consequently, we have concluded that we should proceed with the core competence model set out in the consultation document, separating those functions that are best performed within a private sector company and those that are best performed wholly within government. About three quarters of the current DERA will be moved to the private sector through a flotation that we will try to achieve in 2001. The terms and conditions of staff will be protected by the TUPE—transfer of undertakings and protection of employment—regulations.

Just under 3,000 staff will be retained within the Ministry of Defence to carry out research in key areas and provide a high-level overview of defence science and technology, in-house impartial advice and the management of international research collaboration. The elements retained will include sensitive programmes and sectors such as the chemical and biological defence sector based at Porton Down, most of the Centre for Defence Analysis and the defence radiological protection service.

The retained DERA will therefore continue to perform a number of critical functions for the Government. It will be a world-class organisation offering rewarding career opportunities within the Ministry of Defence and the wider civil service. We envisage that retained DERA will continue, for the time being, under the existing trading fund arrangements.

We are confident that the principles underlying core competence are right, but we also recognise that there is more detailed work to be carried out during implementation. We will continue to consult our stakeholders closely, to ensure that any concerns are fully considered. Our timetable envisages that separation between the two parts will be achieved by the end of the year; we will then conduct a rigorous period of shadow operation to demonstrate that both organisations and their supporting infrastructure are robust and will perform as expected. As we identified in the consultation document, our preference is to seek a flotation on the stock market as soon as its potential is suitably developed and we can ensure best value for the taxpayer. We will keep open the option of seeking a strategic partner for the business as an intermediate step.

DERA is also home to the Defence Diversification Agency, which was established to take forward our commitment to strengthening links between civil and military technology. We remain fully committed to ensuring that the objectives set for the DDA are met, and we are currently reviewing how best to take forward its role in the light of the PPP process. Throughout that process, we have remained committed to the objective of ensuring the best possible future for DERA and for defence science and technology. We now have a way forward that is both workable and good for DERA, for the Ministry of Defence and for the wider UK economy; it will offer value for money to the taxpayer while ensuring that the Government and our armed forces retain access to leading edge technology.

The spending review was good for defence, good for the armed forces and good for the country. Our decision on DERA will build on that to ensure that we capitalise on a vital national asset, both ensuring the maximum benefit for defence in future and allowing our scientific expertise to develop and flourish in the wider market. I commend those decisions to the House.

Mr. Iain Duncan Smith (Chingford and Woodford Green)

I thank the Secretary of State for his courtesy in allowing us early enough sight of the statement to prepare a response. I shall deal with the spending figures at the end of my questions, but let me start by welcoming the announcement of the settlement regarding war widows, which will be received with gratitude by hon. Members on both sides of the House. The right hon. Gentleman is to be commended for that.

My first question is about Maverick. I am intrigued by the fact that although the right hon. Gentleman said that he would go ahead and purchase Maverick, he added that neither the trials nor the negotiations were yet complete. Therefore we do not know whether he will make the purchase, because one of the latter processes might fall down. It seems strange to announce the purchase of Maverick before knowing exactly what will happen.

If the RAF wants the missile, the lessons of Kosovo leave me in no doubt that it should get it, but will the Secretary of State confirm that the decision on Maverick raises questions about Brimstone? Is he aware of any delay in Brimstone's coming into service? We have talked about the first missiles being due in March, with an in-service date in October; is there to be some delay? If not, why is Maverick being introduced slightly more than a year before Brimstone, which I understood would do the same job, is likely to be introduced? Does the order indicate concern about a shortfall in Brimstone's capability that the RAF needs to plug?

When Brimstone finally enters service, will the RAF run two missile systems, with all the problems involving spares that that will engender? Will the right hon. Gentleman explain how he intends to resolve that problem, which will tend to make life more expensive and more complicated? Is it not true that he has let it be known that there will be a 25 per cent. reduction in the Brimstone order; and is it not that reduction in Brimstone numbers, not extra money, that makes available the sum needed to purchase Maverick?

I welcome the Secretary of State's announcement of the order for the global positioning satellite system, but what impact will that have on the implementation of JTIDS—the joint tactical information and distribution system? In addition, what impact will his new proposals for DERA have on that agency's involvement in the process?

Today's announcement focused on DERA. I confess that reading and hearing the statement made me think that I had read the wrong report from the Select Committee on Defence. The report I read struck me as one of the most damning I had ever read on a so-called privatisation. The Conservatives remain in favour of privatisation, provided that a case can be made, and the case of DERA is no different. The previous Government turned down the proposals on DERA, because they did not believe that the case could be made. The Defence Committee said—and I agree with it: In our judgment the current risks of proceeding with the public-private partnership—even in its new and improved format—continue to outweigh the still hypothetical benefits. It bases that opinion—again, I agree with it—on three main areas. The first is the relationship with the United States.

The Secretary of State said some warm words about the US relationship, but below the level of politicians discussing things with politicians, are not serious problems emerging at the working level? Owing to their fears about what is happening, British people working at DERA are being excluded from discussions with US defence companies. Practically, they are being locked out. The Secretary of State needs to give us an answer.

The second concern is what might happen to Boscombe Down, about which we heard no word. Will the Secretary of State confirm that the MOD still requires an in-house capability for aircraft testing and evaluation? Will he clarify that? If not, will he indicate the possible implications for serving RAF officers who will be forced to work in private companies? How will they be dealt with, and how will their future be secured?

On intellectual property rights, again the Defence Committee was clear, and questions remain. Private companies to which I have talked—big and small—raise exactly the same point. They have put a lot of money into such developments, but are likely to see things going against them. They are deeply unhappy about the process of ownership. The Secretary of State did not give any explanation of how the Government will resolve that big issue.

Under the Secretary of State's plans, not just units, but some of the people in them, will be put into the private sector. When the units are divided up, some people will be trespassing on both sides of the line. What will happen to them? That issue is highlighted by the question of provision for employee share ownership in the new private company. For example, the people working for the public body will not be able to own shares, but those who have been transferred to the private sector may be able to do so. How do we sort out that mess?

On DERA, it seems that the Secretary of State has determined to be indeterminate. He says that the Government will try to privatise by 2001, and a shadow organisation will be set up. If the shadow organisation highlights the problems identified by the Defence Committee, will he kill the process? Or is he driven by the Treasury to return the money, regardless of what the shadow organisation says? It is no good just saying that an organisation will be world class. Having worked in the private sector, I know that companies are world class not because the managing director says so, but because of their reputation for the quality both of the people who work for them and of the stuff that they do.

I return to the issues surrounding the budget. I wish the Secretary of State would just tell the truth about the settlement, rather than presenting it with smoke and mirrors, as is so typical of this Government. He knows very well that this is not the first real-terms increase in the defence budget in the past 15 years. I checked with the Library, just out of interest, and it pointed out that in 1996–97 there was a 0.6 per cent. increase in the defence budget. So, straight off, the right hon. Gentleman's statement was incorrect. [Interruption.] Hang on; he is to respond to these points—no doubt with yet another puff of smoke.

Three simple matters arise in connection with the budget. First, it has been falling since 1997, and is still falling. The Secretary of State inherited a budget of 2.9 per cent. of GDP, and if he is lucky, he will leave it at 2.4 per cent. of GDP. Secondly, does not the strategic defence review set a spending target of 2.4 per cent. of GDP? Even with the cash settlement, as the House of Commons Library kindly tells us, by 2003–04 the budget will fall to 2.3 per cent. of GDP—below the Government's target. The third and main point is that, as the Library's extrapolated figures show, without the panicky cash increase, the budget would have fallen to 2 per cent. of GDP by 2003–04.

The reality is that the Government have slashed defence spending to a much lower level than they inherited. That is the real reason why the Secretary of State screamed in panic at the Chancellor, "Save my life"—which he has tried to do. With the defence budget now lower than that which he inherited, the Secretary of State will have decimated our defence forces by the next election. That is the real record.

Mr. Hoon

I am sure that the House will be intrigued by the final comments of the hon. Gentleman, who speaks for the Conservative party on defence. This is the first time that an extra £1,250 million has been described as slashing a budget. That indicates the depth of his difficulty in dealing with this matter.

The hon. Gentleman concluded with a number of comments about gross domestic product. Perhaps he has not kept up with all that his leader has been saying recently about GDP. In case he is not a regular reader of The Daily Telegraph, I will remind him. The Leader of the Opposition said: We are making it clear that a Conservative Government will increase public spending by a smaller proportion than the growth of the economy as a whole. That is a clear lesson, which the hon. Gentleman ought to have learned.

If the hon. Gentleman is planning to increase spending on defence, he had better say so. He had better tell the House what the Conservative party's plans are. If he has plans to increase the size of the defence budget—we have not seen any evidence of that—he needs to tell the other members of the shadow Cabinet whose budget will pay for it. If the Conservative party gets its way, the budget will be slashed right across public spending. That is clear from all that the Opposition have said in recent days in response to the Government's announcement of extra money.

If we cut the budget by the amount proposed by the Conservative party, there would be a reduction—[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. I understood that the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) wanted a reply from the Secretary of State.

Mr. Geoffrey Clifton-Brown (Cotswold)

He is not getting one.

Mr. Deputy Speaker

Order. It is a reply, so far as I am concerned.

Mr. Hoon

To achieve the boasts of the shadow Chancellor, there would have to be a cut of 1.3 per cent., or £900 million, in the defence budget. That represents a real cut in the amount spent on defence.

We understand that the hon. Gentleman wants an increase in the amount spent on the Territorial Army. We have estimated that such an increase would cost £150 million, even without the loss to the budget if surplus equipment and property could not be sold off. That is a gap of more than £350 million in the hon. Gentleman's spending figures. If we add to that the £250 million that he wants to forgo from the proceeds of the DERA privatisation, he should tell the House how his figures add up.

In the promises made by the Conservative spokesman there is a huge hole, of the order of £1.3 billion, which is roughly the extra sum that the Government propose to spend on defence in the next three years. The hon. Gentleman has not done his sums properly. He is promising the country that the Conservatives will spend more on defence, but the shadow Chancellor's proposals mean that they would cut the amount spent on defence.

The Opposition must tell the country what they will cut. If they intend to cut the budget, it is no good making vague promises about improving the Territorial Army, and about equipment. We need to know what they would cut. Are they proposing to cut Meteor? Are they proposing to cut Type 45? Are they proposing to cut provision for the future large aircraft, or the new carriers? I should welcome a proper explanation of the Conservatives' intentions.

When it comes to defence, the choice between the Labour party and the Conservatives is clear: the first real-terms increase in defence spending since the end of the cold war, or massive cuts in defence under the Conservative party.

Mr. Christopher Leslie (Shipley)


Mr. Deputy Speaker

Order. An hon. Member is trying to address the House and cannot be heard. I cannot tolerate that situation.

Mr. Leslie

I welcome the settlement for war widows. That was an important announcement, as was that of the extra money for defence spending. My right hon. Friend explained that defence spending has received its first boost for more than a decade. Will he comment on the shadow Chancellor's statements on the spending review? Does he believe that the Conservative cuts guarantee would imperil the defence of the realm?

Mr. Hoon

I am grateful to my hon. Friend for his observations, especially those about war widows. Instead of making vague promises, Conservative Members should set out their precise intentions for defence. The Government are committed to spending extra money on defence in each of the next three years. Conservative Members are traipsing round the country telling everyone that they intend to cut public spending. Either they would cut public spending and defence provision or they would cut taxes. Which is it?

Mr. Menzies Campbell (North-East Fife)

Does the Secretary of State understand that in spite of his assurances, more than residual discomfort remains in the House about what appears to be a doctrinaire drive towards the privatisation of part of DERA? What is the Secretary of State's response to the report by the Select Committee on Defence, which says: the…risks of proceeding…outweigh the…hypothetical benefits. It continues, more colourfully, to say that the Secretary of State's proposals rely on a wing and a prayer. It is true that there will be an increase in projected defence spending, but in 2003–04 we will spend only 2.3 per cent. of GDP on defence. Some argue that that is the lowest level of defence spending since the Napoleonic wars. How will the figures assist the Government to persuade European allies to spend more on defence to achieve the European security and defence policy, which both the Secretary of State and I support? Do the figures depend on maintaining the so-called efficiency saving of 3 per cent., the continuation of land sales, and the sale of DERA achieving the predicted £250 million?

Will the figures that the Secretary of State announced allow for the maintenance of the Eurofighter programme in numbers, delivery dates and service date? Will they allow for the continuation of the aircraft carrier replacement programme? Will they also allow for the replacement of the light machine gun, which the Director of Infantry seems to regard as a matter of some urgency?

Mr. Hoon

I am sorry that the right hon. and learned Gentleman believes that we have been doctrinaire about DERA. We underwent a completely new consultation process, precisely to demonstrate that we were not doctrinaire. I cannot imagine the reason for the accusation that we are doctrinaire, after we said that the results of one consultation process had not been satisfactory and that we would reconsider the position. The right hon. and learned Gentleman's criticism does not stand up.

Those who have considered the revised proposal have largely welcomed it. I accept that we will not please all of the people all of the time. I realise that that is a trait that Liberal Democrats try to display, but in government it is sometimes necessary to make a decision. We have made a decision that was strongly supported by the United States as recently as this morning. Senior United States officials who are in the United Kingdom said that they were pleased with the proposals.

As for the right hon. and learned Gentleman's suggestion about GDP, we are talking about a substantial amount of extra money—an extra £1,250 million, over and above inflation, to spend on defence. That allows us to say to our European partners and allies that they should increase their defence budgets. We are spending more money, which will allow us to fulfil the programme that we set out under the strategic defence review.

Mr. David Winnick (Walsall, North)

In view of—[Interruption.] I shall begin when the interruptions have stopped.

In view of my right hon. Friend's welcome statement today, will he say when a statement will be made about compensation for former prisoners of war of the Japanese? Does my right hon. Friend realise that the Prime Minister's welcome remarks have raised expectations among those very brave people—now far fewer in number—who suffered so terribly from starvation and torture at the hands of the Japanese? We must bear in mind the fact that 25 per cent. of British prisoners of war of the Japanese never returned—and we know why.

Mr. Hoon

My hon. Friend has quite properly pursued that matter with a great deal of commitment and effort, and I entirely share his sympathy. All I can say now is that the matter is still being considered by the Government.

Mr. Julian Brazier (Canterbury)

Will the Secretary of State answer just two of the questions that my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) asked about DERA? First, which features of the trial involving the shadow DERA organisation will determine whether it is a success and whether the privatisation should proceed? Secondly, what will happen to the intellectual property rights that DERA holds, many of which are of such enormous concern to small and medium-sized defence businesses throughout the country?

Mr. Hoon

The answer to both those questions will be established precisely in the process that I have set out. We shall carefully consider which intellectual property rights should remain with which organisation according to the functions that are divided. We shall certainly make a robust assessment during the shadow working of the two separate organisations, and we shall learn from that process how best to achieve our aims. There are no blueprints. That is precisely why we are not being dogmatic about the process.

Mr. Andrew Mackinlay (Thurrock)

Full marks to my right hon. Friends the Secretaries of State for Defence and for Social Security for remedying the wrong in relation to war widows, but in his discussions with the Secretary of State for Social Security, did my right hon. Friend tackle the outstanding and irritating anomaly, which involves considerable injustice, whereby some local authorities decide not to exercise their discretion to disregard war disablement pensions in dealing with matters such as housing benefit?

Mr. Brazier

Hear, hear.

Mr. Mackinlay

Indeed, that anomaly is a cause of constant irritation to all hon. Members, and I am astonished that neither the previous Government nor this Government have addressed the issue. That would cost the Exchequer nothing, it would make local authorities face their responsibilities, and it would mean parity of treatment and value throughout the United Kingdom. Can we do it now?

Mr. Hoon

I am grateful to my hon. Friend for making the point about war widows. He says that a wrong is being done, but I should explain that most pension policies had such a provision in the past. We have been able to change an anomaly in the war widows pension scheme, but other pension schemes will need to be altered in future to try to provide consistency. That is relevant to my hon. Friend's second point. Certainly, we should like local authorities to adopt a more sympathetic attitude towards those with whom they deal. but above all, we should like them to adopt a consistent approach.

Sir Teddy Taylor (Rochford and Southend, East)

The Secretary of State says that the new DERA company will have the freedom to flourish, but does that mean that it will have the freedom to take its own commercial decisions without direction or guidance from Ministers? If that is the case, is he aware that unlike all the others, those in DERA at Shoeburyness would greatly welcome the fact, because, rightly or wrongly, they think that the guidance that Ministers have given has resulted in work being shifted from Shoeburyness to Eskmeals against the wishes of customers and against all the merits of common sense and economic judgment?

Mr. Hoon

I have heard similar arguments from others who represent areas where there are ranges, but they have put them exactly the opposite way round. There is clearly already competition between the ranges, and the commercial freedom that we expect to be extended will be of benefit to them. The fact that the new DERA will have commercial freedom is one of the reasons why we think it important to put the organisation into the private sector.

Mr. Stephen Hepburn (Jarrow)

May I remind my right hon. Friend that the average age of skilled workers on the Tyne is now 50, and rising? When will he make a decision on the placement of roll on/roll off ferry orders? If newspaper articles are correct—they are not always—I urge him to tell the European Parliament to keep its hands off British Government contracts for British workers. He will be aware of the concern that once again, Tyneside might lose out on a Government contract, and he knows about the importance of the decision to the future of shipbuilding on Tyneside, so I ask him to give more information.

Mr. Hoon

I am grateful to my hon. Friend for his concern. The matter is being considered carefully by the Government, and he will know that a determined effort has been made to ensure that appropriate decisions are taken on placement of the order for ro-ro ferries. His concern would more properly be directed to the European Commission rather than the European Parliament, but a constraint under which we operate is that placement must be wholly consistent with European law.

Mr. Clifton-Brown

What implications does the right hon. Gentleman's statement have for the overstretch of our troops, and what effect will it have on troop numbers in the three armed services—not only regulars, but reservists and territorials—over the next three years?

Mr. Hoon

I am grateful to the hon. Gentleman for his genuine concern about a real issue. On overstretch, we have managed to reduce our commitments. Towards the end of last year, 47 per cent. of the Army was deployed or on exercise, which caused significant overstretch. The figure is now a more manageable 27 per cent., but I recognise that we have a continuing problem with retention, which he is right to raise. Recruitment figures in recent years have been excellent, but the retention figures are somewhat disappointing. As I said in my statement, the accommodation that we make available to members of the armed forces is a cause for concern, and appears to have implications for retention. Many of those who leave the armed forces earlier than we might like cite the poor quality of some of the accommodation, so I hope that some of the extra money that we have available as a result of the Chancellor's settlement can be used to improve some fairly poor accommodation.

Mr. Syd Rapson (Portsmouth, North)

I add my congratulations on the issue of war widows, whose position was severely undermined by Margaret Thatcher when she was Prime Minister. My hon. Friend the Minister for the Armed Forces and I represented thousands of people who were made redundant under the previous Government, who nigh on destroyed the basis of the Ministry of Defence. On DERA, the trade unions have lobbied many of us about consultation. If the decision is positive, will full consultation be available to them during the changeover from Government service to the private sector?

Mr. Hoon

I can certainly give that assurance. A careful programme of consultation with all those affected will be undertaken to ensure that we have the right people in the right organisations.

Mr. William Ross (East Londonderry)

It was evident from the right hon. Gentleman's statement that he intends to remedy some of the equipment defects that have shown up in recent conflicts. However, will he go further and tell us exactly how many extra soldiers, sailors and airmen there will be? Equipment is not much use if we do not have the men to wield it. Above all, what steps will he take to ensure that the soldiers on the ground have decent rifles?

Mr. Hoon

I am grateful to the hon. Gentleman for raising the question of numbers. We are committed to carrying through the decisions of the strategic defence review, and this money will allow us to do that. The SDR set out a target for armed forces numbers and aimed at a particular provision for the Army. That remains our objective, but, as I said to the hon. Member for Cotswold (Mr. Clifton-Brown), achieving it has been made more difficult by the retention problems that we have experienced. Poor accommodation is often cited as a reason for people leaving the Army earlier than we might like, so I hope that addressing that issue will have consequences for improved retention, and therefore for the size of the armed forces.

Mr. Harry Cohen (Leyton and Wanstead)

I judge from an earlier reply that the Secretary of State is content for existing patents to go across to the privatised DERA, but will a thoroughgoing assessment be made of each patent's value and implications for national defence? Will the privatised DERA play any role in advising the MOD on contract preparation and allocation?

Mr. Hoon

Certainly a vigorous determined assessment will be made of which intellectual property rights will go to which organisation, not least because that will have significant consequences for the valuation of the new company. We will ensure that a proper assessment is made of the value of each element of intellectual property transferred to the private sector. I made it clear in my statement that giving the Government objective impartial advice will continue to be part of retained DERA's function.

Mr. Crispin Blunt (Reigate)

Will the Secretary of State confirm that the cash increases that he has announced do not even go as far as reversing the cuts imposed under the last comprehensive spending review two years ago? Secondly, will he confirm that the 3 per cent. efficiency savings target remains in place, which puts enormous pressure on the base level and the bottom level of staff officers who have to implement it? if the right hon. Gentleman does not understand the pain caused by that target—which was imposed under his predecessor when he was mugged by the Chancellor of the Exchequer two years ago, when the target increased from 2 per cent. to 3 per cent.—he is not doing his job properly.

Thirdly, will the right hon. Gentleman confirm that it is a bit rich to try to claim that the Select Committee on Defence is in support of the transfer of DERA? When I was a member of it, it was—and according to the reports that I have read since, it still is—opposed to the proposed transfer of DERA. He talks about £250 million having to be found if the transfer does not go ahead, but the Treasury will be taking £500 million anyway from the sale of DERA, and that will not benefit the defence budget.

Is it not a sad state of affairs that the Secretary of State has to be rescued by the Chief of the Defence Staff, who had to see the Prime Minister? That is the equivalent of the Ministry of Defence's nuclear bomb. The Secretary of State is leaving the defence budget in precisely the same precarious condition. No wonder we are reading in the diary columns that he wants to go to the Department of Trade and Industry.

Mr. Hoon

I am surprised that the hon. Gentleman did not learn more about the processes of government when he was advising a previous Conservative Government. Perhaps the nature of his advice was such as to lead that Government to continue to cut the defence budget, as they did year on year for 15 years. It is astonishing to hear the hon. Gentleman, when he is supposed to know something about this issue—[interruption]

Mr. Deputy Speaker

Order. The hon. Member for Reigate (Mr. Blunt) asked about four questions when he should have asked only one, and now he is shouting from a sedentary position.

Mr. Hoon

The hon. Gentleman is complaining about the fact that extra money will be spent on defence, over and above inflation. That was never achieved by Conservative Governments while he was giving them advice. I do not know how he manages to reconcile the two. Perhaps that is why he is now a Conservative Member rather than a defence adviser. Clearly, he was a disaster as a defence adviser. Unless he improves the quality of the advice that he gives the House, he will be a disaster in his current job, too.

The reality is that—irrespective of a 3 per cent. efficiency target—we are spending extra money. Whatever level of efficiency is achieved, the benefit will accrue to the defence budget. The more efficient the armed forces—each of the three services—are, the more will be available for spending. That will be a considerable advantage for defence.

Mr. Tam Dalyell (Linlithgow)

Patchy though the circumstances may be, the view of the Royal Scots Dragoon Guards, with whom I stayed, was that their accommodation in Kosovo was excellent, and that the contractors should be congratulated on the efforts that they have made. Could something be done to relax the rules on the buying of local produce, so that fruit and other items do not have to come frozen from Britain?

On the crucial issue of retention, is not one of the problems that the families of the Royal Scots Dragoon Guards, and there are other examples, have been in Fallingbostel for eight long years? The retention problem would be somewhat eased if only the regiment could have a home posting. If we are to go on and on in Bosnia and Kosovo year after year—four months next year and, heaven help us, six months the year after that—the retention problem will become acute.

Mr. Hoon

I am extremely grateful to my hon. Friend for his helpful and constructive suggestions, and especially for his observations about the temporary field accommodation in Kosovo. Notwithstanding the difficulties that we had in ensuring that it was available, that accommodation is now the envy of every other armed force in the theatre.

I shall look at the question of improving local purchasing, especially of fresh food, and shall write to him in due course about the result of my inquiries. I have considerable sympathy with his point about home posting. It is sensible to try to find more satisfactory ways of ensuring that members of the armed forces retain a base in the United Kingdom. That will have beneficial consequences for retention.