Defence Procurement

HC Deb 17 July 2002 vol 389 cc311-51

[Relevant document: The Fourth Report from the Defence Committee, Session 2001–02, HC 779, on Major Procurement Projects.]

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

4.51 pm

The Minister of State for Defence (Mr. Adam Ingram)

I welcome the official Opposition's support for the Government's announcement on defence spending. Monday's announcement by the Chancellor represents the biggest sustained real increase in defence spending plans for 20 years.

That is excellent news for defence. The 2000 spending review provided the first sustained growth in the defence budget since the end of the cold war: an annual average of about 0.3 per cent. over the three years. This year's spending review has gone further, providing for real annual growth of 1.2 per cent. over the next three years. In real terms, it represents new money: in year one—

Mr. David Laws (Yeovil)

Will the right hon. Gentleman give way?

Mr. Ingram

Perhaps the hon. Gentleman will let me give the figures—he may not have heard them yet.

In year one, the amount will be £725 million. In year two, it will be £798 million and in year three, £1.047 billion. Unlike the years of Tory decline, when it comes to defence, Labour means business.

Mr. Laws

Is the Minister aware that Treasury officials, in evidence this morning to the Select Committee on Defence, confirmed that defence expenditure in real terms would be lower in every year of the spending review than it was last year?

Mr. Ingram

I should like to see the transcript of the evidence. It is certainly worth examining any advice given by Treasury officials, but we have to be cautious in interpreting it. I should rather take advice from Departments than from the hon. Gentleman.

I hope that the Opposition's support for our new budget extends to our programme of radical, realistic reform that underpins it. Based on our approach of maximising support to the front line, that has meant an extensive and ongoing overhaul of our delivery of support services to our Navy, Army and Air Force. Difficult decisions have had to be made, and there are more in the pipeline.

I want to make it clear from the outset that we will not flinch from those decisions, because it is important that we get it right. We must make best and efficient use of our newly increased budget; more money to spend does not mean less focus on effective delivery. Indeed, the very opposite applies. We need to get real value for our defence pound.

Against that background, I welcome this opportunity to outline our progress in delivering the programme of equipment modernisation set in hand after the strategic defence review to ensure that we have capable and effective armed forces, properly equipped for the tasks that we ask our service men and women to undertake.

The SDR set us firmly on the right track for making sure that our armed forces can meet the demands of today's and tomorrow's operations. It identified a range of improvements to our capabilities, especially to enhance the ability of the armed forces to conduct expeditionary operations.

Of course a great deal has happened since the SDR and since we last debated defence procurement in October 2000. The events of 11 September last year shocked us all. In response, we have looked afresh at our defence posture and plans. In doing that, we have not set aside the conclusions of the strategic defence review; rather. we have described this work as a new chapter building on the assumptions that we made and the conclusions that we reached during the SDR.

The new chapter work has considered the extent to which the strategic context has changed and how we might best engage in tackling both the symptoms and causes of terrorism. It has also focused on the balance between home defence and countering threats abroad, and on how to enhance the effectiveness of our military contribution to both.

Further conclusions on the wider aspects of the new chapter review will be published in a White Paper tomorrow and, clearly, I do not want to anticipate that now. But I can give some broad indications of the likely consequences for our forward equipment programme. It will not surprise the House that we are likely to see a continued emphasis on rapid deployment, intelligence gathering and precision strike capabilities. That is consistent with the conclusions of the SDR, although some further enhancements in those areas will be needed.

In particular, we are moving in the direction of what is called "network-centric capability", bringing together sensors and strike assets to enable the controlled, precise and rapid delivery of military effect. We will therefore want to look at enhancements to our capability to acquire and analyse information, get the information to those who need it and the precision strike capabilities to turn it into results. My right hon. Friend the Secretary of State for Defence will make a full statement tomorrow, setting out our conclusions on the new chapter work and the implications for defence capability.

Llew Smith (Blaenau Gwent)

In the past, we have purchased nuclear weapons from the United States. In what situations would the Government be willing to use those weapons of mass destruction?

Mr. Ingram

My hon. Friend should be aware that we never set out the scenarios in which those weapons would be put to use, although my right hon. Friend the Secretary of State has made it clear time and time again, at this Dispatch Box and elsewhere, that, in the right circumstances, the weapons would be used. That is the purpose for their existence as part of our force capabilities.

Llew Smith

Will the Minister give way?

Mr. Ingram

No, I have dealt with that point. The issue concerns the use of equipment rather than its capabilities. My hon. Friend has had the opportunity of hearing my right hon. Friend the Secretary of State explaining time and time again about that part of our equipment capability.

The settlement for defence agreed as part of the 2002 spending review, and announced by my right hon. Friend the Chancellor on Monday, will provide a firm foundation for moving forward with the new chapter. It will offer in particular an opportunity to make the further investment necessary to deliver the enhanced capabilities that the new chapter work tells us we need. The Government have made available £1 billion of new capital investment and £500 million of new resources to take the work forward. My right hon. Friend the Secretary of State for Defence will provide more details on this tomorrow, but it is clear that the settlement is very good news for defence.

Mr. James Gray (North Wiltshire)

Will the Minister give way?

Mr. Ingram

Given the sparse presence on the Conservative Benches behind him, the hon. Gentleman will have plenty of opportunity to take all the time that he wants to set forth his arguments. But I shall certainly give way to him.

Mr. Gray

I am grateful to the Minister for giving way so early in his speech. He is right that I may have a few moments to speak later, if I am lucky enough to catch your eye, Madam Deputy Speaker. The Minister has talked about the switch to resource accounting and, particularly, on 1 April 2003, he will have to take account of depreciation and carry-over costs of some £12.2 billion, in addition to current costs. Has he taken those figures into consideration in coming up with the figure of £3.5 billion to which he has referred?

Mr. Ingram

The answer is yes. I suggest that the hon. Gentleman look at the make-up of the figures for the three-year programme, which have been published by the Treasury, and the way in which those figures are affected by taking account of depreciation. It is important to take account of those non-cash items; doing otherwise would, in a sense, be false accounting. Those realistic aspects of the Budget settlement have to be taken into account.

Mr. Mike Hancock (Portsmouth, South)

Will the Minister give way?

Mr. Ingram

The debate is about procurement issues, and we should deal with them. Some hon. Members may have doubts about whether the settlement can meet the demands, but they have not yet heard what I have to say about our procurement programme. I do not know whether the hon. Gentleman wants to rush away to get home, but if he cares to hold on, I may give way to him when he has, I hope, absorbed some of the other information that I will impart to him and his hon. Friends.

Since 11 September, British armed forces have been actively engaged in the war against terrorism in operations against al-Qaeda and Taliban forces in Afghanistan. The challenges of mounting and sustaining operations at that range and in such a harsh environment should not be underestimated. It is a credit to our service men and women and their equipment that United Kingdom forces were able to make the contribution that they did, alongside American and other allies.

Some £155 million was made available to the Ministry of Defence to fund additional equipment and other urgent operational requirements. A number of significantly enhanced capabilities specifically needed for that campaign, such as lightweight hand-held thermal imagers, night vision goggles and additional secure communications equipment, were brought into service rapidly and deployed to good and powerful effect. I acknowledge, however, that all that has not been trouble-free. In the extreme conditions in Afghanistan, all weapon systems are at risk of developing problems. Hon. Members will be aware that, in particular, there have been reports of stoppages with the upgraded SA80 weapon.

Let me assure the House that Ministers take any reported shortcomings in the SA80 very seriously indeed. We attach considerable importance to making sure that our service personnel have reliable and effective equipment that is up to the job. Indeed, that was one reason why I insisted that troops deploying to Afghanistan should take the modified SA80 with them. Notwithstanding the problems encountered there, the SA80 A2 is a more capable and much more reliable weapon than its predecessor. The question is whether it is good enough.

The modified SA80 performed very well during the trials in highly demanding conditions, but, given the new reports, a full and thorough investigation has been set in hand. Specialists have been sent to Afghanistan to assess the problems at first hand with the Royal Marines and to conduct test firings under typical operational conditions. That team has now completed its work and is preparing, as a matter of urgency, a full report on its findings. It would be inappropriate for me to comment further until the investigation team's report has been received and its findings assessed.

Mr. John Smith (Vale of Glamorgan)

I am reassured by my right hon. Friend's comments on the SA80's performance, but is that not a typical example of why we must get our procurement right? We inherited that gun from the previous Government with very severe problems, and we have had to invest a lot of money to get it absolutely right now. We need to avoid such problems in future.

Mr. Ingram

It is easy to apportion blame. It is true that the SA80 was procured under the previous Government. Notwithstanding the extensive upgrade programme—£90 million was spent on it—and the intensive testing, we must now analyse the concerns that have been raised and find a way forward. I take my hon. Friend's point, and hon. Members know that he makes his point well. He is apportioning blame, but I want to ensure that we get this right.

Mr. Paul Keetch (Hereford)

The Minister is right, and I welcome the news that he has just given. Will he assure the House and, more importantly, the men and women who carry the SA80 that, if that report shows any doubt at all about that weapons's serviceability and record, the Government will be prepared to procure a different rifle, if not for the entire British armed forces, at least for those infantry, special forces, paratroops, Marines and so on who might use it in battle?

Mr. Ingram

That is perhaps a step too far. The hon. Gentleman should not use language that could somehow lead to a lack of confidence in what is a very sophisticated rifle, which, unfortunately, in some reports, has been shown not to have performed as well as we anticipated that it would in the extreme circumstances of Afghanistan.

David Burnside

Will the Minister give way?

Mr. Ingram

Let me answer this question first. We must assess the problem, analyse it, and test the rifle against other potential rifles while remembering that not all of them may have been tested in those extreme conditions. It is easy to jump from one rifle to another, saying that the other is better, but all that testing must take place. Let me therefore judge the options once I have the analysis.

David Burnside

Will the Minister confirm that other weapons are already used by special forces, including in Afghanistan? The problem being raised is not relevant to many operational forces, at present, who are using a Heckler and Koch.

Mr. Ingram

I shall not comment on what special forces may or may not use in theatre. Clearly, as I said in my earlier response, we must carry out that detailed analysis. We must consider that rifle in connection with other equivalent weapon systems.

Mr. Hancock

I hope that I shall have the chance later to make the point on which I wanted to intervene earlier.

On this point, the Minister referred to the extensive testing of the weapon prior to and after its modification. What were the extreme conditions in Afghanistan that were not tested during the extensive testing and after the £92 million had been spent? Having spoken to troops who have recently returned from Afghanistan, they would say that the performance of the weapon was no better than it had been previously.

Mr. Ingram

Extensive testing was carried out in the whole range of extreme weather conditions—cold, hot and dusty. The weapon was tested not by politicians or civil servants, but by soldiers, in all those conditions. The hon. Gentleman may recollect the announcement at the conclusion of that extensive test programme and the launch of the SA80 A2. Evidence was adduced that showed the mean time in relation to failure of that rifle, which unquestionably showed a big improvement on what had occurred previously.

Part of the analysis that is now taking place must, of course, take into account the maintenance regime. Are orders and advice properly given so that they are well understood, or are there factors that come into play that take the rifle into a more extreme environment than all the other testing environments? I am not in a position at this point in time to say what the conclusion is. I must wait for the expert advice before I can respond. I ask hon. Gentlemen, however, not to be quick to make judgments and decisions, and not to make them on the back of speaking to one or two service men or women. They should take balanced advice on this matter.

I have set out the serious way in which we are dealing with this matter. I do not want any language to be used—obviously, hon. Gentlemen can use whatever language they want—that could somehow put uncertainty in the minds of soldiers. They must use this rifle, which is a substantial improvement on that which they had before, which was already a very sophisticated weapon that had been purchased and designed for specific sets of circumstances. It was found to have faults, modifications were made, and we are now dealing with and trying to analyse the reports on the failures. Caution should be our watchword in dealing with these matters.

I want to turn in more detail to the progress that we have made since the last procurement debate nearly two years ago in delivering some of the key projects that make up the defence equipment programme. Decisions taken during the strategic defence review have led to a broad range of powerful new equipment, some already in service with the armed forces and some in the pipeline to enhance our future capabilities.

The House will be aware that we have embarked on the most extensive warship-building programme for a generation. On 2 July, I announced the findings of the RAND study into alternative procurement strategies for our future warship programme over the next 15 to 20 years and it dealt, in particular, with acquisition options for the Type 45 destroyer. The initial results from the study were used last year to help to inform our decision to proceed with a revised procurement strategy for that ship. To increase productivity and to retain the potential for future competition, we have decided that blocks or modules of each ship will be built by BAE Systems Marine and Vosper Thornycroft. Final assembly will be carried out by BAE Systems Marine. We now have a total of six Type 45s on contract, and they are due to enter service from 2007. All that demonstrates our clear commitment to a modern and powerful Royal Navy while guaranteeing work for UK industry and providing better value for money.

The Royal Navy's ability to respond rapidly and flexibly to crises around the world will also be enhanced with the acquisition of the two next-generation aircraft carriers. Good progress is being made on their development. We expect to advise the potential prime contractors this autumn about the type of carrier design to take forward. We plan to announce the selection of our preferred prime contractor early in 2003, with the award of a build contract planned for early in 2004. The construction of the carriers will offer tremendous opportunities for UK shipyards—and I stress "UK shipyards".

An important element of that programme is the decision that I announced on 2 July that the future carriers will be base-ported at Portsmouth. As well as being good news for Portsmouth, that allows the relevant companies to construct their bids with that certainty in mind.

Work continues on the new Astute class of attack submarine and on the replacement landing platform dock ships. Progress on these projects has been too slow, largely owing to a range of design and project management difficulties on the part of the contractor. That is very disappointing, but the Ministry of Defence is actively engaged with BAE Systems on all these projects to ensure that the vessels are brought into service as quickly as practicable. The company is in no doubt about our expectations.

Mr. Kevan Jones (North Durham)

I am very reassured by my hon. Friend's comment that the aircraft carriers will be built in the UK and will support UK shipyards. However, is he aware of what has recently occurred on Tyneside? Swan Hunter shipbuilders sub-contracted work on its alternative landing ship logistics to Dutch yards while the yards on Teesside and elsewhere remained empty. Work that could be done in this country is not being done here. Will he therefore assure me that work that is given to a prime contractor will not be sub-contracted to Dutch or other European yards?

Mr. Ingram

We became aware of that development when my colleague in the other place was questioned by, and gave evidence to, the Scottish Affairs Committee. It was news to the Department, but it acted very quickly. It made clear to Swan Hunter our view of the build strategy. On the work that has been put out to tender, I understand that progress has been made to seek to have it done in the UK. However, we must recognise that there may be occasions when there is no capability for elements of a new build ship. It is not just a case of saying we have the skills base and the work should be done here. Sometimes sophisticated judgments have to be made and, when the work goes out to tender, European procurement rules may come into play.

Mr. Jones

I am grateful for that answer, but I raised the matter with the Ministry of Defence in a written question that I tabled last November. The Department assured me that it would keep a close eye on the sub-contracting work at Swan Hunter. Some sub-contractors in the region suspected in November that the problem would arise. If people in the north-east knew about it then, surely the Ministry should have known about it, too.

Mr. Ingram

I do not understand the allegation. Is my hon. Friend saying that we have let down the north-east? If so, the opposite is true. I have given a commitment to UK shipyards which he should welcome. I said that the specifics relating to that section of the hull, which involved specialist steel cutting, were made known when evidence was given to the Select Committee. We acted immediately and the company was left in no doubt about its approach to procurement. Rather than being negative about what we are doing for UK shipbuilding, my hon. Friend should rejoice in the fact that we have given a tremendous commitment to UK shipyards. There is an old saying in Glasgow: it was tears that made the Clyde. It seems to me that the Ministry of Defence saved the Clyde, and that would probably be reflected in shipyard footprints throughout the UK.

Mr. Ian Davidson (Glasgow, Pollok)

As a Member who represents a Clydeside constituency, may I say how grateful we all are to the Minister and his colleagues for awarding the Type 45 and aircraft carrier contracts, which will require a tremendous amount of metal work, to our area? However, will he bear it in mind that competition and capacity for the future are also important, not only in terms of metal shaping, but in terms of the systems? The key to having future capacity to bid for major orders such as aircraft carriers will be the retention of a systems capacity. Given that one of the major bidders for the aircraft carrier is not British owned, is the Minister satisfied that if that company is awarded the status of prime contractor, the capacity for systems construction will remain in this country?

Mr. Ingram

If my hon. Friend holds on, I will set out a review of industrial policy as it relates to procurement policy. However, he makes an interesting point. He claims that one bidder is not British, but if both bidders are non-UK owned, what would that mean for his argument? Will we be unable to place the order with the other company if it is taken over by a foreign competitor? We have to he clear that our drive and intention is to get such vessels built within UK shipyards where there is capacity to do so. However, we may get better value for money elsewhere in many cases that involve specialist equipment. The important consideration is not necessarily that we get British equipment, but that we get the best equipment.

Jim Knight (South Dorset)

My right hon. Friend mentioned the decision on basing the aircraft carriers. I read his statement and letter to me with great care and was disappointed that the Department could not make the brave decision to return the basing of the aircraft carriers to Portland. I was interested to read his comments on a temporary berthing for the carrier. Is the Department thinking exclusively of Southampton for that role, or will it consider other prime locations on the south coast?

Mr. Ingram

My hon. Friend, who always approaches such matters with great care and diligence, is right about his area not benefiting from that particular announcement. The announcement that applied to Southampton related to the unusual circumstances in which both aircraft carriers are in port at the same time. At some point in the future we will have to cater for those circumstances by providing additional berthing facilities. On the basis of an intensive study, I can say that Southampton offers the best facilities with the minimum investment. Depending on what facilities were provided, it could cost hundreds of millions of pounds to invest in a support berthing capability, and it might then never be used, so we have to exercise judgment in determining where to base ancillary support.

My hon. Friend is very active both as a member of the Defence Committee and in representing his area, and I know that he will continue to raise these matters with me, but I hope that he understands the background to this decision.

Before that exchange, I was commenting on specific matters relating to the aircraft carrier and the Astute class of submarine. I pointed out the delays to that programme and to the landing platform dock ship programme. It is worth repeating that the company is in no doubt as to our expectations for its performance on those ships.

Although new warship platforms are important, we must be able to support them as part of our overall capability to deploy world wide. We need to determine the best way of supplying and replenishing the modern Navy, following the retirement of our ageing Royal Fleet Auxiliary support vessels. It is vital that we get those crucial capabilities right.

Looking to the future, I can announce that we are establishing the military afloat reach and sustainability project team—or MARS, in MOD-speak—at the Defence Procurement Agency in Abbey Wood to determine the best way to meet those needs. That could include more new build, new design ships, more flexible than our current single-role support shipping, faster, and able to adapt to a number of different roles. I expect to see the solution being phased in over the latter half of the decade. As a first step, industry will shortly be briefed on that.

We will welcome innovative proposals, which might include public-private partnership arrangements. I hope for an imaginative and enthusiastic response from British industry. The spending review has given us the scope to launch that important renewal of these key capabilities.

I have already set out where we are on the future aircraft carrier project. The aircraft selected as having the best potential to carry out strike, air defence and reconnaissance missions from the new carriers is the joint strike fighter. The JSF will be a supersonic aircraft, incorporating advanced stealth technology and capable of conducting multi-role operations from carriers and from land. It will be able to locate, monitor and attack targets with precision weapons while protecting itself from air or surface threats.

The project will bring major benefits to UK companies, including BAE and Rolls-Royce, which could gain work valued at £3 billion during the current phase of the programme, and at £24 billion for downstream production and support activities. That could sustain or create some 3,500 jobs in UK companies, rising to 8,500 or more for production and support work.

A detailed evaluation of the short take-off/vertical landing and carrier variant of the JSF is currently under way to establish which would best meet our needs. The House will, of course, be advised accordingly once we have reached a decision on that.

The JSF will replace the capabilities offered by the joint force Harrier. The decision to withdraw the Sea Harrier earlier than previously planned reflects, the age of that aircraft—it is 20 years since the Falklands war. The major upgrade required to keep it viable would have been technically very risky and expensive, and the world has moved on. Our focus is now on expeditionary warfare, with carrier-based aircraft principally used for land attack operations. The Sea Harrier makes little contribution to that.

We will instead significantly increase our land attack offensive capability by upgrading the Harrier GR7 to GR9 standard, enabling it to use smart and precision weapons. The recent Defence Committee report on major procurement projects acknowledged the rationale behind that decision, and will no doubt make a further contribution on that.

Mr. Mark Francois (Rayleigh)

Will the Minister give way?

Mr. Ingram

I was expecting some response to this point, but may I just finish it?

The Sea Harrier also lacks utility in countering the threat from sea-skimming missiles, whereas modern ship-borne systems have been designed for that purpose. I recognise that its drawdown removes a layer of air defence in the short term—there is no question about that. However, it is important to remember that there are other layers of defence—for example, Type 42 anti-air warfare destroyers armed with Sea Dart anti-aircraft missiles and Type 22 and 23 frigates with their point defence missile systems and close-in weapon systems.

Mr. Francois

I am glad not to have disappointed the Minister, and thank him for giving way. Can he confirm that when JSF comes into service on the new carrier in 2012, part of its mission will be air defence, including the air defence of the fleet?

Mr. Ingram

Part of it will be, but that is not its prime purpose. We have not walked away from or tried to hide the aspect of managed risk. It is interesting that the qualitative assessment in the Defence Committee's report recognised that it had been alleged that the decision was driven by a cost imperative and that it was about saving money. One of the Conservative Front-Bench spokesmen signed up to that report, so at least the official Opposition accepts that the decision was not driven by that, and that other factors come into play.

Mr. Francois

I see that the Chairman of the Defence Committee is in his place, and no doubt he, too, will want to comment. I have read the Committee's report, and there is no way in which the Minister can spin it into an endorsement of the Government's decision. The Committee expressed reservations about it, and he should be accurate about that to the House.

Mr. Ingram

I know that Opposition Members are told to use the word "spin" every time they speak to a Minister, so that eventually it will stick to us. There is no spin involved—it is an open explanation of the basis of the decision. The Committee accepted—or, to use a better word, acknowledged—the rationale behind the decision. It may have doubts, but ultimately the decision rests with the Ministry of Defence, not the Committee, and we have to take responsibility for any misjudgments. We welcome all reports on the Department, but we have to balance our original decisions against any questions that arise.

This was a sizeable, expensive, and indeed risky programme, and I have described the ingredients that had to come into play. The best advice came from those who were considering the issue of capability, not from civil servants and Ministers, who took advice on the military aspects. They asked two questions. Can the risk be managed? Is it the best way forward in terms of the spending profile both then and currently? The answer was yes.

Mr. Hancock

Will the Minister be kind enough to explain the judgment that he made, given that his chief military adviser, Air Marshal Sir Jock Stirrup, said on 1 May in evidence to the Defence Committee: No, forgive me, but I made clear that if I could I would have preferred to have retained a viable Sea Harrier in service because we will be without one of the layers of air defence". The chief adviser to the Ministry of Defence and to the Minister was advising that he would have chosen to retain the Sea Harrier. What judgment did the Minister make in overruling that advice?

Mr. Ingram

There was no overruling of that advice: it was part of the advice that we were given. One side of the equation was based on taking an approach that could have retained it, but that would have had certain consequences, including the risky element of upgrading the engine and issues relating to the management of resources. Military people would probably say. as now seems to be the case with the Liberals, "Just give us everything that we ask for." Then they must step back and accept that we have to live in the real world. The advice was that there would be a reduction for a time in the layer of defences for any taskforce. [Interruption.] The hon. Member for Hereford (Mr. Keetch) should read all the evidence.

We are upgrading the support mechanisms on the ships. The Type 45 destroyers provided even more capability and that led to the position that we subsequently adopted.

Mr. Laws

rose—

Mr. Ingram

The world has moved on, and we are not fighting the war of 20 years ago. We are fighting in a completely new context and in coalition. That is a new way forward; it is what interoperability means.

Mr. Gerald Howarth (Aldershot)

rose—

Mr. Ingram

I shall give way to the hon. Member for Yeovil (Mr. Laws) first. I assume that the hon. Member for Aldershot (Mr. Howarth) will repudiate our position. I shall be interested to find out.

Mr. Laws

Does the Minister accept that he is replacing the technical risks in the upgrade project with actual military risks, which our forces will face without the Sea Harrier? Does he recall paragraph 93 of the Select Committee's recent report? It states: There are, then, a lot of pieces that must all fall into place before the Sea Harrier's demise can be regarded with at least some confidence. Is he not worried about that?

Mr. Ingram

Of course, we have a measure of anxiety about the programme's delivery. I have set out a range of other decisions. After the short period that I mentioned, the new Type 45s will be in service and the other support mechanisms on existing ships will be upgraded. We will thus have the capability. Hon. Members will understand that the probability of a single Royal Navy taskforce going to sea is not high.

International coalition of effort leads us to the conclusion that if we were deploying against a threat, we would have partners. [Interruption.] Where is the threat coming from? Perhaps the hon. Member for Yeovil can tell us the location of the new threat. Could the Sea Harriers tackle it? They cannot deal effectively with sea-skimming missiles. We have to equip ships to deal with them.

There is risk management in everything that we do in defence. We have to balance resources and capabilities and the technical implications of an upgrade. Opposition Members do not appear to understand that there are risks in the technical aspects of the upgrade. They must resolve the conundrum, as we have done. That is why we made the decision.

Mr. Gerald Howarth

The Minister makes a great deal of the cost and technical difficulties of an upgrade of the

Sea Harrier F/A2. He is right; I have spoken extensively to Rolls-Royce about the matter, and an upgrade would be expensive.

Mr. Ingram

What about risk?

Mr. Howarth

There would be some risk attached to the technical fit of the engine. However, if an aircraft that was introduced into service as recently as 1999 is so deficient, why not scrap it and save the money now?

Mr. Ingram

That is a ludicrous position. We have capability; the aircraft is not useless. However, it is not all-singing, all-dancing in the way in which Opposition Members appear to believe. As we move towards the expeditionary purpose, we need the capability to match. That is not compatible with Sea Harrier capabilities. Such judgments have to be made. Do we spend a lot of money, and risk not delivering the programme? The risk is not small. Indeed, we are considering a significant technical risk. The Sea Harrier is not designed to take the new engine. Conservative Members shake their heads. Have they got better advisers than the Ministry of Defence?

Mr. Gray

Rolls-Royce.

Mr. Ingram

Well, okay. Since Rolls-Royce is in my constituency, I suggest that the hon. Gentleman get the company to put that in writing and send it to me. Has Rolls-Royce put it in writing to the hon. Gentleman? I hear silence.

Mr. Keetch

The Minister is a great student of history and will know that he is not the first Minister for the Armed Forces to say in the House that, effectively, we will never go to war by ourselves. Denis Healey said that in defence of the cancellation of CVA1; Sir John Nott said so in the 1980 defence review when he was planning to sell off HMS Invincible, which gave the wrong signal to the Argentines and led to the Falklands war, to which the Minister referred. If the Minister is saying that Britain will never need an air defence capability for the fleet again, why will the JSF have such an element? He cannot have it both ways. We either need an air defence capability—in which case it should be continued—or we do not.

Mr. Ingram

I do not think that I used the word "never"; I said "probability" and "slim". We would all love the benefit of hindsight or to be able to project ourselves months or years before making such decisions in order to meet the unknown, but that is simply not possible. No Minister or Government have had that wisdom. It has been a long time since there has been a Liberal Government, and although I am an amateur student of history, I do not recollect their getting everything right.

There must be a balanced judgment. We have made that judgment on the best advice and after considering all related elements. With the upgrade to the GR9 variant, we will have a tremendous force projection capability, which will enhance our strength and our ability to tackle what we believe on the probability of assessment to be the enemies of the future.

The word "never" never appeared in my explanation. At some point, I will be able to rely on the fact that I never said that. I would be able to take some solace from that, although I hope that I shall never have to do so. The probability of assessment and the management of risk are undoubtedly right. We have had a useful and informative debate on that rumbling issue. I have again tried to educate from the Dispatch Box and to point Opposition Members towards the right decision, but we will see what happens as the debate develops.

Operating alongside the JSF and complementing its capabilities will be Eurofighter. As my right hon. Friend the Prime Minister told the House on 10 July, there has been no change in the Government's commitment to Eurofighter. The aircraft will serve as the cornerstone of the RAF's fighting capability from the second half of this decade. It will be a "state of the art" fighter aircraft with a formidable weapons suite, including the advanced short-range air-to-air missile, Meteor, Storm Shadow and Brimstone, and provide a true, adverse-weather, multi-role capability.

The programme remains important not only to the RAF but to the UK's defence industry and those working in it. The UK has made a contractual commitment to purchase 55 Eurofighter aircraft in the first of three envisaged production tranches. A memorandum of understanding with the partner nations covers the first tranche, and the balance of 232 aircraft to be purchased in two further tranches—89 in tranche 2 and 88 in tranche 3.

Mr. Gray

The Minister referred to the Prime Minister committing himself to the Eurofighter as is. Can we be plain about this? Is the Minister giving an undertaking that the Government will definitely purchase 232 airframes—and if so, how do they intend to pay for them?

Mr. Ingram

That is predicated on Labour remaining in power; I am grateful to the hon. Gentleman for conceding that. His point is not silly. Clearly, we can make commitments only from where we stand at this point. Under most circumstances, it has never been possible for Governments to commit future Governments—certainly not those of a different hue.

I have set out our commitment in the memorandum of understanding, and there are many commitments associated with that. There will be a tremendous payback in UK industry terms; all those benefits will flow from this. I have set out the three tranches of purchasing, and the Prime Minister made all this clear on 10 July. Who am I to say anything different? I welcome his statement because it is consistent with what we have been saying all along.

Mr. Gray

Perhaps I can clarify the position. When the Conservatives return to power in three or four years' time, we shall be firmly committed to purchasing all 232 Eurofighter aircraft. Will the Government now match that commitment?

Mr. Ingram

Well, okay, let us match commitments. Let us go down the list. When I get to the end of my speech, I would like the hon. Gentleman to say that he will stand by every one of our commitments—[Interruption.] I have given the assurance, as has the Prime Minister. I do not think that that is at variance with what the hon. Gentleman has said on this. The words stand, and they are very clear. That commitment remains the same, and I have set out the tranche purchasing approach on this.

I mentioned the Meteor beyond visual range air-to-air missile. Good progress has been made on resolving complex technical and commercial issues, and a draft contract has been circulated to partners. The UK and partner nations remain committed to the project, but the contract is unlikely to be signed before the summer. The project still needs to gain the necessary approvals in the German system. The next opportunity for the Bundestag committees to discuss Meteor—and indeed A400M—will be in September. I very much hope that they will grasp this opportunity. Officials are discussing with partners and industry the implications of a delay until September. This delay is disappointing, but we continue to do all that we can to place the contract as soon as possible. As I have just said, the same time frame applies to decisions on A400M. We are working hard to ensure that this contract can also come into effect.

Having dealt with specific sea and air capabilities, let me now highlight three particular capability achievements that contribute directly to our forces' ability to deploy, engage and win on the battlefield. The first is the delivery of the Westland Apache attack helicopter, which entered service in January last year. The arrival of Apache illustrates how we are meeting our strategic defence review commitment to deliver world-class, highly capable equipment to the armed forces, which will help to transform the battlefield. [Interruption.] I think that the hon. Member for Hereford and I are on side on this one.

The second achievement involves the Maverick anti-armour missile, which entered service with the RAF in February 2001. Lessons learned from operations in Kosovo identified the need for improvements to our capability to attack armoured targets with precision and speed. We have acted quickly to fill that gap. Thirdly, I want to highlight the delivery of the Viking all-terrain vehicle platform to the Royal Marines, which has proved a great success. Looking forward to future equipment capabilities, the MOD has signed several key contracts, including that for the delivery of a heavy equipment transporter service, and one for the next generation light anti-armour weapon.

I am also pleased to inform the House that the Ministry of Defence has today announced its intention, subject to the satisfactory conclusion of final contract negotiations, to award a contract worth some £350 million to RO Defence for the demonstration, manufacture and support of 65 Terrier armoured engineer vehicles. Terrier will replace the in-service combat engineer tractor, enabling the British Army to retain and enhance a vital operational capability provided by the Royal Engineers. This new order is very welcome news for the company and for Alvis, which will have a significant role in manufacturing the vehicles. I am sure that the management and work force at both locations will be delighted with this news.

I have already mentioned that the development of a network-centric capability will transform the way in which the United Kingdom's armed forces are able to operate. This forms a key part of the work that we have been undertaking on the new chapter to the strategic defence review. This is not just an aspiration; things are happening now to deliver the reality, providing an essential foundation on which the new chapter will build.

The need for reliable, global military communications has been demonstrated in all recent conflicts, but especially in Afghanistan. The Skynet 5 satellite programme will ensure that we continue to have this important capability. We announced the Paradigm consortium as the preferred bidder in February and, subject to successful negotiation, we expect to place a private finance initiative contract by the end of the year.

Over the coming years, we will see great improvements in our ability to communicate, and to exchange information securely wherever we operate. A number of complementary systems will ensure that we continue to have effective command and control, whether operating independently or with our allies. Bowman will provide a secure communication and data transfer system, as well as the basis for the wider digitisation of land operations. We expect it to enter service in 2004.

We recognised the early need to improve communications, and we have introduced the personal role radio, which has proved extremely useful in Afghanistan. I can announce today that BAE Systems, in Christchurch, and Marconi Mobile, in Chelmsford, have been chosen as preferred bidders for the assessment phase of the first stage of the Falcon programme, which will provide a communication system at formation level. These two British companies have been chosen to enter the final stage of the competition for the armed forces' new, £430 million secure communication system. Successful communications are the key to success on the battlefield, and to our ability to deliver precision weapons rapidly and accurately—what we are calling network-centric capability.

Falcon's role in drawing this together, and connecting systems such as Skynet and Bowman, is key, giving senior commanders the ability to direct operations effectively on the battlefields of the future. Falcon will be able to carry a greater volume of voice and data traffic more effectively than existing equipment. It can be deployed on or off-vehicle, and moved rapidly by air into the operational theatre. It will also need less manpower to operate and to support.

Finally, Cormorant will provide a state-of-the-art, theatre-wide area communications network, and will enter service shortly.

Hugh Robertson (Faversham and Mid-Kent)

On talking to anybody involved in recent armed forces operations, it is clear that the key word is inter-operability—the ability to operate not only within our services, but with service men from other countries. Can the Minister guarantee today that, as the new equipment programmes come on-stream, they will be tested to ensure that they are fully inter-operable with American systems, given that, these days, we spend much more time operating with the Americans and, indeed, with our continental allies? Surely that is a key part of the programme.

Mr. Ingram

That is a very important point. Although inter-operability has been a watchword for some time, it has become the key approach in terms not only of our enhanced capabilities, but of how we encourage our European allies and aspirant NATO nations to improve their capabilities as well. We have very good relations with the United States, and if that interface is genuinely to deliver what we want in respect of NATO or any other partnership between allied nations, we must ensure that such inter-operability and compatibility exists. Otherwise, certain procurement decisions, such as those made by previous Governments, could well have to be scrapped.

On the projects that I have just outlined, performance in many key capability areas has been, and continues to be, impressive. However, in certain areas the rate of progress has been disappointing. Let me make it clear that, when contractors are unable to deliver equipment to agreed time frames, we do not just sit back in resignation. We are getting much smarter at dealing with the consequences of slippage.

The overall rate of slippage has reduced, as has the number of projects experiencing delay. New slippage during 2001—some 29 months across four projects—was less than half that in 2000. We are also much better at working with contractors to ensure that we get a useful capability into service at the earliest possible date, building on that initial operating capability through incremental acquisition to reach the full levels of required performance. Our approach to acceptance of the ASRAAM missile is a good example of this smart behaviour. The Ministry of Defence has taken delivery of a first batch of interim standard missiles, which offer a significant improvement over existing capability.

The Public Accounts Committee's recent report, "Ministry of Defence: Major Projects Report 2001", provides further evidence that the Department is continuing to improve cost control, that we have slowed the rate of slippage on projects, and that new equipment continues to meet the vast majority of specified technical requirements. According to the Committee:

The Major Projects Report for 2001 shows encouraging signs that the Department's performance is improving under Smart Acquisition". In an earlier report, published on 23 November 2001, the NAO welcomed the signs that the Ministry of Defence is beginning to bring delays on major projects under control, and is continuing to control costs on major projects and to meet the vast majority of the technical requirements of the Armed Services. We will respond formally to the PAC report—and to the Defence Committee's survey of major procurement projects—in the early autumn. It would be wrong to reply before the formal response process. [Interruption.] The Opposition complain that I have now been speaking for an hour, but I have tried to take all the interventions that would add value to the debate. We have an extensive debate on a key issue. [Interruption.] I am conscious that representation is sparse on the Benches behind the Opposition Whip—

Mr. David Wilshire (Spelthorne)

And behind you.

Mr. Ingram

We are comfortable with our solution, but it is the Opposition's job to try to knock us down. I do not need a lot of allies behind me, although I welcome every contribution that will be made.

Smart acquisition is not just about buying new equipment; it is also about how we manage the equipment we own to maximise the capability available to front-line forces in a cost-effective manner. That means looking not only at how we acquire the equipment in the first place, but at how we support equipment through its in-service life and how we undertake its disposal.

Being smarter in how we support equipment falls to the Defence Logistics Organisation, which as part of its drive to reduce costs and improve effectiveness is reviewing stock holdings and using innovative techniques to identify further reductions.

Mr. Hancock

Will the Minister give way?

Mr. Ingram

Well, I hope that I will not get into trouble with Opposition Front Benchers for extending the debate.

Mr. Hancock

I congratulate the Minister on the robust way in which he has defended his position and thank him for his generosity in taking interventions. I sense that the Minister is easing to a conclusion, but before he does can he tell the House whether he is satisfied that the procurement that will be required under the new chapter can be achieved within the new money that has been allocated to the Ministry, or will some of the existing procurement schemes—those in the planning or development stage—be cut?

Mr. Ingram

I am grateful to the hon. Gentleman for his intervention, but he must not have heard my earlier remarks. I said that a White Paper will be published tomorrow and the Secretary of State will then elaborate on its contents. I have pointed out the £1 billion of new capital investment and the £500 million of other money, but I suggest that the hon. Gentleman seek to explore his specific questions after the White Paper is published.

The Defence Logistic Organisation's non-project procurement office was set up on 1 April 2000 to manage general stores and has already generated significant savings. In its first year of operations, it rationalised the supplier base, making savings of some £40 million on new contracts valued at £350 million. Other partnering agreements with industry are helping the Department to manage its stocks more effectively, transferring stock-holding activities and risks to contractors. [Interruption.] I have a couple more points to make. We have had a good debate so far, and I look forward to further contributions.

Another important plank of our overall smart acquisition programme has been the drive to extend its benefits—previously confined mainly to the equipment programme—more vigorously into the acquisition of services, especially through private finance and new commercial partnering arrangements. Our public-private partnership and private finance initiative programmes continue to have an important role to play in making best use of defence resources and delivering improved services. We have the richest, most diverse and one of the most successful PFI programmes in Whitehall. PFI has enabled us to obtain new aircrew training simulators and other equipment-based services, but such schemes could go much further and that is the approach that we are taking.

The last issue that I wish to address is industrial policy and I see that my hon. Friend the Member for North Durham (Mr. Jones) who intervened earlier on that point is still in his place. I am happy to exchange views with him if he has any further thoughts on the issue. All of the issues that I have set out are important in their own right, but clearly they have an impact on industry generally. The United Kingdom benefits from a strong and innovative defence industry that contributes to our overall economic wealth, science and technology base, and—importantly—to regional economies.

Competition remains the bedrock of our acquisition policy—when sensibly applied it consistently gives the taxpayer value for money. Competition works to encourage innovation. As our procurement requirements change, innovation will increasingly be the key to winning many contracts, something that I hope will benefit many of our smaller and medium-sized firms. Competition should be seen not as a threat but as an opportunity.

I would not suggest, however, that there is a single standard approach to that opportunity. We will use alternative procurement routes, such as partnering, where industry and Government can benefit from stable long-term relationships. Suggestions from some parts of industry that we should look only to privileged or monopoly suppliers are shortsighted: to do so would stifle innovation and we would end up paying inflated prices for probably inferior equipment.

Let there be no doubt. We want to buy the best. We want to buy British. So we must constantly look for ways to help British industry to be the best, but industry has to play its part. My Department's first responsibility is to spend the defence pound to achieve best value for money. That applies more widely than simply purchasing equipment. It has broadened from equipment acquisition to the purchase of services, and many defence companies now cross national borders. It is where the technology is created that is important and that means looking to see where the skills and the intellectual property reside, where the investment is made, and where the jobs are sustained and created.

We also support the UK defence industry with our efforts to improve access to foreign markets and through our research and technology strategy. Increased access to foreign defence markets will improve technology transfer across national boundaries and increase the opportunities for our companies to compete for export orders. That is important: UK defence companies cannot rely on MOD orders alone to keep them in business. That is not the MOD's job.

Mr. James Arbuthnot (North-East Hampshire)

Is the Minister aware that there should be much support for the Government's decision on head-up displays being sold on US aircraft? If we were to withdraw the right for manufactured equipment from this country to be sold abroad by our allies, we would never be able to enter partnership agreements for valuable equipment that will win markets all around the world.

Mr. Ingram

I agree entirely, and that has certainly been the Government's view in the case to which the right hon. Gentleman refers.

Jim Knight

My right hon. Friend mentioned research and development. Does he agree that having a geographical concentration of expertise, especially in research and development, is a good thing? In my area, we have expertise in sea systems technology, two QinetiQ operations that are based in the area, and many other private sector operations. However, the Defence Science and Technology Laboratory proposes to remove its discrete sea systems expertise and place it elsewhere—

Madam Deputy Speaker (Sylvia Heal)

Order. Will the hon. Gentleman now bring his intervention to a close?

Jim Knight

Certainly, Madam Deputy Speaker. I would be grateful for my right hon. Friend's comments.

Mr. Ingram

The concentration of science and technology cannot be a good thing, because we want to see a spread over the UK. However, industry has to stand by the decisions that it takes. We cannot second-guess companies or force them to do something else. However, we can encourage them and discuss the Government's future relationships with them. I have tried to set out what the Government can do, what we expect of industry and the possibilities for a partnership approach. That does not rest just with the MOD: it applies across Government deli very.

Mr. Gerald Howarth

Will the Minister give way?

Mr. Ingram

The hon. Gentleman must have been given leeway by his Whip to intervene. Only a few moments ago, the Opposition were complaining that I was speaking for too long.

Mr. Howarth

I regard the Minister as an extremely courteous man, and, along with others today, I am very grateful to him for giving way.

The point made by the hon. Member for South Dorset (Jim Knight) is important, and it has come to light only in the last week. I had a letter from the Under-Secretary of State about the concentration of DSTL employees on three sites. The point made by the hon. Gentleman relates not to company decisions, but to a decision by the Government. I suspect that it is a very good point. Can the Minister—or perhaps the Under-Secretary of State when he winds up the debate—explain the rationale behind that concentration?

Mr. Ingram

As the hon. Gentleman says, the decision rests outside the Department, but my hon. Friend the Under-Secretary of State may explain the rationale later. Let me, however, say something about the near-company status conferred by some of our activities. Trading funds are one example. We must operate on the basis of best principle rather than mere dissemination for the sake of it. Quality decisions must be made to secure the maximum return on investment. We are no different from industry in that respect. As I have said, we expect a great deal from industry. We must deliver a great deal in return, and we must find solutions. Emotive decision-making is not the best way of delivering on any Government policy, but that applies particularly to the Ministry of Defence.

Mr. Davidson

The Minister urged me earlier to await his utterances on industrial policy. I did so, but they were a trifle too delphic for me. In other words, I did'nae understand them completely.

I did of course understand what the Minister said about the merits of competition, and about the advantages of partnership and the disadvantages of monopoly supply. Perhaps, though, I can take him into the fourth dimension. Many of these matters cannot be seen in isolation here and now, because some of the decisions we make here and now have implications for our future capacity to tender for orders. What is the Government's industrial policy in relation to, in particular, the aircraft carrier, in the context of retaining intellectual property associated with systems design in this country so that we can bid for future orders?

Mr. Ingram

I am sorry if I was delphic. I did not intend to be. I thought I was being very clear about what we require from industry, what we will not accept from industry—which my hon. Friend now accepts—and how we can move forward together.

I spent some time talking about shipbuilding capacity. The MOD alone cannot save the shipbuilding industry. We can do a lot, but the industry must be much more forward-looking and much more commercially intensive. It must look for the opportunities that are out there so that it can spread its workload to secure the broad capacity and skills base that we need.

We must seek at all times to purchase the best possible equipment for our front line. That means that we cannot be a patsy to Government. There is no longer any sacred cow. It cannot be thought that we will roll over and accept things because of political pressure from one quarter or another.

I know that my hon. Friend engages with the company in his constituency. No doubt he will make its members aware of what is being said now, and has been said consistently, by defence Ministers, if they are not already aware of it. We want a lot from industry, and we are prepared to give a lot, but industry must produce the best equipment, and it must produce it at a good price. That must be the core of our approach.

Overall, I consider that we have the right resources, the right industrial policies, the right approach to smart acquisition, and a wide range of impressive equipment projects to help ensure that our armed forces have the capabilities that they need in order to deal with the complex challenges of the future. We ask a lot from the men and women in our armed forces, and they have the right to expect the best from us in return. That is this Government's objective, and I think we are on course to achieve it.

6.5 pm

Mr. Gerald Howarth (Aldershot)

I think the Minister has received general acclamation for what must be described as a marathon. He entered into the spirit that the House wanted by giving way and engaging in debate—a debate that will continue this evening.

This is a timely debate, occurring as it does on the eve of the Farnborough air show in my constituency. I hope the Minister and others will go to that: it is the greatest air show in the world, and the greatest showcase for an important component of British manufacturing industry. I am bound to add that it might have been better to hold the debate after the publication of the new chapter tomorrow, when we could have had the benefit of seeing it. No doubt its publication will give us another opportunity to question the Minister. I hope he will ensure that we have a proper debate about the new chapter.

I too pay tribute to the United Kingdom's defence industry. Notwithstanding the occasional criticism, British industry delivers some first-class equipment to Her Majesty's forces. It gives employment to 345,000 people throughout the United Kingdom, and contributes significantly to our national prosperity. The British aerospace industry alone has earned the United Kingdom £100,000 million in exports in the past 10 years, with defence exports playing their part.

The Minister made an important point when he said that British companies must look overseas to ensure that they are not wholly dependent on the United. Kingdom defence market. That means, however, that those companies must have the support of the British Government and of Parliament for their efforts to provide defence equipment to defend our allies overseas.

I welcome the Minister's announcement about the Terrier, and the £350 million order for Royal Ordnance. We are talking about a British company and a British order for the benefit of some first-class British Royal Engineers. I am particularly pleased because the Royal Engineers have a major base at Gibraltar barracks in my constituency, and I think they have demonstrated that when others are on exercise they are doing it for real. Exercise Saif Sareea proved that last November.

As we expected, the Minister made much of the Chancellor's financial largesse—although deli very of the largesse announced on Monday is not scheduled to start for nine months. Before the Minister gets too excited, let us examine the figures. On Monday the Chancellor told us that defence spending would increase by £3.5 billion over the next three years from today's base of £29.3 billion; but, as my hon. Friend the Member for North Wiltshire (Mr. Gray) implied, that figure refers to the new resource accounting standards recently introduced in all Departments, to which we shall all have to become accustomed.

On the old cash accounting basis, this year's figure would be £24.2 billion. Under that convention, and allowing for annual inflation of 2.5 per cent., the increase in spending over the next three years will amount to just £1.2 billion—about £400 million a year. Even on the Government's figures, there will only be a 1.2 per cent. real annual increase.

The Minister trumpeted the marvellous settlement that his Department had secured. I do not want to be too churlish, but I think it only fair to point out that his 1.2 per cent. compares with a three times greater increase for the Department for Culture, Media and Sport, which received 3.5 per cent. for each of the next three years. Some may of course regard sport as an extension of war, but I am afraid the fact remains that the Minister's Department did not do quite as well, in comparison with other Departments, as he tried to pretend to the House.

Mr. Kevan Jones

The Tory Government cut the defence budget by one third. although I accept that times were different then. It is interesting to hear the hon. Gentleman go through the figures, but can he give a commitment that a future Conservative Government would at least match the increase that has been announced? If not, will he say what increase such a Government would provide?

Mr. Howarth

That was a good try by the hon. Gentleman, who anticipates part of my speech. I had expected that he would ask that question, and he may rest assured that I will come back to it.

As a percentage of gross domestic product—a yardstick constantly applied to NATO applicant states—UK defence spending will fall to a post-1979 low of 2.2 per cent. That compares with 2.9 per cent. of GDP when the Conservative Government left office in 1997.

When the threat was high and real, as in 1982–83, the then Conservative Government found the resources to match it, and spending rose by 6.6 per cent. in that period. Even when that Government cut defence expenditure after the fall of the Berlin wall—I am sure the hon. Member for North Durham (Mr. Jones) is old enough to remember that there was a great clamour then for a peace dividend—I do not recall that any member of the then Opposition said that the cuts were too great.

Mr. Bruce George (Walsall. South)

rose—

Mr. Howarth

All the argument was the other way—except, I suspect, from the right hon. Gentleman who is about to intervene.

Mr. George

I am grateful to the hon. Gentleman. I hope that his highfalutin statistics were not the ones provided for him by the Defence Committee this morning, or we would get very angry. Does he accept that much of the increase in defence expenditure after the Falklands war was used to replace the ships that were sunk, of which there were too many? Also, in 1985 the Conservative Government broke the commitment given by Fred Mulley in response to a NATO request that the UK, like all NATO members, would increase defence expenditure by 3 per cent. in real terms. The decline in defence expenditure began in 1985. well into the cold war. I hope that the hon. Gentleman will look again at his brief, and be more careful. It is true that the Conservative Government left office with defence expenditure of around 2.8 or 2.9 per cent. of GDP, but it was 5.3 per cent. when—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The right hon. Gentleman is a very experienced Member of this House, and he must know that his remarks have gone well beyond the bounds of an intervention.

Mr. Howarth

I can safely conclude that, whichever party was in government, its defence expenditure would not be sufficient for the right hon. Gentleman, who has long been a stalwart supporter of defence expenditure.

The figures that I have came from the House of Commons Library, not the Defence Committee or the Government. The right hon. Member for Walsall, South (Mr. George) is right that there was subsequently a reduction in expenditure, but in the years 1982–83, 1983–84 and 1984–85 there were increases of 6.6 per cent., 2.9 per cent. and 5.3 per cent. respectively. That shows that there were substantial increases, not just post-Falklands, but at a time when the UK faced a threat.

As I said, I doubt whether any Opposition Member at the time said that the then Conservative Government were cutting defence expenditure too much. Indeed, when I was resting between engagements in the period 1992–97, one Labour Member whose name I shall not reveal told me that a Labour Government on taking power would not have to worry about making cuts, as the Tories would have done all that for them.

Does the Minister of State wish to intervene?

Mr. Ingram

No.

Mr. Howarth

Fine.

I do not want to be churlish about the increase in defence expenditure. I assure the House that the Opposition welcome it—unlike the Labour Opposition in the 1980s, who rejected the Conservative Government's increase in defence expenditure. Given the range of military commitments that the Government have entered into, it was imperative that real increases were made.

Everyone—from previous Chief of the Defence Staff Lord Guthrie to Back-Bench Labour Members—has called for an increase in defence expenditure, but that has to be viewed in the perspective of the massive increase made in the US. This year alone, expenditure there has risen by $48 billion, as many hon. Members will know. The expenditure gap between European nations such as Britain and the US is widening. We understand that we cannot match US expenditure, so I shall say no more on the point, other than that we welcome the increase that has been announced.

I can tell the hon. Member for North Durham that the Opposition position on spending was made clear by my hon. Friend the Member for North Essex (Mr. Jenkin), the shadow Secretary of State for Defence, at the Royal United Services Institute meeting last week. He said: It is still three years before the likely date of the next general election. We shall only be able to decide on the proper level of defence spending after consultation in Government with the Chiefs of Staff and our allies. We will fully fund the defence capabilities that are essential to safeguard national security and to fulfil our international obligations. I suggest that that is a stronger commitment than any given by any Opposition in the post-war period. It is a very strong commitment and reflects the priority that the Conservative party accords to defence under the leadership of my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith).

Mr. Kevan Jones

I am very grateful to the hon. Gentleman for giving way again. The statement that he has just made may have been all-encompassing but as an explanation it was as clear as mud. If we are to enter into the expenditure that the Opposition clearly want, what other services such as education or health does the hon Member for Aldershot (Mr. Howarth) think we should cut? Or does he think that the Government have an endless, elastic budget that fits all demands?

Mr. Howarth

I am sorry that the hon. Gentleman, whom I happen to like, should choose to digress down the route of expenditure on other things. This debate is about defence, on which I have set out the Opposition's position. I have heard the hon. Gentleman question visitors to the Defence Committee, and I know that he often says that their perfectly clear assertions are "as clear as mud." So I do not consider that his remark amounts to a serious criticism of my explanation of the position taken by my hon. Friend the Member for North Essex, the shadow Secretary of State.

It is the Opposition's duty to hold the Government to account over their strategic defence review commitments. This is not a game: we have a duty to question the Government and to ensure that they are doing the right thing.

If the Chancellor's settlement is as generous as the Minister of State suggested, why did he not say that recent cuts would be restored? What about returning 5 Squadron Royal Air Force Tornadoes from mothballs? What about reinstating the three cancelled Nimrod MRA4s? What about engaging the 5,600 recruits needed to bring Britain's smallest Army since the time of Wellington to the Government's own target strength, and to restore the Territorial Army to its Tory strength of 59,000? Why do not the Government reverse their decision to scrap the Royal Navy's fleet protection force of Sea Harriers, which they said they could not afford to keep after 2004? Of that we heard nothing in the Minister's speech.

Mr. Ingram

I talked about Sea Harriers.

Mr. Howarth

The Minister did talk about Sea Harriers, but he said nothing about the cuts that we were told had to be made to save money. We did not hear that those Sea Harriers were to be restored as a result of what the Government call the substantial increase in defence expenditure accorded by the Chancellor.

What provision have the Government made for the cost of putting a division of up to 25,000 men into full battle order? The Secretary of State told us on Monday that absolutely no decisions have been taken by the British Government in relation to operations in Iraq".—[Official Report, 15 July 2002; Vol. 389. c. 10.] The right hon. Gentleman was right to make that clear. Yet the Prime Minister also made it clear in his cosy fireside chat yesterday that military action might be required because the threat posed by Iraq's weapons programme was growing, not diminishing. Either sensible and prudent preparations are now being made or our armed forces risk being called into action with inadequate preparation. Which is it? The Minister must answer that when he comes to the Dispatch Box—unless he would like to answer now, in which case I will give way.

The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie)

Carry on.

Mr. Howarth

That says it all. There is a big hole in the Government's strategy on the issue.

Mr. John Smith

Surely the hon. Gentleman appreciates that force planning and preparations for various scenarios take place all the time. It would not be appropriate for a Minister to declare what planning is currently taking place inside our armed forces should we enter into military action, when the enemy would like to know what the hon. Gentleman wants to know.

Mr. Howarth

Of course the House should not be informed of every detail, but there is a policy issue here. If an operation is mounted, there will be a cost attributable thereto, and it is right for us to ask whether Ministers are putting that into their budget and making the necessary provisions.

Mr. Ingram

Am I right in assuming that the hon. Gentleman is asking about commitments to any future deployment and the costs associated with that, not just about a specific deployment?

Mr. Howarth

indicated dissent.

Mr. Ingram

I see that the hon. Gentleman is asking only about the specific. Whether specific or general, when the unplanned-for demand comes, the cost is then met, as happened under previous Governments. If the hon. Gentleman looks at the budget outturns on which he claims to be an expert, he will realise that the commitments that we have had to meet recently in Macedonia, Sierra Leone and, more important, in large-scale terms, Afghanistan, have all been met. I hope that the hon. Gentleman is not asserting that we do not do that.

Mr. Howarth

No, I was not asserting that. I do not regard myself as an expert, but the House of Commons Library is reasonably expert in these matters, and I do not think that the Minister of State should query its integrity.

The point that I am making is clear: the Secretary of State said that absolutely no decisions have been made, but the Prime Minister is making it clear that there is a prospect of the Government undertaking some kind of operation. As yet, no decisions have been made, and we understand that. However, I repeat that either sensible and prudent preparations are being made or our armed forces risk being called into action without proper preparation.

Mr. Ingram

So that there is no doubt in the hon. Gentleman's mind, will he take it from me that all operational costs are met from contingency funds and not from planned expenditure? Does he understand that part of the process? To ask that is to call into question not anyone's analysis but the hon. Gentleman's capability of understanding the complexity of these issues.

Mr. Howarth

Of course not all expenditure comes from the contingency fund. Some will inevitably come from the Ministry of Defence, and we have not yet seen the full accounts relating to Afghanistan.

I should like to press the Minister on the SA80 rifle, which is causing so much concern. The SA80 would be the standard infantry weapon in any major ground operation in the middle east or elsewhere. I am not sure whether the House properly noted the point made by my hon. Friend the shadow Secretary of State for Defence on Monday, when he asked the Secretary of State to confirm that in a test of the weapon in Afghanistan, out of 30 rifles firing 90 rounds each, 20 jammed. We are pleased that the tests to which the Minister of State referred took place, but the House needs to know the outcome. We entirely accept that the right hon. Gentleman has not yet received the report, but the House is entitled to know the outcome of those tests and his response to the report. If the report fails to give the SA80 a clean bill of health, are the Government prepared to replace that weapon altogether, as the hon. Member for Hereford (Mr. Keetch), who is no longer in his place, asked? Can the Under-Secretary confirm that comparative tests are under way in Bagram, involving the SA80 and other comparable weapons such as the M16—which, incidentally, is the standard weapon for the United States army, and the weapon of choice for certain key elements of the British Army?

On some of the major procurement programmes, we welcome many of the projects under way. The Minister of State referred to the two substantial new 50,000 tonne aircraft carriers, which will provide the United Kingdom with a vital independent capability to launch operations without recourse to land bases. However, the project is inextricably bound up with the new joint strike fighter being built by Lockheed Martin and BAE Systems. The JSF, with its offensive and air defence capability, will be the vessels' essential partners. My hon. Friend the Member for Rayleigh (Mr. Francois) was right to point out that the JSF is not simply an offensive weapon with an air-to-ground capability but has an air defence capability. That is an important factor. However, the project is not yet assured, nor can anyone at this stage of the aircraft's development programme be entirely confident of an in-service target date of 2012 being met. The House will want to know exactly how the Government see the timetable for these two linked programmes working out. The two carriers and the joint strike fighter must both come on stream at the same time, which is quite a risk. We wish the Government well and hope that the projects will be achieved on time and together.

I hope that the Minister of State will be able to tell us soon when we can expect a decision on the joint strike fighter type to be procured. He said that he was not in a position to make a decision yet, but it is important to the whole design concept of the aircraft carrier whether the aircraft to be deployed from that carrier will be a short take-off vertical landing aircraft—STOVL—or whether it will be the carrier variant, which will be a steam catapult-launched variant. The design of the aircraft carrier depends on that decision. My personal preference, to which I know the Minister will attach enormous weight, is to find in favour of the STOVL variant rather than the catapult-launched carrier variant, as I believe that the STOVL variant will provide versatility as well as maintaining Britain's lead in this very important field of technology. There is an added advantage in that pilots operating off aircraft carriers using a STOVL aircraft need a lot less training than pilots on a catapult-launched system, which I am told takes up to six months to convert from a STOVL aircraft.

We have discussed the Sea Harrier already, but I wish to say a little more. With the F/A2 Sea Harrier being withdrawn from 2004, our existing carriers will be without an outer layer of air defence cover, as the Minister of State acknowledged. In our view, that will severely limit the UK's ability to deploy an expeditionary force.

Indeed, as Air Marshal Sir Jock Stirrup, Deputy Chief of the Defence Staff, Equipment Capability, told the Defence Committee on 1 May, official thinking was that we envisage in most cases high intensity combat operations being with allies and partners". That is entirely consistent with what the Minister said, but it means that we shall not have that independent capability should the need arise.

We hope that the need will not arise, but it may. My remarks are slightly tongue in cheek, but currently there are arguments relating to Gibraltar and we have just seen Spain reclaim an island that the Moroccans had claimed—[Interruption.] I am not suggesting that Spain is about to invade Gibraltar, and the Minister need not assume that I am. However, the important point is that no one predicted the Falklands. Being prepared for the unexpected is one of the key duties of the Government.

In a reply to my hon. Friend the Member for North Essex, the Government conceded that although they anticipate that they will not have to operate other than with the support of allies and partners, no consultations have taken place with allies and partners who could provide air defence cover. We are talking principally about the United States. The policy was not as well thought through as the Government suggested.

Mr. Kevan Jones

May I try to extract a commitment from the hon. Gentleman? The Conservative party's approach to defence expenditure seems to rely on an elastic cheque book. If we were in the nightmare situation that there was a Tory Government, would they take a gamble with money and technology and actually upgrade the Sea Harrier?

Mr. Howarth

There is no technical gamble in operating the Sea Harrier at present. As we speak, the Sea Harrier is on duty with Her Majesty's forces, performing the role for which it was designed—to defend the fleet and act as an interceptor. The aircraft is doing that at the moment, so there is no technical gamble to take.

The Government should acknowledge that the Select Committee, by consensus, was unhappy with their decision to scrap the Sea Harrier. Even Sir Jock conceded:

It is not…something that I would have chosen to do were it not for the fact that we have to make some hard choices in terms of balance of investment. The hon. Member for Portsmouth, South (Mr. Hancock) also referred to that point. In effect, Sir Jock was saying—he made no secret of it—"If we had the money, we'd like to keep the Sea Harriers". I have heard that from even higher authorities.

Mr. Hancock

Will the hon. Gentleman tell the House whether he still shares my opinion that no sustainable argument was made by anyone who gave evidence to the Committee for the early phasing out of the Sea Harrier? The life of the aircraft could be extended until the gap could be fully covered by the Type 45 and the upgraded equipment on the Type 42.

Mr. Howarth

The hon. Gentleman is right. If the joint strike fighter is to have its air defence capability, it is conceded that that would be valuable for a maritime expeditionary force, but that is what will be removed.

The Government are relying on the Type 45 destroyer with its improved phased-array radar and new principal anti-air missile system to make up some of the air defence capability lost with the demise of the Sea Harrier. However, the first Type 45 is not due in service until at least 2007—as the Minister acknowledged—but we do not know whether that target in-service date will be achieved. Even that is a full 18 months after the last Sea Harrier will have disappeared—assuming that the programme will be on time and that its weapons system meets the specification.

Will the Minister confirm the Defence Procurement Agency's statement that the ship will have a potential ballistic missile defence capability, using the Sampson radar? In a written answer to my hon. Friend the Member for North Wiltshire, the Under-Secretary of State for Defence denied that any Ministry of Defence studies had been made to assess the specific suitability of the Type 45 for a ballistic missile defence role. He also acknowledged:

As the design of the type 45 progresses, opportunities to upgrade the ship's capability are being identified and acted upon".—[Official Report, 16 July 2002; Vol. 389, c. 158W.] Will the Minister tell us what those opportunities are and whether studies will be carried out to assess the vessel's adaptability to a BMD role? However shy the Government may be on that point, we know that the capability exists, and Labour Members should reflect on the assurances—false or otherwise—that they may have been given.

Mr. Francois

Although the official in-service date for the Type 45 is late 2007, the vessel is a first of class. With such vessels there are often extra trials, so realistically the in-service date will be 2008 or even 2009. Can my hon. Friend therefore confirm that the gap between the Sea Harrier coming out and PAAMS—the principal anti-air missie systems—being available on the Type 45 could be two or even three years?

Mr. Howarth

My hon. Friend is absolutely right. The Type 45 is due at the end of 2007. Once it has been to sea, it will be withdrawn—as my hon. Friend rightly says—to—the principal anti-air missile systems—undergo further trials. It will thus not be available.

The Minister referred to the Eurofighter Typhoon. Obviously, we all welcome that aircraft. The right hon. Gentleman was entirely right to describe its virtues, although he forgot to remind the House that the Conservative Government were responsible for defining the aircraft in the first place. However, there is cross-party agreement; we are all in favour of the Eurofighter Typhoon, which will perform a valuable role.

The aircraft is costly, and there has been a delay in the programme, caused in part by collaboration with our European partners. There is a price to pay for such collaboration in terms of the difficulty of achieving partner agreements for complicated projects. However, the benefit of collaboration is that it makes it much more difficult to cancel the programme.

It is disappointing that the delivery of the first twin-seat aircraft to the Royal Air Force will I understand be in December this year and that the delivery of the first single-seat aircraft is not planned until the second half of next year. One of the problems that that creates is that those dates will run up against the introduction of the joint strike fighter.

Another example of the delays attributable to European collaboration is the A400M medium-lift transport. It is 10 years since I saw a wooden mock-up proudly displayed at the Farnborough international air show, yet we are currently little further forward. We are still in limbo as regards the engine. When will Airbus make a decision? It was due to do so at the end of this month, but our understanding from Rolls-Royce is that that is unlikely. There are technical difficulties with the 18-ft diameter propellers. The Minister will know of the difficulties encountered with the C-130J and the effects of the new propellers and engines on the aircraft's aerodynamics. What support are the Government giving for the TP400D6 engine that Rolls-Royce is developing with its European partners?

We await the outcome of a German election to know whether that project, too, will proceed. If Germany decides to pull out of the project, will it be rendered unviable? I think that the Germans are to order about 40 of the aircraft. What happens if they pull out? Will the project continue to stagger from one crisis to the next?

It is just as well that the Chief of Defence Procurement, Sir Robert Walmsley has, as he put it, in my back pocket a financial proposal that we could quickly convert at a known price for two C-17s". Presumably, if the A400M project collapses the RAF will require more than an extra two C-17s. Although I accept that the Minister is reluctant to give a deadline for the A400M to proceed, will he tell us whether he is in negotiation with the United States to procure an adequate supply of C-17s? Is he looking to have part of the aircraft built in the United Kingdom, apart from the head-up display that is already standard equipment on every C-17 produced by the US, as it is also standard equipment on every F-16 and F-22 produced? More than 5,000 have been produced for the United States by the United Kingdom.

We welcome the decision to order Bowman, which was a good example of the Government making a hard decision when a procurement programme had run into difficulties. The Government cut their losses, demonstrating the value of not reinventing the wheel and. where appropriate, of buying something off the shelf that does the job. Bowman is a vital part of the communications system, replacing Clansman. Its secure voice service, secure data messaging and automatic position location navigation recording system should add significantly to command and control operations. As Sir Jock said to the Committee on 1 May, the prospects of getting it in service in 2004 are reasonable. The Minister is holding to that in-service date of 2004, which is good news.

On communications, the Minister referred to "network-centric" activities. I am not entirely clear what that is about, although the Minister gave a good explanation. Much has been made of that philosophy applying to modern military activity. In so far as I understand the term, it is right that proper weight should be applied to developing systems that will enhance the dissemination of information, enabling commanders to acquire information quickly, to make better-informed decisions equally speedily and to strike surgically.

The Ministry of Defence is looking at the application of unmanned aerial vehicles to contribute to that development under the Watchkeeper programme. We welcome that and urge the Government to move swiftly, and not repeat the long-drawn-out process by which its predecessor, Phoenix, arrived. As my hon. Friend the Member for Faversham and Mid-Kent (Hugh Robertson) said, we believe that it is imperative that the equipment is entirely compatible and interoperable with our partner nations, particularly the United States.

The Minister referred to the need to buy the best, and not necessarily British. All of us believe that we can buy British and best in nearly every case, but that will not always be so. [Interruption.] I am agreeing with the Minister: he does not need to worry. Actually, he probably does need to worry if I am agreeing with him. The Spike missile system—the new light forces anti-tank guided weapons system—is produced by Israel. If the British Government feel that that is the best system on offer, they should not withhold it from British troops.

Concern was expressed about sponsored reserves, a subject referred to in the Committee's Report. The Government need to take the good points made there into account. As a Conservative, I never cease to be staggered by the extent to which some Labour Ministers have embraced a philosophy that they have spent their entire political lives until now trying to destroy. We heard the Minister talking with enthusiasm about the private finance initiative. I remind him that we invented the PFI and it has delivered good results across the public sector. However, I would like the Minister to respond to the issue of sponsored reserves rather than wait for a reply to the Committee's report, which will not be forthcoming before the House rises.

Jim Knight

Will the hon. Gentleman give way?

Mr. Howarth

I will not, if the hon. Gentleman will forgive me. I have spoken for a long time, although not for as long as his right hon. Friend the Minister.

There are some good programmes in the Government's procurement plans. It is very important that we do not analyse projects to death. We must try to get equipment that is more readily available, and not necessarily equipment that meets requirements down to the last and finest detail. We need equipment to be robust and cost-effective. That is the better way to go. A company in Hampshire has told me that it would like the Government to introduce more technology demonstrators rather than trying to get everything right on paper, as technology demonstrators would allow us to see the technology in action.

Finally, the real question will be the extent to which this substantial bow-wave of procurement programmes is financed. The carriers, the joint strike fighter, the future strategic tanker aircraft and the various other projects that the Minister and I have mentioned will all have a substantial price tag attached. I hope that the Government are confident that they will be able to persuade the Chancellor to part with the money when the going gets tough—as it inevitably will—so that many of these worthwhile projects are not axed because of insufficient financial provision.

6.45 pm

Mr. Bruce George (Walsall, South)

Thank you, Mr. Deputy Speaker. I will continue the remarks that I began to make earlier. I usually approach these debates wearing a Defence Committee hat and by being consensual. However, an Opposition Member will always deliberately provoke me into taking that hat off and being partisan. I will try hard to put that consensual hat back on.

It is a great pleasure to follow the hon. Member for Aldershot (Mr. Howarth). I do not know how he manages to combine the two onerous tasks of being a senior member of the Defence Committee and a member of the Conservative defence team. If he finds the tasks too difficult to bear, we will reluctantly wave him goodbye. I promise him a champagne reception, which the Minister will pay for—[Interruption.] Not out of the defence budget, but out of his own pocket.

The hon. Member for Aldershot's speech contained a few lapses about the SA80, for which his party must accept a degree of responsibility, and the famous Phoenix, which began its life in about 1977. Two decades later, it came into operation and is now effective. I shall not give my A to Z of Tory procurement failures.

This Government have not had time to rack up the failures of the Conservative party. After 17 years, we will be able to evaluate exactly how effective their procurement policies have been. I hope to be around long enough to say that the Government have done substantially better.

Unless provoked. I will not refer to the defence budget, but I can promise the hon. Member for Aldershot that the decline began in 1985. The Tories' great success was to achieve the Frank Allaun goal of bringing defence expenditure down almost to the average of our European partners. If Mr. Allaun knew that, he might have rushed out to vote Conservative because—here I go again, being partisan—the Tories delivered one of the principal policies of the left wing of the Labour party. Having got that out of the way, I will now get back to serious consensual politics.

Anyone listening tonight might have imagined that the debate would be fierce and the difference between the parties unbridgeable. In reality, it is not; the difference between the parties now is narrower than it has been in my many years here. Everyone hopes that it will remain that way.

Procurement is critically important. I have served on the Defence Committee since 1979, and those who have served on that Committee over the years have monitored the MOD's performance in procuring equipment and weapons systems. We have produced dozens and dozens of reports that, over the years, have been fairly consistent in indicating frequent delays, cost escalation and, in many cases, gross under-performance.

All Governments have tried to introduce a system in which the procurement of weapons systems is efficient and the equipment is produced to time and at a cost relatively close to the original estimate, so that our military personnel achieve most of their objectives when they fire the weapons or drive the vehicles. Smart procurement, or smart acquisition, is the latest in a long saga of attempts to do that, and I shall discuss later whether it has been successful so far or, indeed, whether there are signs of success.

When annual defence procurement debates were introduced in 1998, our predecessor members of the Defence Committee monitored equipment issues more systematically. The Committee instituted annual inquiries based on a survey of major procurement projects. The goal was to monitor and report progress on a selection of the operationally more significant procurement programmes. Those programmes were on what I call the at-risk register because they were most at risk from predators in the Treasury, trying to play silly games by elongating the procurement process.

We wanted to report regularly to the House on whether there were any signs of Treasury interference in programmes that were proceeding reasonably successfully. We also wanted to find out whether there were signs of cost escalation. I am grateful to the MOD for responding annually to our requests for all sorts of information. We have 14 separate procurement items on the list, from the future aircraft carrier to the Swiftsure and Trafalgar submarine updates and the private finance initiative projects. The MOD provides us with a great deal of information.

However, unlike previous Defence Committee reports on procurement, we have a rather different focus. In our first report in 1999, we evaluated the then recent, thankful withdrawal from the Horizon frigate programme and its replacement by the Type 45 destroyer programme. We considered PAAMS—the principal anti-air missile system—which is an integral part of the common new generation frigate, as the Type 45 destroyer was then called. In our second inquiry, we considered BVRAAM—the beyond visual range air-to-air missile—for the Eurofighter and the strategic lift programmes. In our third report, we considered the future aircraft carrier and the future joint combat aircraft programmes and all sorts of other things.

As I have said, our approach has been slightly different in this Parliament, and I am sure that many hon. Members will have read our report, so it would be superfluous to go into any detail. We did not duck the contentious subjects, such as the warship-building strategies, the warship support modernisation initiative, PFI schemes, the decommissioning of the Sea Harrier and information superiority capability. We followed up several of our earlier inquiries on ammunition supply, ASRAAM—the advanced short-range air-to-air missile—BVRAAM and the A400M. We made a list of other recommendations, and it is a very good report.

We have considered some quite contentious issues in the report, and I shall begin with warship procurement. The MOD has had to use the division of work on the Type 45 programme as the basis for steering the future of warship procurement in the United Kingdom more generally, because decisions on the Type 45 programme will have implications for future shipbuilding capacity and the extent of competition for other programmes.

I sympathise with the MOD; it had to find a solution in very difficult circumstances. We are all aware of those circumstances: too much capacity chasing too little naval work. The MOD commissioned a study by RAND Europe, which showed that there is an uncertain balance between the benefits of maintaining competition in the market and placing all the work with one shipyard to produce economies of scale. A compromise on the Type 45 programme is probably the best that can be achieved in what is a difficult balancing act.

BAE Systems's yards will assemble the vessels from blocks built by its yards at Barrow and on the Clyde and by Vosper Thornycroft. That will help to keep those yards in business, while allowing economies of scale because of the larger production runs of the same block for each vessel. However, I wish to highlight the risks in that approach. As RAND said, that approach might not stop BAE Systems becoming the only United Kingdom yard able to project manage and assemble warships, reducing the scope for future competition.

Another possible risk is that the MOD will have to play its part in ensuring that sufficient capacity remains to gear up for an unexpected increase in warship procurement activity, possibly at the end of the decade, as the future carrier and future surface combatants come on stream.

The MOD rejected the unsolicited bid from BAE Systems to build all the Type 45s because of concerns about, inter alia, the Astute submarine and Type 45 blocks tripping over each other in Barrow's Devonshire dock hall. However, RAND noted that there were similar dangers with the current plan in which it is envisaged that the second and subsequent Type 45s will be assembled at Barrow. Since our report was published, the MOD has announced that the construction of the Astute submarine has been delayed by a year, and I would welcome the Minister's assurance that that will not threaten the Type 45 construction programme.

I shall refer to a further risk. Having decided on long production runs for the Type 45, there are sound financial reasons why the MOD should order all 12 vessels. I repeat that the Government should commit themselves to ordering all 12 vessels. Until they do so, they will not be able to suppress suspicion that the Treasury will sink some of them. None of that detracts from the fact that, at last, the MOD has begun to tackle a long-running problem in that sector. I should like such work and RAND's analysis to form the basis of a fundamental review of warship procurement strategies.

We also considered the warship support modernisation initiative—a highly contentious issue even on our Committee. As with warship construction. warship support and maintenance has long been beset with fundamental imbalances and ever-falling naval work loads as a result of new maintenance technologies and a shrinking fleet. I recall that, in the mid-1980s, there was a wonderful philosophical debate in the Defence Committee about whether 44 frigates and destroyers was "about 50", as the then Government said, or "about 40", as the Committee said. I can even remember back to the time when we had 75 frigates and destroyers. I am not quite certain exactly how many frigates and destroyers we now have available because of some directional difficulties that were encountered in the antipodes.

The warship support modernisation initiative is at least a positive step towards tackling the structural problems. I hope that it will produce the estimated savings of £327 million over five years and £48 million a year thereafter. Some of those savings will come from greater competition for refits negotiated as part of the initiative, and some from rationalising activities across dockyards and neighbouring naval bases.

Although much of that can and deserves to be applauded, regrettably, as the Minister knows, it comes at a cost. The MOD will have to be very prudent to minimise the adverse aspects of this policy and its impact. Some 1,000 jobs—some would say 750—will go. We have welcomed assurances during our inquiry that all three naval bases have a secure future. It remains a concern, however, that all of the current naval dockyards may not have a secure future as a result of the warship support modernisation initiative. It seems that Rosyth may have a difficult time without the existence of a co-located dockyard and naval base. What I—and, I suspect, most members of the Committee—want is a sensitive handling of job losses with minimum compulsory redundancies, the protection of essential facilities in the dockyards and naval bases, and care taken to avoid, as far as possible, disruption to sailors and sailors' families as refits are placed according to competition.

We are told that Sea Harrier is to be withdrawn between 2004 and 2006, six to eight years earlier than planned. First, that has not been an example of good forward planning because some aircraft will be less than 10 years old when phased out. Although part of the decision to withdraw them was based on a new post-cold war security environment, we should note that the latest aircraft were ordered in 1993. It seems fairly clear to me and the Committee that the upgrading of the Sea Harrier to make it effective flying off carriers in hot conditions has presented and will present real technical challenges. In a similar vein, its air defence system—its Blue Vixen radar and ASRAAM missiles—could not sensibly be shoehorned into the offensive support RAF Harriers.

The real question is whether the MOD should keep the Sea Harriers as they are with their imperfections. That, in turn, raises two other questions that our report examined: what other systems could cover Sea Harriers' air defence capability, and do we still need that capability anyway? We highlighted the things that would have to be done—or the assumptions that would have to be made—if a rationale for withdrawing the Sea Harrier were put forward. The Type 45 destroyer and its PAAMS would have to be delivered without delays to its 2007 in-service date. I have already spoken of my concerns in that regard. In the meantime, the improvements planned for the existing Type 42s and their Sea Dart missiles must be similarly pursued with the utmost vigour. The eight years of delays in putting an infrared fuse on Sea Dart must be a thing of the past.

More fundamentally, the rationale for withdrawing Sea Harrier depends on two all-important foundations. Future naval operations will be for the most part in the littoral environment, supporting land forces, for example, where hostile aircraft will not have to undertake the long run-in towards our ships, which makes them vulnerable to our air defence aircraft—missiles could be fired at us from ground-based launchers with little warning. In those littoral environments, effective air missile defences will be essential, and the Sea Harrier does not provide that. We will have to rely on allies for airborne air defence cover for our ships—that means the United States. If and when we do fight in the open ocean, for some as yet unforeseen reason, we will have to have the United States alongside us.

Mr. Gerald Howarth

I am grateful to the right hon. Gentleman for making a point that I made. Is he aware of other armed forces that have a significant capability in that sphere? He singled out the United States; is he aware of anybody else with that capability who could protect our carrier force?

Mr. George

If we look at the Russians, I am not certain about the extent to which they will be alongside us, although progress and reconciliation has been spectacular. When I think of the significant navies, I am not certain about the equipment or reliability even of some of our allies. The hon. Gentleman draws attention to a point that we need to consider.

At paragraph 93 of the Committee's report, we stated: We recognise that there is a rationale for not upgrading the Sea Harrier, and withdrawing it early from service. We talked about the caveats, and concluded: There are, then, a lot of pieces that must all fall into place before the Sea Harrier's demise can be regarded with at least some confidence. The MoD must ensure that none are missing. We will be following this process very closely. The House can draw its own conclusions from that.

Our report touched on all sorts of things, including the A400M, about which we all know the details. We concluded: Currently, therefore, the MoD finds itself in an enviable position. But if the A400M continues to struggle the secret will be to know when it would be better to deal with someone else. That is not elegant language, but it is very clear. I hope that everything will come right, but there are technical problems. Our allies will deliver their financial and technical support and expertise, but a point may be reached—although I hope that it is not reached—at which the MOD will have to take some very difficult decisions. Ultimately, it is in the business of delivering to our armed forces that which they want, and that which is affordable in the right numbers. The warning must be made clearly to our European partners that they must deliver or there are clear alternatives.

We talked about the MOD being beset with collaboration difficulties with both the BVRAAM and the A400M programme. We said:

It must continue to push its partners on both to show a stronger commitment and remind them that there are other options for the UK if the contract negotiations for these programmes continue to struggle. I will not go into the debate about how much our defence budget is increasing. I have seen the briefing, and, although I am not particularly numerate—like my colleague the hon. Member for Aldershot, who is grinning at me as he knows that we are similarly bedevilled by lack of statistical competence—there is, of course, a rise in expenditure, the extent of which we will be anxious to evaluate when the time comes. The fact that there have been two increases in the last three years, after a period of unrelieved and stark decline, is very welcome. I hope that the evaluation that the Defence Committee will make will bear out more or less what the Government are arguing—that the increase has been reasonably substantial.

I mentioned at the beginning of my speech that, since the second world war, and, I am sure, since the days of procuring bows and arrows—[Interruption.] We procured very good bows and arrows to fight the French, and very good archers to fire them. That was one of the successes. As a fellow Welshman, my hon. Friend the Member for Vale of Glamorgan (Mr. Smith) knows exactly what I am saying. Even the supply of swords in the 18th century was a disaster because they snapped. Procurement has persistently been a problem, so the strategic defence review of 1998 made another attempt to try to achieve what has hitherto eluded Governments—efficient procurement.

The Select Committee on Defence evaluated the smart procurement initiative and we said that the fact that there was such an initiative was a tacit recognition of the failure of some of the past attempts to secure improvement through similar means. We were reasonably sympathetic to the initiative, but we said: The MoD will need to take deliberate steps to ensure its ability to detect in good time those projects going badly wrong under the more flexible and delegated regime envisaged under smart procurement. We recognised that the initiative was designed to bring about improvements and reforms, and we wished the MOD well.

In 1999, in a report on the common new generation frigate programme, we commented on the problems of European collaboration. With an incredible lack of drama, we said of the Horizon programme that the

story of European collaborative ventures is not particularly inspiring". We could have put it much more strongly.

In 2000, in our report entitled "Major Procurement Projects", we considered procurement equipment programmes and concluded:

There are…some early signs of a more imaginative and robust approach emerging, and these offer a glimpse of what improvements the initiative may be able to provide. In 2001, our report on the MOD's annual reporting cycle said: Despite the difficulty in reconciling the MoD's performance data, the results do indicate satisfactory performance against targets for cost overruns, if not on delays. So there was some progress there.

The National Audit Office's "Major Projects Report 2001" was mentioned earlier. Paragraph 4 on page 2 states: Our overall conclusions are that, there is evidence of continued improved cost control, that delays are beginning to be brought under control, and although the proportion has fallen slightly (from 98 per cent. to 93 per cent.), the Department is still expecting to meet the majority of the technical requirements of customers. Therefore, there are early signs that progress is being made, but it is far too early to be absolutely certain that the system is becoming much more efficient. If that happens, it will take place over the next five to 10 years.

The debate has suggested that there is not much between us. A budget of 2.5 or 2.6 per cent. is realistic in the circumstances, and some welcome increases have been wrung out of the Treasury. Should the security environment deteriorate, I hope that the budget would increase in response. However, we must recognise that, among many other problems, it is difficult to procure anything in less than 15 years unless we are prepared to buy off the shelf. Even the United States does not have a limitless capacity to crank out aircraft and other equipment simply because its strongest ally wants that equipment suddenly because of a deteriorating environment.

The budget increase is welcome, and we will reflect on it. We should give a partial pat on the back to Ministers, the Defence Procurement Agency, the MOD and all concerned. A hearty pat on the back is better than the knife between the shoulder blades with which they are more cognisant. I hope that progress will continue, because the taxpayers requires weapons that are necessary and that can be delivered while the services want systems that work. There are good signs that the interests of Parliament, the taxpayer and the military can be reconciled. We must work towards that end.

We on the Defence Committee will continue to be frank and critical when necessary and supportive when we can. We hope that some of our recommendations will find their way through the labyrinth towards effective decision making. Perhaps the Select Committee system will come of age and will be seen not as a reluctant partner that must be tolerated but more constructively as something that can assist the MOD to undertake its tasks more effectively. As a former permanent secretary in the MOD and now, I am delighted to say, an adviser to the Committee has said, "The better you are as a Committee, the better we have to be." I hope that the Committee can improve its performance and that that, directly or indirectly, will help the MOD to improve its performance, so that people outside shout "Hallelujah".

7.16 pm

Mr. David Laws (Yeovil)

I begin with the issue that the Minister first mentioned—the MOD budget and the change that the spending review has made. Without that budget, there is no procurement. The tensions in the budget over the past 10 or 15 years have been behind the pressures on the procurement budget that have been experienced in that time and over the life of this Government.

We were led to believe by the Chancellor of the Exchequer's statement on Monday that the MOD had received a rather generous settlement. Indeed, the MOD had an unusually early mention in his statement as if to flag up the priority that it had received in the spending review. Then we received confirmation of the importance that the Government put on the issue in the joint press release that was issued by the Chancellor and the Secretary of State for Defence. It was headed, "Gordon Brown announces billions extra for defence", and it quoted the Secretary of State for Defence as saying:

This is an excellent settlement for defence. I will not use the word "spin", because I do not identify the Minister as a spinner. However, the Chancellor has a reputation in his Budget and spending statements of not needing always to be taken at face value. We therefore need to compare the reality of the Government's announcement on Monday with the figures that have been released.

The right hon. Member for Walsall, South (Mr. George) said that the Defence Committee would consider this issue, so perhaps I should draw his attention to the Government's document on the spending review that was published on Monday. Table 1.3 helpfully gives all the annual growth rates in real terms of every single Department over the period of the spending review. We would, of course, expect the big public service Departments—the Departments responsible for education, health, crime and transport—to be at the top. We would not necessarily expect the MOD to have a comparable budget increase. However, we discover that not only are those Departments doing better than the MOD but, as the hon. Member for Aldershot (Mr. Howarth) pointed out, other Departments surprisingly outshine the MOD by a long way. They include the Department for Culture, Media and Sport, the Foreign and Commonwealth Office, the Lord Chancellor's Department, the Office of the Deputy Prime Minister and the Chancellor's Department itself. In fact, only one of the Departments listed in the table—the Department for Work and Pensions—has an annual growth rate of expenditure less than that of the Ministry of Defence. If we add the changes to annually managed expenditure, which are not reflected in the table but will form part of the budget of the Department for Work and Pensions, we discover that the Ministry of Defence has had the smallest real increase in the spending review.

I do not ignore the fact that the background to the problem is a 15-year period in which we saw a sharp contraction of the defence budget. I do not fail to acknowledge that the Secretary of State has halted that decline in this and the last spending review. However, no one should be under any illusions, and the Government should not create the illusion, that that will create slack in the budget or that pressure on the procurement budget will ease. The settlement will lock in the decline in the defence budget and the decline in capability that went with it. Expenditure this year and over the period of the spending review will increase by 1.2 per cent. in real terms, but much of the Minister's budget is for pay as well as procurement. As those tend to increase above inflation, the extent of the challenge that the Ministry faces becomes clear.

When I intervened on the Minister, he was not surefooted in his response. I asked what he thought about today's evidence to the Treasury Committee from two distinguished Treasury officials, Mr. Sharples, a friend of the Prime Minister and head of public expenditure at the Treasury, and his colleague, Mr. Macpherson. They confirmed something that is clear if we flick to page 167 of the spending review document: expenditure by the Ministry of Defence will be less in real terms in every year of the spending review than its expenditure last year. I hope that that puts into context the nature of the budget challenges that face the Ministry and the fact that we still have difficult procurement issues to address.

I am not asking the Minister to rely only on the spending statement or on the Treasury officials to support my case. I have the same briefing document on expenditure as the hon. Member for Aldershot, which confirms the figures to which he drew our attention. It also shows that if we use the base year of 2001–02, the budget falls over the following four years by just over £300 million. The average annual real change is, therefore, a fall of 0.3 per cent.

Dr. Moonie

To save me from having to spend too long on that in my winding-up speech, there is a vast difference between outturn figures and budgets. The hon. Gentleman is comparing an outturn figure, which includes contingencies that are always paid by the Treasury, with the forecast budget figure, which underpins our regular spending. He is 100 per cent. wrong.

Mr. Laws

Although the Minister says that I am 100 per cent. wrong, I am, in fact, 100 per cent. right because the figures in the document bear out the claim that in every year of the spending review real expenditure will be lower than it was last year. Regardless of the contingency claims, that demonstrates that the Ministry of Defence budget remains under pressure.

I notice that the Minister did not challenge what I said about the Ministry having the lowest increase in real terms of any Department other than the Department for Work and Pensions and, when we include the change in annually managed expenditure, that it comes bottom of the list. I am sorry if the Minister does not like those comments, but he should look at the documents. Perhaps he is irritated and upset because the Chancellor managed to pull the wool over his Department's eyes. Perhaps he does not like the reality of the figures, which do not live up to the Chancellor's spin, but they are in his Department's documents.

We are grateful to the right hon. Member for Walsall, South for the excellent report that his Committee produced last week on major procurement projects. I shall focus on the four or five projects on which there are the most substantive concerns or the greatest differences of opinion. I accept his general point that there is, thank goodness, a great deal of unity among hon. Members on the overall approach taken by the Ministry of Defence, but we must concentrate on the matters that concern us.

The Minister gave the impression that the Select Committee's report was mildly supportive of the decision on the Sea Harrier. Having read the report and listened to the comments of the right hon. Member for Walsall, South, the Chairman of the Select Committee, I must say that they are a strange endorsement indeed. In paragraph 92 of the report, the Committee notes: We are forced to conclude that…the UK has already decided that in another five years it will rely on others"— other nations, that is— for air-defence patrols for our naval task forces. The hon. Member for Aldershot asked on whom we might rely to take over the vital role of air patrols at sea. The right hon. Gentleman said that the only alternative to the United States of America is Russia, a country on which no one would want to rely to secure our future defence needs.

I am sure that hon. Members agree that we must ensure that the strategy for the future of our defence is sufficiently flexible so that we can fight any reasonable campaign. We cannot be sure that the campaigns that we might have to fight over the next five to 10 years, when we might have no proper air cover for our fleet, will receive the support of the USA. If we cannot be sure of that, we cannot be sure of the support of any other nation either.

The Minister said that he is taking a decision on the balance of risks and that the technical upgrade of the Sea Harrier is risky. However, he should acknowledge that he is transferring one risk for another. He does not want to risk upgrading the Sea Harrier but, as a consequence, he is taking the risk either that our armed forces will not be able to engage in operations requiring that layer of air cover or that we will engage in those operations in circumstances that endanger our armed forces, which would be even worse.

There is deep non-party political concern among hon. Members—I certainly detected it in the Select Committee—about the Government's decision. I urge the Minister to reconsider it because, in a world of second best, it might be better to spend money prolonging the life of the Sea Harriers rather than losing the significant capability that allows us to deploy the Royal Navy with air cover. The experience of the Falklands war reinforced the fact that we cannot rely on ship-based missiles to defend our forces, especially at sea, because the ability of our enemies to deploy missile technology against us is changing and improving all the time. Defence Ministers and generals used to be criticised for always wanting to prepare to fight the last war. My concern is that we seem to be unable to fight even the last war, let alone the next one. I hope that the Government will re-examine that matter.

Mr. Francois

The hon. Gentleman mentioned the Falklands. I am an Atlanticist by instinct. If anybody is likely to support us, it would probably be the United States. We now know that the United States provided us with assistance in the Falklands, but even they did not send us the USS Nimitz. That was a real scenario in which we could not rely even on the US for carrier-based air power. It is not fantasy to say that a problem exists.

Mr. Laws

I entirely agree. We simply cannot predict the type of environment that we will be in or the defence choices that we will have to make. We cannot be sure of future circumstances and the level of support that we will receive from our potential allies, even the United States. Over the next five to 10 years, the Government risk putting us in a position in which we cannot pursue our defence interests or have to take unacceptable risks to do so. I hope that the Minister and the Department will reconsider the issue.

Mr. Ingram

It is easy for the hon. Gentleman to throw around scenarios that have no bearing on reality. Will he accept that the period from the non-availability of the Harriers to the availability of the new fleet is about 18 months, not the five to 10 years that he has just quoted?

Mr. Laws

There are two points. First, if we are to rely on aircraft rather than simply on ship-based missiles, that period would be longer than the Minister has indicated. We all—not least the Minister and his Department—know about the potential for new orders to slip. What could start off as a two, three or five-year gap could easily slip into a much longer one. We would not only risk our flexibility in defence policy and our armed forces during that period, but run down the skills and abilities of the air crew who are currently involved in such operations. They are specialised and skilled and would be difficult to maintain without Sea Harriers.

Secondly, in responding to the hon. Member for Aldershot, the Minister said that, at the moment, the Government do not intend to change the number of Eurofighters to be ordered. We know how these things can change and that current Government policy is to order 232 Eurofighters. Are the Government considering not taking the later tranche of Eurofighters because of slippage of the programme, the pressures on the procurement budget and on the defence budget in general and the fact that the arrival of later tranches of Eurofighters will be close to the arrival of the joint strike fighter?

That matter is slightly unclear and I look forward to gaining some insight into it when the Under-Secretary replies. Are the Government considering transferring orders between the Eurofighter and the joint strike fighter? The Minister will know that regardless of what is said in the House, many people, including defence experts, those who have recent experience of such matters and perhaps those on the Defence Committee, are sceptical about the Government's willingness to deliver on the 232 Eurofighters and believe that, eventually, they will order a much lower number—perhaps even fewer than 150.

The third issue is lift capability, which has not been much discussed today. However, it is an extremely important issue in light of the fact that the Minister and his Department envisage that we will be engaged, not in the static warfare that we might have fought in western or eastern Europe, where we would be able to reinforce from Germany or our own shores, but in operations in which, typically, we might have to deploy all over the world. Has he evaluated our lift capability, including the capability of our helicopter fleet? He would be disappointed if I did not mention helicopters. Has he calculated whether our current lift capability matches the requirements that he and his Department believe we should have?

Does the Minister believe that we should consider bringing forward the Sabre project, which would look at a replacement for Puma and Sea King? Obviously, I am not going to try to influence the Minister by suggesting an ideal replacement. He knows that many excellent products come out of the west country, and this matter must be considered in the normal, rigorously competitive way. Without mentioning specific products, can he say whether lift capability has been evaluated and whether it is considered a problem?

My fourth point has been aired by a number of hon. Members: the SA80. Today, The Sun has a cartoon showing a typical battlefield of the future, with new unmanned aircraft using all sorts of sophisticated technology to scan information and pick up what is happening. It ends with a picture of the Prime Minister in Downing street following all the information as it comes in. All that sounds wonderful, and if we can get the technology right, it may be the way of the future.

While we are waiting for that fantastic new technology, however, there remains concern, as the Minister has acknowledged, over the most basic product on which our armed forces rely—the rifle. He said that he does not want to make irresponsible statements or raise fears unnecessarily and that he is conducting an investigation into the product to find out whether it is good enough. We understand all that, but he will understand that there is already great concern about that equipment which extends into the armed forces.

When the Under-Secretary winds up the debate, will he go a little further and say more about the time scale for the decision that will be made? Can he give us a firm commitment that if the Department concludes that the product is not reliable enough in the extreme conditions in which we may deploy our forces, it will be willing to make a potentially large investment to find a new piece of equipment to do the job? Does he agree that the issue is too important and basic to be subject to budgetary constraints and to be offset against other items in the procurement budget?

Finally, will the Under-Secretary shed some light on the matter of unmanned aerial vehicles, to which I just referred? The other day, the Minister of State answered several questions asked by my hon. Friend the Member for Hereford (Mr. Keetch) about the Phoenix system and its possible replacement. That project has been long delayed and there has been much comment about the effectiveness, or potentially the ineffectiveness, of Phoenix. Does that project still have some life in it, or do Ministers consider it dead? Will it be replaced by the new Watchkeeper system that is being considered?

Those are some of the major issues on which we need answers today. I see from the Minister of State's reaction that I have hit on some of the right issues; I seem to have enlivened him. I look forward to enlightenment in the wind-up not only on the salient procurement issues but on the budgetary issues about which all hon. Members have expressed concern today.