Defence Procurement

HC Deb 17 July 2002 vol 389 cc352-86 7.39 pm

Rachel Squire (Dunfermline, West)

I shall touch on several issues. First, as my right hon. Friend the Member for Walsall, South (Mr. George) anticipated, I want to talk about defence procurement as it affects my constituency—namely, Rosyth dockyard—and secondly, I want to deal with some of the wider issues affecting defence procurement, British defence manufacturing and the interoperability of our forces with our United States and European allies, especially post-11 September.

I begin by saying how much I disagreed with the comments of the hon. Member for Yeovil (Mr. Laws) as regards the budget and the comprehensive spending review, and how much I welcomed the announcements on defence spending made earlier this week by my right hon. Friend the Chancellor of the Exchequer. The debate has been given additional importance by the announcement of the largest increase in defence spending for 20 years, representing 1.2 per cent. growth per year in real terms for the next three years. I trust the Government to deliver, and I trust that in three years' time the hon. Member for Yeovil may be willing to acknowledge that his figures were not correct.

Mr. Laws

I am grateful for the hon. Lady's patience, given that she has only just started her speech. Surely she is aware that the figures that I quoted are from the Government's own document. Which of those figures does she disagree with?

Rachel Squire

I was aware that they were in the Government's own document but, as became clear during the Minister's speech, in this House the interpretation of any quoted figures is often very much subject to—shall we say?—political bias.

I trust that the extra defence spending that was announced on Monday will be delivered. The Government have already shown their commitment to, and acknowledged the importance of, additional defence expenditure post-11 September. The events of the past few months make it even more vital that we provide our armed forces with the equipment and technology that they need for effective operations anywhere in the world. I pay tribute to the British armed forces, who have excelled themselves, especially in the past 12 months. Whether they are engaged in war fighting or peacekeeping, there are none better. We owe it to them to provide the equipment, support and logistics that they need, when they need them. We also owe it to their families to give the troops guns that fire and communications systems that work. When we talk about procurement, we must recognise that the core ingredient of any decision is people, whether they are members of the armed forces, employees in our defence manufacturing base, or those providing the vital support services that are needed to keep our planes flying and our ships afloat.

That brings me to Rosyth dockyard. I want the Minister and hon. Members to recognise the major changes and challenges that Rosyth dockyard has dealt with in the past 10 years. Its core and secure area of work—submarine refitting—was removed by the disastrous, costly, and politically motivated decision of the previous Conservative Government. Rosyth naval base was closed, the entire dockyard was removed from the Ministry of Defence and sold to a private company, and the dockyard work force had to deal with thousands of redundancies and major changes to pay, conditions and working practices. I pay tribute to the dockyard work force not only for surviving the equivalent of a hurricane, but for achieving so much and looking to their future rather than the past.

A very effective partnership has been developed between Babcock Rosyth and the work force, and in recent years the dockyard has won additional work against fierce competition. It has reduced its costs and has delivered on cost and on time, and there has been high praise from the Navy, the Government and many parts of the MOD for Rosyth's skills and expertise, particularly as demonstrated by its recent refit of Ark Royal. It has delivered, to use the words of my right hon. Friend the Minister, real value for the defence pound. Given the recent unfortunate incident involving HMS Nottingham and the damage that she incurred, I would put in a bid for Rosyth dockyard being well equipped to help to mend that ship and to deliver her to full operational value. I should add that Babcock Rosyth has contacts in Australia and Babcock owns a dockyard in New Zealand.

As regards future procurement decisions, the reality for Rosyth is that, despite its present work load, in two years' time that allocated programme of work will have been reduced to virtually nothing. My right hon. Friend the Minister said today that industry must seek new work and not always rely on the Government to deliver it. I would make three points in response to that. First, Rosyth dockyard is providing the best, and at a good price. Secondly, it has vigorously sought other work and ventures elsewhere, with some success, but it is not sufficient to maintain a work force of 2,000. Thirdly, it is not competing with other dockyards on a level playing field, because the other two dockyards concerned have between them a guarantee of 10 to 20 years' work on submarines and the Type 45. Moreover, they have naval bases attached to them, with the admirals no doubt occasionally expressing their point of view.

I am worried by the trend in the thinking of the Defence Procurement Agency and the Ministry of Defence whereby all refit and maintenance work is to be located at the base port, because that would severely disadvantage the Rosyth dockyard work force. Given what Rosyth has delivered in cost savings and efficiency, combined with high standards of workmanship, I hope for a commitment from the Minister that it will have the same opportunities as the other two dockyards in obtaining naval work and competing on a level playing field. As the workers of Rosyth have told me, they have delivered on the demands made of them by Babcock and the MOD, and they would now like their efforts to be recognised and rewarded with some kind of secure future.

That brings me to one of the major procurement issues—the future aircraft carrier. Whichever company it is decided will be the prime contractor—Thales or BAE

Systems—I urge it, the MOD and the Government seriously to consider bringing the assembly work to Rosyth. They would not regret it.

Rosyth has unrivalled experience in refitting and supporting the current aircraft carrier fleet and other types of warship. It has a deep water channel with unrivalled access to the sea. The Forth is not congested with a large volume of commercial shipping and leisure craft. Rosyth is adjacent to Royal Naval Armaments Depot Crombie, the only suitable deep-water berth in the UK for rearming a ship. It continues to have HMS Caledonia to support naval personnel and their families.

Rosyth has the largest non-tidal basin for ship repair in the UK—an ideal environment for assembly, outfitting and maintenance activities. By widening an existing dry dock and other modifications through a single investment, it could provide a facility suitable for assembly, outfitting, commissioning and maintenance as well as sufficient labour to undertake the work, drawing on a highly skilled work force from throughout Scotland and the north of England.

Before I conclude my comments on Rosyth dockyard and the possibility of a major share of the aircraft carrier work of the future, I want to emphasise that the dockyard work force acknowledges that work has been provided, and that without a change of Government in 1997, the yard would probably have closed by now. It welcomed the commitment that the Labour Government demonstrated to the biggest warship-building programme in more than 30 years.

I believe that the dockyard work force is also well aware that the defence procurement proposals of those who promote independence for Scotland, who are again notably absent, would mean, at best, a single, small warship. That is hardly sufficient to keep Rosyth, Faslane or the Clyde shipyards in operation.

Procurement is about delivering on cost and on time the equipment that our armed forces need to do the job that we ask of them to maximum effect. I want to make three points about that.

First, it is important to give all ranks, not only the most senior, the opportunity to comment on the design and type of equipment that they need to do the job. I understand from the Defence Procurement Agency and the integrated project teams that that is being done now. I hope that the opportunity to comment and influence will be increased.

Secondly, it is vital to have a quick fix process for pieces of equipment that clearly do not work. We have heard a great deal about the SA80s, so I shall not go over ground that has already been covered. I welcome the measures that the Government have put in place to try to ensure that we never repeat the saga of years of failure of equipment and of failure to tackle the problem properly. I look forward to ensuring that our armed forces have the equipment that gives them what they need when they need it.

Thirdly, we accept, especially after 11 September, that no nation's forces are likely to operate alone. It is therefore even more important to consider the interoperability of new equipment, especially with our NATO allies. However, although we try to achieve that, we do not want to rely totally on one other country—the United States—for our defence procurement and equipment. In defence procurement, like other aspects of defence policy, Britain must balance its European and its US interests. The rationalisation of the defence industry in Britain, in the US and throughout Europe requires us to perform a tough balancing act.

Although our alliance with the US is close and important, it is not an equal partnership in defence manufacturing. The US admits that it should remove some of the needless bureaucratic and lengthy delays that its system currently imposes on British firms that are trying to compete in its market. However, there is little evidence of its acting on that yet. I would welcome hearing from the Minister whether any recent discussions have taken place between the MOD or the Department of Trade and Industry and the US on providing a more level playing field for British firms.

We cannot and do not want to go it alone in producing all the defence equipment we need or in tackling all the conflicts and challenges with which the world presents us. Britain is rightfully proud of its engineering skills and the reputation of the British armed forces. We must aim to ensure that our defence policy, especially our procurement policy, allows us to build on and maintain that reputation and to be described as "simply the best".

7.56 pm

Mr. Mark Francois (Rayleigh)

I am pleased to follow the hon. Member for Dunfermline, West (Rachel Squire) and to contribute to the debate. I acknowledge the Minister's courtesy in giving way on numerous occasions, including to me more than once. He or the Under-Secretary may want to return the compliment before I sit down because I shall focus on the proposed procurement and disposal of aircraft.

The Government's 1998 strategic defence review reoriented Britain's armed forces towards an essentially expeditionary strategy. In a press conference shortly after SDR was announced, the then Secretary of State for Defence, now Lord Robertson, Secretary General of NATO, summed up the change: If the war is no longer going to come to us, then we may have to go to the war. That realignment of Britain's armed forces had important implications for their associated equipment programme, with a renewed emphasis on equipment to facilitate expeditionary warfare such as transport aircraft, helicopters and amphibious shipping.

A centrepiece of the new force structure was the decision to replace the Royal Navy's three existing aircraft carriers of the Invincible class with two new, larger aircraft carriers, which would allow for a far larger complement of aircraft, including what has become the F-35 joint strike fighter. The new carriers are intended to enter service in 2012 and 2015. They will be escorted by the new Type 45 destroyer, equipped with the equally new principal anti-air missile system or PAAMS.

The first new ship is due to enter service in late 2007 to replace the Type 42 destroyers, which are armed with the increasingly obsolescent Sea Dart anti-air missile system. As I said earlier, the first Type 45 will be a first of class. That means a prolonged trials process. From past experience, that could extend the in-service date until the ship is declared operational into the fleet in 2008 or even 2009, especially if PAAMS does not perform as advertised, straight out of the box, first time around.

Those points are important because air superiority is crucial to 21st century military operations. As the strategic defence review White Paper pointed out in paragraph 87 on page 22:

Air power will be a crucial factor in maritime operations, on most battlefields and as part of the most demanding peace support operations, as in Bosnia in 1995. Air superiority and air defence will be essential for a wide range of deployed operations. We should ask, therefore, what the implications are for our expeditionary warfare capability in the decade ahead before the first of the proposed new carriers becomes available. To begin with, there has been considerable speculation about whether the two new ships will still be delivered according to the original schedule. I hope that they will be, but even if they are, the Royal Navy will still in the meantime have to provide support for expeditionary operations with its existing assets, which would have to be run on until the carriers and their new aircraft join the fleet.

However, the Government have since taken the controversial decision to withdraw the Sea Harrier from Royal Navy service between 2004 and 2006. The Government allege that they have to do so because the aircraft suffers performance limitations in certain hot climates and they cannot afford an engine upgrade to address that. In seeking to justify this, the Government have also sought to stress that the carriers will still carry the GR7/9 variant, which is optimised for ground attack rather than for air defence.

As Ministers will recall, there was a very lively debate about the decision on 8 May in Westminster Hall. It would be charitable to say that the Government did not exactly win the argument that morning in seeking to justify their decision. We were told, for instance, that the Sea Harrier, which was combat-proven in the Falklands campaign, has to go because it is an old aircraft, being more than 20 years old. However, the Jaguar is nearly 30 years old and the Canberra has been in service for virtually half a century and is still going strong.

Moreover, the Sea Harriers have been significantly upgraded. Beginning in 1994, the then Government invested £466 million in upgrading the aircraft to the new F/A2 standard, with a more capable radar and associated electronics, and medium range air-to-air missiles—making the F/A2 one of the best air defence aircraft in Europe and considerably more capable than the aircraft that fought in the Falklands.

Jim Knight

I acknowledge comments in the Defence Committee's report about the weaknesses of abolishing the aircraft so quickly following the last upgrade, but does the right hon. Gentleman—sorry, the hon. Gentleman—acknowledge that even following that upgrade the aircraft is still no defence against sea-skimming missiles? Given that many of the savings from getting rid of the Sea Harriers are going into the upgrade of GR7s and GR9s, does he agree that on balance and on the cost-benefit analysis, the MOD's decision has considerable merit?

Mr. Francois

I thank the hon. Gentleman very much for inadvertently promoting me: it is a burden that I shall live with. Exocet, which hit the Sheffield in 1982, was a sea-skimmer, but it was launched from an aircraft. Therefore, it is important that we keep any threat aircraft that can be armed with missiles designed to sea skim in the terminal phase as far away from friendly shipping as possible.

The last of the upgrades begun in 1994 was completed just a few years ago, so the considerable investment of almost £500 million of taxpayers' money will, effectively, be largely foregone if the aircraft are scrapped early before the new JSF is available. It makes very little sense to upgrade those aircraft and then scrap them just a few years later.

I believe that there are still powerful reasons why the Sea Harriers should not be retired early, as the Government envisage. First, doing so will seriously weaken the defence of our expeditionary forces. As Ministers have pointed out in this debate, the theory of naval air defence is based on a concept of layered defence—addressing the threat from as far out as possible. Sea Harrier, with its look-down, shoot-down radar and medium-range missiles, allows a fleet commander to do that considerably beyond the horizon. Without the Sea Harrier, that critical outer layer is removed, thus allowing threat aircraft that carry certain classes of air-to-surface missiles to get much closer to the target shipping and to threaten to saturate the ship-based defences—in other words to overwhelm the defence by getting close enough.

Jim Knight

I would be interested to know which potential adversaries the hon. Gentleman thinks have such technology, which would be a threat to us if we did not have the Sea Harrier.

Mr. Francois

First, as I understand it, a number of middle eastern states have air-to-surface missile technology, as indeed does China. I cite those two examples off the top of my head, but I am sure that I could come up with others.

Secondly, Sea Harriers should not be retired early because doing so threatens to denude offensive operations. In littoral operations of the kind often envisaged in the strategic defence review, the Sea Harriers might be needed to provide "top cover" for the GR7s against intercepting enemy aircraft—a role the land-attack Harriers are effectively unable to carry out for themselves.

In the debate on 8 May, my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) used the good analogy of a shield, the Sea Harriers, and a spear, the GR7s. By this decision, we would not only remove the shield but blunt the spear wherever the enemy has air defence aircraft of its own that could threaten the GR7 Harriers as they went into attack.

Jim Knight

I am exceptionally grateful to the hon. Gentleman for giving way a third time. He talks of shields and spears, and he will be aware that occasionally people use a two-handed sword rather than a sword and a shield. He mentioned some possible adversaries who have the technology to threaten us if we do not have Sea Harriers. Does he envisage that we would ever go into combat with such nations on our own?

Mr. Francois

In early 1982, no one envisaged that we would go into combat to defend the Falkland Islands. History shows again and again that we must prepare as far as we practically can for the unexpected. The great problem with this decision is that it assumes that we will fight only in certain given scenarios. History shows that that is probably a mistake.

Thirdly, Sea Harriers should not be retired early because there are important implications for rules of engagement. I do not think that that has been mentioned. The Sea Harrier allows a fleet commander to identify visually a potential threat—that could turn out to be a civilian airliner—rather than rely just on the interpretation of a radar image. Without that capability, and even allowing for helicopter-borne airborne early warning, the fleet commander is partially blinded and can only take a "launch/don't launch" decision about his missiles when the contact is much closer in and he is under much greater time pressure to do so. Crucially, he cannot visually check until it is perhaps too late. All those important operational constraints could put a naval task force heading into harm's way at serious risk if it were attacked from the air.

Ministers have already conceded that the decision involves an element of risk. On 29 April the Minister told the House: There is an associated risk attached to all of this, but it is without question a decision based on the balance of investment."—[Official Report, 29 April 2002; Vol. 384, c. 660.] My contention is that it is a greater risk than Ministers have been prepared to acknowledge, perhaps even to themselves. In short, it is not possible to maintain a credible commitment to an expeditionary strategy that lies at the heart of the SDR, and then to announce the abolition of carrier-based air defence for six years. If the Government wish to press ahead with the decision, they should acknowledge that the expeditionary strategy envisaged in the SDR will be largely in abeyance for six years between 2006 and 2012.

All that being so, the Sea Harriers should still be run on. As my hon. Friend the Member for North Essex (Mr. Jenkin) argued from the Front Bench in Westminster Hall: We can all agree that it is desirable to upgrade the Sea Harriers' engine and we know that it will be expensive. Even if the Government cannot afford the engine upgrade, I submit that Sea Harriers with the existing engine remaining in service as long as possible is much better than no Sea Harriers at all."—[Official Report, Westminster Hall, 8 May 2002; Vol. 385, c. 86WH.] That sums up the situation in a nutshell. Moreover, in cold climates, there are few constraints, and even in tropical conditions the aircraft could still be deployed—perhaps operating with lighter loads if necessary in order still to provide some capability.

Ministers have already conceded that the decision was partly due to financial reasons—it was a balance of investment decision. Given the extra resources apparently announced for defence in the comprehensive spending review, is this not a suitable opportunity for the Government to concede that they have got this one wrong and that some of the additional resources could be directed to rectifying the mistake? That would maintain integral air defence cover for the Royal Navy until the new carriers and their associated aircraft were available. Furthermore, it would not expose the fleet and whomever it was assigned to protect to unacceptable risk for six years or more.

Ministers have been unable to carry the House on this subject today. I do not believe that they have won the argument. If they want to repent, this would be a very good time for them to do so, and I sincerely urge them to reconsider this dangerous decision while there is still time.

8.10 pm

Mark Tami (Alyn and Deeside)

I would like to begin by joining other hon. Members in warmly welcoming the extra money for defence pledged by the Chancellor in the latest round of the comprehensive spending review. I am sure that Conservative Members will get tired of hearing that it is the Labour Government who have provided the largest increase in defence spending for more than 20 years, with resources growing by more than 1.2 per cent. a year in real terms to 2005–06. We should also remember that the Conservatives cut defence spending by a third in their last 10 years in government.

Mr. Gerald Howarth

As the hon. Gentleman is clearly critical of the last Conservative Government and the extent to which they cut defence spending, will he tell us by how much we should have cut it and how much more money we should have spent on defence than we did?

Mark Tami

I am not going to enter into a debate about how much the Conservatives should have cut. They talk a good fight on defence, but it is the Labour Government who are putting the investment in, when and where it is actually needed.

Jim Knight

We should talk about real spending.

Mark Tami

That is right. The Labour Government, in marked contrast to the Conservatives, have put the finances of this country on a sound footing and delivered a stable economy, low interest rates, low inflation and low business taxes, and that has enabled us to invest in the security that the people of the nation deserve.

The cold war is now something that is taught in history lessons at school, rather like the second world war was in my time at school. We now see more of the cold war in James Bond films than anywhere else in the media, and many teenagers have probably never heard of the Soviet Union. The world is vastly different from when the Berlin wall came down. The old days, when we planned for nuclear and conventional conflict in mainland Europe, with tanks rolling across the plains, have gone from our thinking.

The world is different now; it is far more complex and unpredictable and, therefore, potentially more insecure. In the United Kingdom, we are right to recognise, especially through NATO, that these new insecurities bring new responsibilities and a new role. Rapid reaction, conflict resolution, and maintaining a strong deterrent are the order of the day. Our commitments are as many as they are diverse. The Government were, therefore, right to recognise that our defence policy had to be brought up to date by the strategic defence review, on both procurement and equipment issues.

Nothing should compromise this country's ability to honour its international commitments and maintain its national security. That is why we must have value for money and, equally, a framework that can deliver what we really need. Value for money alone can never be a sufficient criterion. When we look at procurement policy, we should look at the whole picture. We should consider not only the purchasing of the equipment, but the way in which we maintain it once it is in service.

There is a growing trend in linking maintenance with a supplier as part of the purchase arrangements. In some cases, that clearly makes sense, but we must also consider the effect of such a policy on our in-house capability at the Ministry of Defence, and in particular, at the Defence Aviation Repair Agency—DARA. In my constituency, DARA, at RAF Sealand, provides vital support to our armed services. It has dramatically improved its efficiency and flexibility and is now gaining new contracts through greater commercial freedom.

We should not, however, lose sight of the principal role of the agency, which is to keep our defence forces in prime operating condition. This vital role was perfectly illustrated during the recent conflicts in Bosnia and, before that, in the Gulf, when the agency worked flat out to keep our front-line services at full fighting strength. If we had not had that capability, or that flexibility, I doubt that we would have achieved the success that we did. I certainly question whether normal contract arrangements would have delivered the level of support that was needed, or that was achieved. We cannot simply contract everything out. It is vital, now more than ever, that we maintain and expand this viable in-house capability.

No one would have predicted the events of 11 September or the international war on terrorism that has followed. But no one predicted the conflicts in the Falklands, in the Gulf or in Bosnia. We are not able to predict, but we must always do our level best to prepare and to plan for future challenges and changes in our global environment. We need to be smart in our buying, but also smart in our planning. That is why we need to place a strong emphasis on supporting British manufacturing.

If I may, I would like to pay tribute to those in the trade union movement, including those in my own union, Amicus, who have done so much to support British manufacturing and the immense contribution that it makes to the prosperity and success of our whole economy. Britain has long been one of the world's leading defence manufacturers, employing well over 100,000 people in good quality jobs. While we have a highly successful export market, the industry clearly also relies on domestic orders. Whenever it is possible and viable to do so, the MOD should look to British manufacturers—and certainly British-based manufacturers—when it is making its purchases.

I welcome and fully support the MOD's decision to purchase 25 A400M transport aircraft. I think that it should have bought more, but that is a start, and I hope, along with our European partners, that the project will be allowed to go ahead. The A400M demonstrates the difficulties often faced by British and European manufacturers in competing with America. The amount of research and development expenditure available in the US often results in American companies being in a better position to bring a finished product to the table.

Opting for American companies will often deliver jobs to this country. Indeed, Raytheon has brought many jobs to my own constituency through the Astor project, and they are certainly welcome. However, if we had opted for the C-17 transport aircraft, or an uprated Hercules, we would have had none of the associated intellectual property rights. So, while that would have created jobs in this country, we would not have been in a position to grow those jobs. The A400M, on the other hand, has great export potential, and we should be able to expect an expansion of jobs as orders for it increase. Intellectual property is therefore the key, and we must take that fully into account in our procurement policy.

Although we have, I hope, decided on a transport aircraft for the future, we have yet to decide on a replacement for our ageing air tanker fleet. The options are either to convert second-hand Boeing aircraft or to opt for the Airbus air tanker. As the wings for the Airbus would be built in Broughton in my constituency, I could be accused of being somewhat biased in relation to that choice. I would contend that the Airbus is a far better long-term choice and offers a good possibility of further export orders. It is therefore the smart choice.

We have a major job to do in promoting our own industry. The French Ministry of Defence rightly comes down on the side of the French defence industry. The French equivalent of the Department of Trade Industry believes that its role is to champion French industry, and our Government, Ministers and Whitehall officials must follow their example. We must support British manufacturing, the British defence industry and British jobs.

The strength of competition from the United States defence industry makes it vital that British companies continue to play a leading role in defence manufacturing exports. In particular, they must play the leading role in making essential projects a reality through European partnership. We must also ensure that this country's skills and intellectual property are valued and invested in. Our defence industries are often the most highly skilled and high-tech in the whole of manufacturing industry. The skills, knowledge and intellectual property that we have built into our defence and aerospace industries have proven time and again to benefit our entire manufacturing base.

In defence, we must not try to prop up lame ducks, but actively to support and encourage what are world-beating industries. Let us support smart procurement, but let us ensure also that we make the smart choice by supporting British manufacturers.

8.21 pm

Mr. Desmond Swayne (New Forest, West)

It is a great pleasure to follow the hon. Member for Alyn and Deeside (Mark Tami). I cannot claim that I agreed with everything that he said, but I agreed with the greater part of it. He argued his case very cogently, and his defence of his constituency interests was a model for us all. I should at this point draw the House's attention to my entry in the Register of Members' Interests.

The sixth report of the Public Accounts Committee, which was published last November, recognised the impressive achievements of our armed forces. However, it also observed that: Despite the considerable sums of money spent on defence equipment", our armed forces are still faced with using out-dated equipment and relying on other nations to provide elements of capability which should by now have been available to them. The report continued by expressing the hope that the equipment capability customer organisation—which is responsible for deciding what is required, and for controlling the funding to deliver that capability—will offer a potentially significant step forward in providing the armed forces with the equipment that they need at the time that they need it.

However, the conclusion to the report observes that there was considerable confusion between the Capability Customer and the Defence Procurement Agency over the fitting of a sonar to the first three Type 45 destroyers… The Committee finds it difficult to understand how the planning for these ships could exclude such vital pieces of kit and views with concern that such a possibility could have been seriously considered. The Committee therefore recommends that the Department should review the arrangements for communication between the Equipment Capability Customer and the Defence Procurement Agency to ensure that those arrangements can be relied on to convey exactly what is required. I wonder whether the Minister can say in his winding-up speech what progress has been made in implementing that recommendation for much better communication between the capability customer and the Defence Procurement Agency. If he is unable to do so, perhaps he might write to me on the matter.

The report also states that, in the evidence presented to the Committee in compiling the report: The Chief of Defence Procurement said that the sonar was being procured because of the headroom provided by achieving a rather better price on the prime contract. That seems to imply that the sonar would not have been acquired, had such headroom not appeared in the main contract. I find that rather odd, and it stretches credulity somewhat.

The Department has not always undertaken the right analyses at the right time. For example, it is generally agreed that the study on anti-armour weapons should have been carried out before committing the medium-range Trigat project to production, rather than after the project was withdrawn. In future, we would expect the equipment capability customer organisation to specify at the outset of such projects precisely when such studies should be undertaken.

The Department's strategy for meeting anti-armour weapons requirements seems to have evolved over time with a general lack of coherence, and as a result a certain cost penalty has been incurred. For example, in the second order to upgrade additional BL755 cluster bombs for the Kosovo campaign, the unit costs were almost double that of the first order. Also, although the order for Brimstone missiles was reduced, that reduction failed to secure a commensurate reduction in the total spend. Additional Maverick missiles were purchased, at a significantly greater cost. I would expect the equipment capability customer organisation to provide a more timely forecast of the mix of weapons required, so that such cost penalties can be avoided.

I have what the Minister might consider a dumb question about Eurofighter. It is perhaps dumb simply because I have no experience in these matters, but someone who lacks expertise in aviation matters should have such a question—which concerns the decision to remove the gun from Eurofighter, at a saving of £32 million—answered for him. I am sure that a plausible scenario exists as to why we do not need that capability, but it gives rise to the question of why our partners in the Eurofighter project are persisting with arming the aircraft with that weapon. It also gives rise to the further question of why other countries continue to arm their aircraft with such weapons. In order to allay the fear that this is simply a cost-cutting exercise, it would be interesting to hear the Minister rehearse precisely why we have decided to do without that capability, given that other countries have decided to persist with it.

I was always a fan of the SA80 weapon and a supporter of that project. As far as I was concerned, the greatest disappointment arising from it was the failure to deliver the weapon anywhere near the 1980 deadline that gave rise to its name. I have always regarded it as a sophisticated weapon and an amazing piece of engineering which, had we got it right at the start—it is interesting to note that much of the recent upgrade consists merely of the production of the original parts using better materials—would have sold in large numbers throughout the world.

I am concerned about the study that has just concluded of failures in Afghanistan. The Minister said that although the study has been concluded, he is awaiting the report. If the commercial organisation for which I worked before becoming a Member of Parliament had had a problem and dispatched a team to look into it, and if that team had returned and had a board meeting coming up, we would not have sat back twiddling our thumbs and waiting for the team to digest its findings and write its report; we would have ensured that we had a swift briefing, even if the report had yet to be written. The defence procurement debate is being held today and it would have been interesting to hear Ministers' comments about the problems in Afghanistan on the basis of their initial briefing on the issue.

Dr. Moonie

We do not have the information yet—otherwise I am sure we would have been able to share it with the hon. Gentleman and others.

Mr. Swayne

I accept that point, but had I been the Minister I would have taken steps to ensure that I had the information before the debate. I would not have waited for the gestation of the report but would have insisted on a verbal briefing straight away.

When the Minister winds up, will he address longer-term procurement and do a bit of blue-sky thinking? We know that our American allies are moving towards a capability for rapid deployment, which will involve very light, air-transportable armaments and armour. Are we intending to follow that lead? I understand that the rapid effects project was supposed to consider aspects of that technology. How is that requirement evolving? It seems to me that in any future conflict we will have to strike a balance between protection and deployability. That balance at the moment comes out at about 70 tonnes for armour. New technology will bring that down and enable a much more deployable armament that provides sufficient protection. Our American allies are considering that issue, but are we following their lead? Will we develop a procurement project along those lines in the future?

8.32 pm

Mr. John Smith (Vale of Glamorgan)

I wish to raise a specific point relating to defence procurement that was touched on by my hon. Friend the Member for Alyn and Deeside (Mark Tami) and briefly mentioned in the two opening speeches. I was surprised that the mentions were so brief, because the area of procurement in question commands the biggest slice of the defence budget—almost £6 billion in procurement and procurement support. It is surprising that it has hardly been mentioned this evening.

As in all good debates among people who are passionate about and committed to defence, several points have been raised in this debate, and I shall respond generally to some of those before I turn to the main issue of my speech. The House may be surprised to learn that I think that tonight's debate is an historic one. Defence procurement does not excite everybody—it is not the sexiest subject for debate—but it has been proved tonight for the first time ever that the Labour party is the party of defence. If anyone was in any doubt about that, they can be sure of it after tonight's debate.

We have had an admission from both sides of the House that this week has seen the announcement of a substantial real-terms increase in defence expenditure that will help our procurement programme no end in the near future. It is the biggest increase in defence spending in 20 years, and it comes on top of at least three successive years' worth of increases in defence expenditure, after the haemorrhaging that we saw in the last 10 years of the Tory Government.

I remind the House that although the Tories cut the budget by a third in real terms, the way in which that was done is the real issue. There was a peace dividend after the cold war; but the way in which the Tory Government cut the defence budget left the country with enormous capability gaps. That is why I was a little worried when I heard the hon. Member for Aldershot (Mr. Howarth) say that if—God forbid—the Tories ever returned to power, they would commit themselves to capabilities enabling us to fulfil our international responsibilities and defend the homeland. I would prefer to consider what they did, rather than what they say they are going to do. There were huge gaps. Heavy lift, for instance, was virtually non-existent by 1997—as were the provision of medical support for our service personnel in the front line, and second-line defence logistics.

Mr. Francois

Let me give the hon. Gentleman a chance to take a quick breather. I think it fair to say that because we are moving to a different system of MOD resource accounting and budgeting, we are to some extent comparing apples with pears. According to the analysis given by my hon. Friend the Member for Aldershot (Mr. Howarth), the figures are not as impressive as the Government suggest. I think we should wait for the Defence Committee to conduct a forensic analysis, as it does best. We shall then see whether the claims of the hon. Gentleman and his party are as impressive as they would have us all believe.

Mr. Smith

The hon. Gentleman would want to wait, wouldn't he? Anyone looking at the Conservatives' record would say, "You bet they want to dilute and undermine this Government's achievements in any way they can, because they contrast so well with their disastrous performance during their last 10 years in office". In those days, we were dangerously lacking in capability. We could not have met our NATO capability requirements by 1997 had we been called on to do so. If article 5 had been invoked, this country could not have delivered on that invocation. It was indeed a disastrous situation in which we found ourselves in 1997—which is why Labour, beyond any doubt, is now the party of defence.

As others will know, whenever Labour Members visit the officers mess, an officer will sidle up—in general, the more senior the military brass the more likely the occurrence—and say, "Of course you know, Mr. Smith, Labour has always been a great friend of defence. We will never forget what a brilliant Defence Secretary Denis Healey was." They always say that, even if they are 21 years old, and we sometimes wonder where they have got it from.

To be honest, in the past I have never been particularly convinced by all that. But since the publication of the strategic defence review a year after the election of a Labour Government in 1997, there has been no doubt about it. That document has stood the test of time. It has given us the increase that defence deserves and needs this year.

Mr. Gray

I am loth to interrupt the hon. Gentleman when we are all enjoying his speech so much, but the strategic defence review happened some five years ago. Even if he is right in his assertion, it has taken his party five years to fund that review properly. Can he explain why?

Mr. Smith

I do not think it has taken five years. There has been a year-on-year increase, albeit small, and there is a substantial increase for the next three years. That must be compared with the massive and dangerous cuts that were made previously. We were able to do what we did because not only was the review inclusive and transparent, but—Conservative Members may not like hearing this—by and large, it garnered, bipartisan support. The books were opened. We were told to look at the current defence resources and at the change in the security environment and decide what action was needed. The fact is that most Members of Parliament agreed with the conclusions.

I am a member of the NATO Parliamentary Assembly: I represent this Parliament in that august organisation. I am also a member of a sub-committee considering the future military capabilities of NATO members and aspirant members. The British strategic defence review is used as a model throughout those countries. I happened to be present at the NATO Parliamentary Assembly summit in Edinburgh when General Wesley Clark, then Supreme Allied Commander Europe, held up the review as a future model for defence forces throughout the NATO countries.

We must not underestimate the strength and achievement of the SDR. Britain has put forward the money in the past, and we are still doing so. Tonight's debate is on procurement, and its emphasis in connection with the success of the SDR has focused on the reconfiguration of our forces to meet the changed security environment. Under the Tories, Britain was still defending itself against a non-existent enemy in the east, and we protected the plains of Germany with thousands of military personnel.

The Territorial Army was mentioned earlier. The previous Tory Government cut its numbers by some 20,000, but those who were left were given a job that they would never have to do in the foreseeable future. That was not good for them or for British defence, and it was a waste of taxpayers' money.

One of the most radical elements of the SDR often gets overlooked, and that has happened again even in this debate. That element is the review's proposals to improve procurement and defence logistics. As it happens, logistics takes up a bigger proportion of the defence budget than procurement. We tend to think of procurement in terms of fast jets, tanks and warships, but the real expenditure is devoted to lines of supply, servicing and keeping the bellies of soldiers on the front line full. I am not sure that the House spends enough time discussing that important matter.

The changes in procurement have been extremely radical. In some respects, they are more radical than the changes in our force structures. My right hon. Friend the Member for Walsall, South (Mr. George), the Chairman of the Defence Committee, was right to say that nothing will happen overnight. We will be lucky if the task is completed in a decade, but the Government have attempted to tackle it and at least the oil tanker is starting to move in the right direction.

The bureaucracy needed to cope with procurement and logistics is gigantic, as is the amount of money involved. The vested bureaucratic and military interests will take quite some time to change, but the indications are that things are changing. Reports from the National Audit Office, the Public Accounts Committee and elsewhere show that we are starting to move in the right direction.

The Government have created the Defence Procurement Agency and the Defence Logistics Organisation, and have brought logistics together in tri-service provision. That may sound easy to do, but it is a different matter when one tries to tell the Army, the Royal Navy and the Royal Air Force and the rest that they will not act alone any more. That is a huge task even to consider taking on, which is why this important programme has been so radical.

The savings, in terms of the reduction of waste, inefficiency and duplication, should be astronomical. We have heard of the cost over-runs with previous defence projects. I would like to be able to blame all that on the previous Tory Government, but such things have gone on for a long time. Projects can take eight, 10 or even 15 years to complete. It is very difficult to keep them under control, which is why the new agencies have been created.

Smart procurement was introduced to speed up decision making, and that approach has now been extended to smart acquisition. The integrated project teams were introduced for the same reason. A concept borrowed from the Americans, they have proved very successful, not merely keeping an eye on a project as it comes on-stream, but throughout its entire life. The potential savings in that regard are huge.

The Government have introduced a series of radical changes whose benefits will become clear to hon. Members of all parties. All the money saved and resources released will be devoted to front-line services. Our soldiers are the best in the world, and they will have the best equipment and resources to do whatever job they are given, be it in Sierra Leone, Kosovo or Afghanistan. That was the challenge set up by the SDR, and we must take it forward.

The fact that we have only to write a new chapter to the SDR in the aftermath of what happened on 11 September last year shows how far-sighted the review was. Obviously, no one anticipated that there would be an international terrorist attack on that scale, and the tragedy will have to change our thinking. It is clear that we will have to be able to deploy rapidly and to carry out a multiplicity of different missions, from peacekeeping to war fighting. We will also, probably, have to be able to deploy forces at much greater distances.

We must look once again at our homeland defence, because the threat could come from anywhere. It could come from an unstable country, rogue state or terrorist gang and could strike right at the heart of this country. We must be able to adjust to meet that challenge.

Jim Knight

I wholeheartedly agree with my hon. Friend. Does he agree that such is the strength of the SDR process that our armed forces are very well placed in terms of projection overseas and certainly in comparison with most of our NATO partners? In many ways it is a shame that our homeland security and our civil response to the new security threat are not as well placed as our armed forces are following the SDR process.

Mr. Smith

I entirely agree with my hon. Friend. I am sure that we will revisit that issue during tomorrow's statement. I have to hand it to the Defence Committee, which warned of such an attack happening long before 11 September. However, we must be careful and distinguish between what we can realistically do to prevent such attacks and what we can do to manage their consequences. There is a difference between what we can realistically do and what we are seen to be doing. I am more interested in reshaping the footprint of British defence forces so that they can more readily identify with regions, local authorities and civil authorities—the police and fire services—and prevent something from happening or respond after it has happened. We would do far better to look at that use of our resources than to create a huge new force like the Territorial Army. Frankly, between 1989 and 1997, the territorials were not quite sure what job they had to do.

Mr. Francois

As a former Territorial Army officer, I should like to respond to the hon. Gentleman's remarks. Rather a lot of Territorial Army soldiers knew exactly what they had to do. They did not need their numbers slashed and the infantry battalions did not need their back broken by a Labour Government.

Mr. Smith

The hon. Gentleman refers to the infantry battalions, the cap badges and the tradition. By and large, it is harder for Tories to take those tough decisions about reforming our military.

The hon. Gentleman is right—it was an error on my part to say that all the territorials had nothing to do. That was nonsense. They occupied key positions in some of the world's trouble spots, including Bosnia. However, the majority were effectively cannon fodder for a non-existent enemy. That was the reality.

Mr. Ian Liddell-Grainger (Bridgwater)

I am also a former officer in the Territorial Army. I was in the Fusiliers, a northern regiment. I sat on a bridge on the River Weser month after month watching for Russian tanks. They may or may not have come, but we knew precisely what we were there to do and we knew how to do it. I hope that the hon. Gentleman appreciates that Territorial Army soldiers did a job for all those years and that they continue to do a job by serving around the world with the regulars.

Mr. Smith

When the red army existed intact, that was an incredibly important and worthwhile job. Now that the red army has collapsed and could not possibly present a realistic threat in the next two or three decades, even if they started building up now, the job no longer exists. I am not casting aspersions on the role played by the territorials. However, the challenge in the SDR was to find them a realistic role for the future. Nobody wanted the territorials to have a valued and important role in the new defence structures, facing new and unpredictable enemies, more than they did.

Mr. Francois

We have to thank the hon. Gentleman for recanting part of what he said earlier.

Mr. Smith

If I gave that impression.

Mr. Francois

He did, and we have acknowledged that. However, part of the debate about the Territorial Army is how it could carry out an operational role in home defence in the aftermath of 11 September. We hope that that will be addressed in the new chapter of the SDR. These are very important issues. I thank the hon. Gentleman for withdrawing his remarks but ask him to think more carefully about what he says.

Mr. Smith

I am not withdrawing what I said—I want that on the record. My point did not appear to be made clearly enough. I am making exactly the same point, and I agree with the hon. Gentleman on future homeland defence requirements. However, there is no doubt that the traditional role of the Territorial Army has changed. There may be slight disagreement between the hon. Members for Rayleigh (Mr. Francois) and for Bridgwater (Mr. Liddell-Grainger) and me because I am an ex-regular and they are ex-territorials. That could account for our differences.

I want to focus on the Government's extremely innovative policies in the Defence Logistics Organisation. As I said earlier, that represents one of the biggest challenges because it has the biggest budget and the greatest potential for cost savings so that money can he spent where we need it—on the front line.

In his opening speech, my right hon. Friend the Minister of State for Defence referred to private finance initiatives and partnership agreements. That is exactly the right way to go forward. The difference between the Labour Government and the previous Conservative Government is that we are not Treasury-led and, most important, we are not ideologically led. We are looking for the most efficient output and the best way of delivering services—whether public, private or a combination of both. That is exactly what we should be doing. Other countries are doing that, especially the United States. We can learn lessons from their experience.

My right hon. Friend did not refer to the creation of the Defence Aviation Repair Agency, an innovative concept which was set up in 1999 to be given trading fund status as a wholly owned subsidiary of the Defence Logistics Organisation. The agency received that status on 1 April last year and by 1 April 2004 it will have a turnover of about £500,000 million. It will have a huge work force and will provide a one-stop shop for the entire deep repair and maintenance of almost all our military aircraft. In about two years, the agency will be a commercial organisation. It will receive money not from the defence vote but from clients who buy in its services. That was a courageous move for the Government and it is one of the ways forward.

The project provides the surge capacity referred to earlier, but without complete dependency on the private sector. It also gives the Ministry of Defence another option if it wants to buy in services other than from private companies. God forbid that a private company should have the monopoly for the supply of those services. If that were so, I agree with my right hon. Friend that we should be in serious trouble.

The agency offers several advantages. Although I have not offered uncritical support for some of the developments in that organisation, it has made enormous progress during the past two years. It has completely restructured the work force and removed whole tiers of management. It has changed the terms and conditions of employment and working practices. It has had to deal with unexpected reductions in demand, when it was not awarded contracts that it expected to receive. There have been unexpected cuts in DLO expenditure of which there was little or no notice.

We have already discussed the Sea Harrier, but one aspect of that debate was not covered: the impact of withdrawing the aircraft earlier than planned on the supply line that services them and on the jobs and skills base that are dependent on such work and that are vital to our future military provision. The agency is preparing to adjust to that.

As I noted, the agency was set up in April 1999; it was awarded trading fund status in April 2001 and will be a fully commercial organisation by April 2004, although it will still be owned by the Ministry of Defence. There are four sites in the United Kingdom, one of which is in my constituency at RAF St. Athan. It is vital to their success that the agency gets the go-ahead for a new purpose-built hangar at St. Athan, as part of one of the biggest aerospace projects in Wales—the red dragon project. The new hangar must be built before the organisation achieves full trading fund status in 2004 to allow it to compete on the open market with other private sector companies not only providing military service and repair but also offering a commercial service to civilian aircraft when possible. My concern is that if the go-ahead for the red dragon project is not given in time, we will not have the facilities to provide a modern manufacturing plant to compete with other players in the market.

I understand that there was a meeting of the ministerial advisory board a week ago, and the expectation was that the go-ahead would be given for the red dragon project. That would have given permission to raise the money; it will be a private sector initiative to provide a purpose-built hangar that will take 47 fighter jets, and multiples of other aircraft, under one roof. There are hundreds of buildings spread over miles of land, most of which were built during the second world war. We cannot expect people to compete in those circumstances. The decision was not taken and there was enormous dismay and anxiety in my constituency, especially among the work force, who have worked so hard to support Government policy. There is anger and uncertainty about the future.

If that hangar is not started by the end of this year, it will not be complete for April 2004, and the organisation that we created under a progressive procurement policy will not be able to compete in the open market; it will have one hand tied behind its back.

Another reason why the Minister should consider this matter carefully is that by unnecessarily delaying the project—if it is delayed; I hope that my hon. Friend the Under—Secretary will say something tonight to convince me and the people who run the Defence Aviation Repair Agency that that is not the decision—there is a danger of playing into the hands of those people within defence procurement, the Ministry of Defence and the military who do not want that solution. They do not like to see so much use of PFI or private partnering, or the creation of new commercial agencies. Naturally, they want to retain their empires and, where they can, build on them.

The British military are the best in the world at fighting wars, but they are not very good at providing the back-up services, stores and support facilities—I speak as an ex-service man—that, frankly, can be provided more efficiently and more cost-effectively in other ways. There are no military benefits from the work reverting back to the military, but there would be a lot of extra resources to go to the front line. Ministers must beware that they do not play into the hands of those who do not want to see agencies such as DARA, or private partnering, succeed. They want to revert to a failed policy.

In many respects, the United States has led the world in new thinking and innovation in logistical support and procurement, but what the Americans say and what they do are often very different. The fact is that we have seen very little shift from military supply and support to private sector innovative provision in the US. The reason is that the lobby on Capitol Hill is so enormous that every time a President—whether Clinton or Bush—had to sign something off, he would not do it. We do not want a parallel situation in this country, caused by a possible delay in a decision that should be taken now to allow the organisation to improve its quality of service, reduce its costs and compete on the open market by 2004.

Red dragon will be one of the biggest aerospace projects in Wales, with an initial investment in excess of £100 million. The Minister may or may not be aware that the decision to delay the go-ahead for the red dragon project could blight that development and that site.

DARA tells me that it has people ready to enter into partnership agreements. Perhaps more importantly, the chief executive of the Welsh Development Agency tells me that he has a number of clients queueing up to move on to the aerospace park. They are ready to make the project work, but they will not wait indefinitely and they may be lost. My right hon. Friend the Minister is aware of the change that is taking place at RAF St. Athan. All the staff are worried and waiting for the decision.

Mr. Ingram

It is difficult in an intervention to deal with all the points that my hon. Friend makes, but I shall try to give him some assurance. He has been a very fierce campaigner for that project and has criticised some of the ways forward, and rightly so. The letter of intent has been signed. As the sole owner of DARA, I remain positive about the way forward. This is a question not of dithering, but of trying to obtain certainty. We are examining the best solutions. Rather than moving forward on the heads of agreement at the meeting last week, I thought it better to complete the internal examination, which is also taking place, of end-to-end support for the RAF, so that it can better advise me on my ultimate decision. I well understand the anxiety; it is a matter of regret, but I hope to be able to give an early answer, and the solution will not be long delayed.

Mr. Smith

I am absolutely delighted with my right hon. Friend's intervention. What he says not only reassures me, but, more importantly, it will reassure the work force at RAF St. Athan and, indeed, the people of Wales, who look forward to the success of the project.

This has been a good debate, and we have covered many procurement issues. I believe that the Government are moving in the right direction. In reality, if people scrape away at the surface, they will find that there is much more bipartisan support for what the Government are doing than Opposition Members will let on.

I am sure that we are on the right path in trying to improve our procurement and logistics because of my experience some years ago., when it was decided that Defence Estates would simply carry out an audit of what the MOD owned in this country. No one had ever done that before. No one had ever sat back and asked, "What exactly do we own and what is it worth? The audit was fascinating. I understand that it found 600 horses, but no one quite knew what they had been used for since the abolition of the cavalry. It found a string of diesel locomotives, rolling stock and land worth millions of pounds. All that money could be saved by a simple auditing initiative. I tell the Government to keep up the good work.

9.3 pm

Mr. Ian Liddell-Grainger (Bridgwater)

First, I must apologise to the House for my slight, forced absence in the middle of this debate.

I should like to talk about a very particular part of defence procurement—the procurement of explosives. There is one plant in this country that makes explosives to the standard and level that the British military needs—the old Royal Ordnance factory at Puriton in Bridgwater. It is important to consider this issue because procurement has not just begun but goes back over the ages. The point has been eloquently made that we are not very good at achieving some of our procurement aims.

The factory began work in 1939, and it was located in Bridgwater because there is lots of water—it happens to be below sea level. By the end of 1941, it had produced 20,000 tons of high explosive. It is best known for the bouncing bomb and many of the other explosives produced in the early part of the war. Since then, it has created some of the best quality explosives in the world. It cannot be beaten by anyone. Those explosives are required for our bombs, shells, missiles and so on.

The factory has been an exemplary employer and has done a phenomenal job. After privatisation in 1987 and because of the shrinkage in this country's defence capacity after the fall of the red army—the red peril—it had to change. However, it is now under threat, but not because of what the Government are doing—it was taken over by BAE Systems. If hon. Members want to boo and hiss now, they may. That is a company that has one aim: to maximise profits. It may sound as if I am speaking for the wrong side, but I agree that a company whose activities put the interests of a country at stake should not just aim for the largest profit that it can make. It is, so far, a British company, and the nation matters more.

Royal Ordnance has a 400-acre production site. It is a large factory capable of producing high-quality explosives on a site that could be a world-beater. It is a site that is out of the range of people. It is in a safe place: that is why it was put there. It is also away from prying eyes. As anyone who has been involved in the chemical industry knows, it is easier to mothball a chemical plant than to shut it down. If one shuts it down, the land clearing and sterilisation of the soil is a massive expense. I hope that Ministers will take that on board.

Puriton is now making RDX, TNT and HMX, which are explosives that we depend on for our military capacity. It also looks after other material that is vital to the defence of the nation, and that we cannot depend on the Americans to supply. Will the Minister address that point? Where will we get that extra material from if Puriton disappears? The United States Government have never said how we will obtain such material if it cannot be supplied from across the pond—I felt that I ought to repeat that to the House.

In terms of supply, from where will we get explosives for Sea Wolf, Spearfish, Sting Ray, BVRAAM and CASOM—I do not know what they stand for, but they all need a warhead that has something in the end that goes "Bang!"—[Interruption.] I am a Territorial Army soldier; I know what "out-of-date" means. We are here to try to save a plant that has done a great job over 60 years.

I received a letter from the Royal Ordnance trade unions—or from the Transport and General under Jack Dromey—which stated that the Defence Committee pointed out that a long-term Partnering Agreement was concluded two years ago, which it hoped would provide the stability for Britain's Royal Ordnance factories"— but— the Agreement 'has only served to give the firm the foundation it needed to close further plants'". That means all three remaining plants. It continued: The Defence Committee then calls on the MOD to act, saying that Defence Ministers 'must continue to monitor more robustly the implications of ammunition plant closures, and indeed other Defence Industry rationalisation to be ready to protect re-supply routes for such essential support for our Armed Forces—. It went on to refer to

the closure of the remaining factory manufacturing high explosives here in Britain…That vital and strategic capability should be preserved. What is at issue? We are talking about the ability of our country to survive with our war stocks for up to 30 days—we need to be able to keep a division operational for 30 days. If the war stocks are not there, and they have to be bought from elsewhere, the defensive and offensive capacity of the nation—its ability to go to war and to protect itself or its citizens—is potentially undermined.

One of the biggest problems over the last few years has been the moving of explosive production out of this country to Germany, America and elsewhere. I shall deal with the American situation in a moment. One of our ammunition plants was closed to remove production to Germany. The Select Committee said that, unless we ensure that our war stocks are safely maintained at the necessary height, we will not be able to resupply in the short term. One can never set out what an emergency will be, as has been eloquently explained in the House by hon. Members. One can never foresee the unexpected—that goes without saying.

The three remaining plants are at Chorley, which does mostly civil work but makes the detonators and initiators, at Bridgwater, which produces high explosives, and at Birtley in the north-east, which assembles the shells and shell cases. We will lose all three plants if BAE Systems has its way.

One of the problems of the Bridgwater plant is that it has never had its own cost base. That may sound strange, but BAE Systems has always made it a part of other loss-making plants in this country. I refer not only to the ones that we know about, but to Glascoed and others. If a plant cannot prove to BAE Systems that it will make money, BAE will view it in a different way. If the plant was given the chance to be a cost-effective unit in its own right, it could prove that it could make money, as it continuously did when it stood on its own two feet for many years.

I asked the Under-Secretary what the Government's policy for ordnance production in the United Kingdom was. I was told that the MOD had entered into a 10-year Framework Partnering Agreement with Royal Ordnance Defence, the United Kingdom's major producer of munitions. This agreement provides the company with a schedule of business and visibility of MOD's potential future requirements such that the company can provide the MOD with munitions at world benchmark prices."—[Official Report, 15 July 2002; Vol. 389, c. 20W.] I do not think that that is correct. If BAE Systems uses that benchmark, it can move production of ammunition to anywhere in the world. There would then be no guarantee that we could obtain ammunition from where we want it or when we want it in an emergency.

Lord Bach said that, if Royal Ordnance had not entered into such an agreement towards the end of 1999, the position would have been so bad that the future of the plants would have been under serious threat. I have raised this matter with the Under-Secretary before, and he rightly raises his eyebrows. However, I shall bang on about it until we go blue in the face.

The Holston military ammunition plant in Tennessee is on a site of 6,000 acres and it is the largest bomb-making factory in the world that is run by the British. It is now controlled by BAE Systems. Royal Ordnance has just been granted $163 million to run the plant, and it is looking to bring in world-beating products from all round the world. It has been given a 25-year extension to the contract to be able to do that, so this is its chance to use its muscle and the framework agreement set up with the MOD to move the production of ammunition to an American army plant in Tennessee.

The plant now has contracts worth $88 million for the production of the RDX and HMX explosives. That is strange, because those explosives are produced in this country. The different types produced at the American plant are now being used in British warheads. A further $75 million contract will give Royal Ordnance the right to a 25-year exclusive contract to bring in production from around the world.

Because we have signed the Ottawa convention, we have signed away our right to produce land mines. That is fine, but the American plant makes land mines. Does the Under-Secretary think that there is a contradiction if we buy ammunition, stores and facilities from a place that produces land mines? Are we not in breach of the convention that we signed? I ask the question, because I do not know the answer. I saw the effect of laying land mines when I sat by the Weser looking for the red peril.

I was a member of the Territorial Army. but now look at it from another point of view. It provides, and still provides, a battlefield replacement ability. It has been involved in the Gulf, Bosnia and most other places where the Regular Army has been. It will continue to do that. However, it has always faced the problem of obtaining the same equipment, training and hack-up as the Regular Army. That creates problems, because the Territorial Army does not have the time to train soldiers unless there is a long run-in to an emergency. Emergencies tend to happen quickly these days and there is little or no preparation time to get our territorial soldiers up to a standard that allows them to replace units or participate as battlefield replacements. The same goes for replacements for engineers, doctors, nurses and any specialist. The majority of TA specialists look after 155 mm guns and many other things that the Army does not keep a corps to do. If we lose that capacity because people are not trained, that procurement system will disappear. We should encourage members of the TA to continue to perform that role.

I have just finished a book by Peter Hennessey, an academic, on the role of Whitehall from world war two to the end of the cold war. He argued eloquently that it is not possible to be over-prepared for civil defence. I suspect that we did not get it right in this country, but we never had to find out. We need to examine the future of home security much more closely. That means knowing about procurement and security and understanding where, say, ammunition comes from because we have only one chance to get it right.

I urge the Minister to defend the factory at Puriton. It is important to have a secure supply of ammunition. We must learn the lessons from the Gulf war when the Belgians would not give us ammunition. Those problems have not gone away. It only takes America to disapprove once and we will not get what we need to do the job of defending this nation.

9.16 pm

Mr. Kevan Jones (North Durham)

I declare my membership of the GMB trade union and draw the attention of the House to my entry in the Register of Members' Interests on the support that it gives to my constituency party. Some of its members work in the defence industry.

I am proud of this country's defence industry and the number of jobs that it creates, not just in the north-east of England, but throughout the country. As my hon. Friend the Member for Alyn and Deeside (Mark Tami) said, those are high-quality jobs. The defence industry helps to ensure that technology is at the forefront of developments.

Like my hon. Friends the Members for Alyn and Deeside and for Dunfermline, West (Rachel Squire), I welcome last week's increase in defence expenditure. It will have a major impact on procurement by the Ministry of Defence. That is important to our defence industry, which is right to be proud of its exports record. We need to defend those exports because they are key to a vibrant and important sector.

Ministry of Defence procurement is crucial because it provides the bedrock business for a range of defence manufacturers. Defence manufacturing now operates across nations, as the Minister said. There are few sole suppliers from one country. Manufacturers work together to put sophisticated programmes in place which are important to us and our European allies. However, it is important to defend UK jobs, and the Ministry of Defence should ensure that jobs are retained within the UK defence industry. It is a matter not just of the number of jobs, but of the skills that they require. Skills cannot be turned on and off like a tap they need to be nurtured over a long time. The defence industry needs a continuous supply of work so that skills can be retained and nurtured.

On the procurement of warships, the Minister said that competition is a key part of defence procurement, including naval procurement, which I accept. It is also about getting value for money.

I refer to comments that Lord Bach made to the Scottish Affairs Committee during its investigation of employment in the shipbuilding industry on the Clyde. He stated: All fighting vessels are built in the UK. He continued:

it remains the policy of this Government that all warship construction will continue to be carried out in this country. Therefore it gives me no pleasure to raise the issue of the advanced landing ship logistics at Swan Hunter, where a large amount of work that could have been carried out in this country has been subcontracted to Holland. Again, in evidence to the Scottish Affairs Committee, an MSF full-time official said that he believed that up to 40 per cent. of the work on the ALSLs has been contracted abroad to Holland.

I raised the issue last November in a parliamentary question for written answer after defence contractors in the north-east told me about their difficulties in getting on tender lists for Swan Hunter. The Scottish Affairs Committee report states:

Lord Bach admitted that whilst there was no intention to contravene the Government's military shipbuilding policy, in this case the overseas fabrication of the hulls did raise questions about compliance. Following an agreement with Swan Hunter (Tyneside), a clause has now been placed in the ALSL contract which requires MoD sanction before fabrication or assembly can be sub-contracted overseas. I would like to know why that was allowed to happen, given that there was a clear concern in the north-east, which I raised with the Ministry of Defence in November. Shipyard workers in the north-east who could have done that work to a high specification are very angry that they have not been given the opportunity to do so.

Mr. John Burnett (Torridge and West Devon)

The hon. Gentleman makes a brave and compelling point. Does he agree that the issue is not only subcontracting to companies in Holland, but the fact that those companies further "sub-subcontract" to countries such as Ukraine, which have no regulations on health and safety in the workplace and which, unlike our shipyards, have significant subsidies available to them?

Mr. Jones

I am not aware of such arrangements, but I view them with great concern. It is clear that when Mr. Yap Kroese tendered for the contract in the first place, he fully intended to subcontract the work to Holland. I feel that we in the north-east have been let down. I, and many others, have argued for procurement of warships in the north-east, but I am sorry to say that people will be left with a bitter taste in their mouths if every time we successfully persuade the Government to procure contracts for Swan Hunter shipbuilders, that work is subcontracted to Holland. The MOD and the north-east shipbuilding community must make a clear commitment to ensure that work that can be carried out in the north-east is carried out there. I understand that time is limited, so I shall finish. I look forward to the Minister's response.

9.23 am

Jim Knight (South Dorset)

I gather that I have only a brief period in which to speak, so I shall keep my remarks exceptionally short. I shall pass over my strong support for the increase in defence spending that was announced on Monday and go straight to key issues for my constituency.

As I mentioned in an intervention, those issues include the consolidation of the Defence Science and Technology Laboratory in Hampshire, with a move away from its current site in Windfrith, where sea-systems expertise sits alongside a great concentration of expertise in the commercial sector. Although I appreciate that DSTL wants to keep some distance between itself and the other half of what used to be the Defence Evaluation and Research Agency, the discrete nature of sea-systems expertise means that the DSTL's continued presence in Windfrith would be a gain for the country as a whole.

While I am talking about my constituency interests, I should say how enthusiastic people in Dorset are about the idea that when the next set of Type 45s are named, HMS Dorsetshire might be revived, following its excellent record over many incarnations. Last time we lost HMS Dorsetshire, the public in Dorset raised the money for its replacement, but unfortunately it was not built and the money had to be returned.

The other point that I want to make relates to international partnerships in procurement. My hon. Friend the Member for Alyn and Deeside (Mark Tami) mentioned the A400M, and I have been privileged to visit the factory in Filton to discuss its importance with the trade union and management sides. I am therefore less than impressed by the fact that our colleagues in the Bundestag are delaying the procurement of the A400M and the Meteor, and I should be interested to learn what efforts the Government are making to put pressure on the German Parliament to make that decision. I agree with my hon. Friend the Member for Dunfermline, West (Rachel Squire) that we should not rely solely on the United States as regards the future of our defence industry. It is very important that we have a successful European industry. so we have to make such projects work. We must also encourage our partners in Europe to give us the same access to their markets as we allow them to ours. I am sure that Ministers will do that.

I support a strong defence industry with properly regulated exports. I look forward to seeing the recommendations of the Quadripartite Committee in its report to be published tomorrow, but I am confident that a strong defence industry is getting stronger thanks to the policies of the Government.

9.26 pm

Mr. James Gray (North Wiltshire)

The hon. Member for South Dorset (Jim Knight) is very understanding towards one or two hon. Members who squeezed his time. I agree that it would be nice for an HMS Dorsetshire to be reinvented—and an HMS Wiltshire come to that. Perhaps he and I will live to see it. That said, Wiltshire is one of the most inland counties, so HMS Wiltshire is less likely than HMS Dorsetshire.

We all welcome this annual opportunity to examine in detail Defence Ministers' brave efforts to demonstrate that they have won the battle with their colleagues at the Treasury and their brazen claims that they are ready to supply, in plentiful quantity, the materiel necessary to carry out their ever more grandiose military ambitions. Unfortunately, they have once again singularly failed to persuade us that they are ready and able to do so. It is true that this week the Chancellor of the Exchequer sought to correct the impression that defence is the lowest of his personal priorities. In six years of speeches—one can check it on the internet—he has rarely mentioned the word "defence", and he gave it no priority until now. He says that he has made a generous contribution towards defence, and we welcome that gesture.

As the Chancellor's neighbour, the hon. Member for Dunfermline, West (Rachel Squire), rightly and memorably said, however, figures are subject to political bias. We fear that in this case the figures may well be biased against defence, and we will examine them very carefully indeed. It has been said that only one person understands defence budgets, and he died some years ago, and it will take us some time to determine exactly what they mean. In his contribution, the hon. Member for Yeovil (Mr. Laws) amply demonstrated that he does not know what they mean at all. We will look carefully at the figures and examine the bold claims that the Chancellor made, which were echoed by many hon. Members this evening. As is so often the case with the Chancellor of the Exchequer, I am afraid that the outcome will prove to be a great deal less beneficial to defence than he would have us believe.

The Minister may like to clarify an important point that was touched on earlier—namely, that as of April 2003 he will have to include in the budgets figures of £6 billion for depreciation and of £4 billion for carrying costs. He must tell us which Ministry of Defence budget that will come from and how it was taken account of in the comprehensive spending review. I understand from several people who know about such matters that that detail has not been thought through at all carefully. I challenge the Minister to explain, in very simple terms so that even I can understand them, exactly how depreciation and carrying costs were taken account of in the CSR. Defence accounting is a murky area, but we can be pretty certain that the Chancellor has been less generous than he would have us believe. The reality remains that the procurement bow wave is bearing down on us even more threateningly, and the CSR has done nothing whatsoever to reassure us about that.

The hon. Member for Vale of Glamorgan (Mr. Smith) made the bold assertion that Labour is now the party of defence. I fear he may have undermined that by his absurd and ignorant attack on the Territorial Army. I suspect that the TA will not accept his assertion; we shall ensure that Territorial Army volunteer reserves throughout the nation are aware of his precise words.

Mr. John Smith

Will the hon. Gentleman give way?

Mr. Gray

I do not have time. The hon. Gentleman had 40 minutes, which meant that several Labour Members could not contribute to the debate. I shall not therefore take an intervention from him.

A well-known company of Scottish lawyers, McLay, Murray and Spens, who have offices down here, are known colloquially in Scotland as "Delay, Worry and Expense". I fear that that epithet characterises the Government's defence procurement programmes. That is shown in a variety of current programmes for the Navy, the Air Force and the Army.

Let me begin with some of the RAF procurement programmes. Several anxieties were expressed—for example, by my hon. Friend the Member for New Forest, West (Mr. Swayne). We are disappointed by the delay in Eurofighter and concerned that the Government cannot manage more than a general commitment to it. As the hon. Member for Yeovil pointed out, we need to be sure about the third tranche of Eurofighter if we are to maintain our reputation as worthwhile designers and a leading force in fighter aircraft development. The third tranche will be different from the first tranche, and we need to be sure of the former.

As my hon. Friend the Member for Aldershot (Mr. Howarth) pointed out, the other great European project, the A400M, may be in difficulties if German constitutional law means that Germany cannot sign up to the 73 aircraft at least until after the general election. How long will Ministers stick with the deal? Seven thousand jobs depend on it. Many are in the west of England, and my constituency is affected.

Perhaps more importantly, what thought have the Government given to an alternative stratagem if the A400M fails? Have they considered, for example, a C-17 with British engines? It would be interesting to know about discussions that Ministers have held with manufacturers about an alternative to the A400M. My constituents in Lyneham need to know urgently where the A400M or its replacement will be based, and what constitutes the future for Lyneham. Two thousand five hundred military jobs, 750 civilian jobs and £75 million depend on it. We look forward to the Minister's early response to the current studies.

The future of strategic air tankers is also the subject of delay, worry and expense. When will the Minister announce which of the two remaining tenderers will be given the contract? Will he make a commitment about the in-service date? We are excellent at air-to-air refuelling, as the Afghanistan experience showed. We need to know that we can continue to offer that capability to the world. We cannot afford further slippage.

Delay, worry and expense apply to the Royal Navy in the context of procurement. It would be useful if the Minister scotched the rumours that the operational fleet is to be cut further. He could begin by allaying our fears about Astute class submarines. In a reply on 9 July to my hon. Friend the Member for North Essex (Mr. Jenkin), the Under-Secretary said that HMS Astute was not scheduled until late 2006 instead of the original date of 2005, and that that would be followed by extensive work-ups.

When the programme was set out in 2001, the MOD said that the Astute class would be built in 69 months. Does the Under-Secretary's reply mean that the target will not be achieved for the other boats? If so, does the Minister accept that Artful and Ambush are likely to be similarly delayed? Will he therefore reconsider the decommissioning date for S and T class boats, which they replace? If not, we will face a cut in our submarine fleet, from 12 to six boats. That is unacceptable, and would prove devastating for our defence capabilities.

My hon. Friends the Members for Rayleigh (Mr. Francois) and for New Forest, West, and the right hon. Member for Walsall, South (Mr. George), said that there was genuine anxiety about the Type 45 programme, which is showing signs of slippage. Will the Minister give us an absolute assurance that there will be no further slippage in the programme, and that the six vessels will meet the in-service date of 2007? If not, will he accept that he leaves the fleet bare of air defence for an unreasonable time because of the Government's demonstrably foolish decision to withdraw the Sea Harriers prematurely—a decision to which so many hon. Members referred?

Incidentally, we hear that an American committee is to visit the UK shortly to assess what help we are to give the Americans with regard to ballistic missile defence. They view the Type 45 as a possibly suitable platform for our contribution to BMD. I know that that would not be popular on the Government Benches, but none the less it sounds as if it is being talked about.

I asked the Minister about the matter in a written question, and the reply that he gave was quite interesting: The type 45 destroyer has been designed with substantial weight and space margins to enable its capability to be upgraded through life."—[Official Report. 16 July 2002; Vol. 389, c. 158W.] I asked whether the Government were thinking about it for BMD, and he signally refused to say that they were not doing so. I therefore ask the Minister today to tell us if he is discussing with his American counterparts whether Type 45s might be used for BMD.

Before the Minister says that no decisions have been taken on BMD, I draw his attention to an interesting brochure that I received this week for a conference about ballistic missile defence. The first speaker is to be none other than Group Captain Adrian Parrish, the ballistic missile defence capability working party chairman in the MOD. He is to be helped by a Mr. Philip Price, the BMD capability working group secretary in the MOD. So there is plainly a substantial part of the Department working on BMD. We need to know whether the Type 45s will be used for that defence programme.

A further programme that it seems is to be delayed—possibly damagingly—is the one for the landing platform docks. I have even heard rumours—I am sure that they are incorrect—that Fearless may have to be brought back into service in order to make up for the delay. Will the Minister take this opportunity to reassure us about the future of Fearless?

Dr. Moonie

Scrap.

Mr. Gray

I think that the Minister will find that he is quite incorrect in saying that. I have it on very good authority that the Brazilians have been crawling all over the ship for some time with a view to buying it for the Brazilian fleet. It is widely rumoured that the Brazilians do not need any LPDs and that the nation that does is Argentina. Will the Minister make plain today that he will put into any contract with the Brazilians a clause that states that the ship may under no circumstances, and at no time ever, be sold to Argentina? It would be an insult to the memory of the 225 service men who died in the Falklands campaign if Fearless were to land up in Argentina. We demand of the Minister an absolute assurance that he will take steps to ensure that that does not happen.

We could go on endlessly about the threats to our naval capabilities, but I would rather rest my case on a quotation from none other than Warship World, an outstanding magazine which most Members present will know well. This week's editorial states that the Royal Navy

stands poised on the brink of fundamental change. which if embraced, we feel will be the beginning of the end of the RN—as we all know it…How many old salts turned in their graves to see Her Majesty sail in a Minehunter from Whale Island to the Old Vernon site (now a shopping centre) reviewing the handful of available ships? Does anyone really believe that no Fleet Review was planned as HM 'didn't want a fuss'. Let's be clear about it—there were insufficient ships to review…The writing is on the wall. The equation of commitments, assets, cash and manpower is always hard to juggle but it must be addressed if this island nation is to continue to operate an independent navy. It has been interesting to hear several Members trying in this debate to justify the withdrawal of Sea Harriers by saying that we will never go to war on our own. That argument could be used for any capability or any procurement programme. One could say, "Don't worry, chaps. We'll rely on the Americans." We on the Opposition Benches believe that the Falklands and a number of other wars demonstrate that we need to be ready and able to go to war if necessary. The withdrawal of the Sea Harriers makes it extraordinarily difficult to be so. Warship World seems to be saying that unless this Government get their procurement act in order, we will not have a Royal Navy as we have come to know it and love it.

The same problems of delay, worry and expense apply to the Army. We have heard a lot about the SA80 that is disturbing. Will the Minister clarify the tests conducted recently in Bagram on other rifles, and say whether, if they show that they are better, he will undertake to scrap the SA80 and replace it with something else? He is right to say that we must not allow our rhetoric to undermine the reliability of the main weapon that our soldiers use.

Mr. Ingram

You have done a good job of that.

Mr. Gray

The Secretary of State is quite wrong. I have always been a great supporter of the SA80; I have used it quite extensively. None the less, if his Government choose to take us into Iraq—it appears that they are talking about 20,000 or 25,000 soldiers—we need to be certain that the tests conducted in Bagram have demonstrated that the SA80 is a serviceable and useful weapon. The Minister must come to the Dispatch Box this evening and tell us what he is going to do about the outcome of that.

My hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger) highlighted some very worrying issues relating to the rundown of the Royal Ordnance factories, and to the problem with the accounting systems which means that we cannot now keep as large ammunition stocks as we used to. If we are to face any kind of major conflict—I have mentioned Iraq, but there could he all sorts of others—we ought, at the very least, to have a decent quantity of usable ammunition in this country, and to be able to keep some kind of capability to manufacture the stuff here. We have handed that capability over predominantly to Belgium and South Africa, and that is a disgrace. What are the Government going to do to ensure that Royal Ordnance is able to continue to manufacture ammunition, against the eventuality that we may go to war against somebody with whom Belgium and South Africa do not agree that we should go to war? It is important that we should be able to say to our people, "You can have the ammunition that you need."

Delay, worry and expense seem to typify the Government's occasionally haphazard and sometimes incompetent approach to some aspects of the procurement of the matériel that our service men need to carry out the ever more demanding tasks being asked of them. Like the hon. Member for Dunfermline, West, I pay tribute to the superb engineering skills that we have in this country, and to the great ability that we have to produce the matériel that we need. I suspect, however, that the Government are not taking the best advantage of those skills and abilities, or doing what they could be doing to promote them or to ensure that we keep them. Indeed, in some areas—we have mentioned ammunition—they are allowing them to be run down.

Despite the Government's brave words about the comprehensive spending review, the fact remains that they are not spending enough money to avoid the awful procurement bow wave that is approaching us. This week's announcement, although welcome, will do little to address the problem if, as is widely predicted, the Prime Minister moves inexorably, despite his own party, towards some kind of conflict with Iraq. The truth is that it is the Treasury that is running the defence of the realm, not Ministry of Defence Ministers. They are not even clever enough to make a decent fist of the inadequate resources with which they are provided. That is not a sensible way of running the nation. There is an eerie echo of the 1930s here, in that the Government are ostrich-like in their determination to do little about our defence capabilities, despite the ever-gathering clouds of war. Let us hope that that is where the similarities end.

9.42 pm

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

Just before the start of this debate, the hon. Member for North Wiltshire (Mr. Gray) accused my right hon. Friend the Secretary of State, presumably unintentionally, of having misled the House. I would like to set the record straight. There was no contradiction between the two answers that my right hon. Friend gave. The first referred to his support for company proposals to supply new warships to Thailand. The second quite rightly stated that the Government of Thailand had expressed no formal interest in the purchase of ex-Royal Navy warships. Those two answers, while difficult to understand for a bear of very small brain, are not incompatible at all.

I shall try, in the time remaining to me, to get through as many of the points that have been raised tonight, some of which are, I have to say, rather old chestnuts. Let me start with the budget. I accept that budget figures are difficult for people to understand. I find them difficult to understand myself, but I was helped by spending two and a half years running the finances of the House of Commons, when I was Chairman of the Finance and Services Committee, during which time I learned to read a budget.

The spokesmen for the Liberals and for the Conservatives both made the mistake of comparing outturn figures with budget figures; the two are quite different. They are different in defence—as opposed to virtually any other Department—for one special reason, namely the operational requirements that the Ministry of Defence has, over and above the fixed costs that we have to bear anyway in terms of paying our people their normal income.

Operational needs are paid for out of the contingency fund, so the outturn figure rightly indicates what we have spent during the year. It does not express what our budget was. For example, last year, something over £1 billion was added into our budget figure. I cannot remember the exact figure, but if any hon. Members wish to know it, I would be happy to write to them. That figure must be stripped out before comparing last year's budget with a future budget. I am not trying to make an "I'm clever and you're dumb" point; indeed, I did not understand the matter myself until it was properly explained to me. However, the fact is that the money in question is real money that will be coming into the budget over the next three years.

I should point out in passing that it is also important to recognise that, because so much of our budget is spent on capital requirement—on procurement, the subject of today's debate—the sum is a real sum that is available each year. Obviously, if something is bought in one year, it has been paid for; it is not necessary to pay for it in the second year as well.

Mr. Laws

I accept entirely the point that the Under-Secretary makes. He was correct in saying that the 2001–02 figure was inflated by a transfer from the reserve. However, he seemed also to accept the simple statistical point that I was making, and which emphasises how tight his budget is: it remains true that, in real terms, his Department's planned spending figures for the whole of the period of the spending review are lower than his Department's spending for last year. Is that correct?

Dr. Moonie

The planned total does not include unforseen items. [Interruption.] Of course it does not. If one strips out the £1 billion, a fair comparison can be made.

It is an old trick on the part of people who think that they know a wee bit about statistics to use percentage terms when it suits them, instead of real figures. Speaking as a statistician of some merit, I should point out that using percentage figures to argue that the Department of Trade and Industry is getting more money than us is of course incorrect, given that its relatively small budget is some 5 per cent. of ours. I have not got the figures in front of me, but from memory the DTI's real increase is about £175 million a year. Our real increase, however, is £725 million for the first year. In real terms, that is four times as much, and of course, it buys four times as much.

Mr. Laws

Will the Under-Secretary give way?

Dr. Moonie

No, sorry, there is no time; I have given the hon. Gentleman his chance. We will see how much that money can buy as we develop our spending plans over the next few years. In his statement tomorrow, my right hon. Friend the Secretary of State may well give some indication of the direction in which we will go.

I shall try to dispose of a couple of old chestnuts, the first of which concerns the SA80. Let us be clear: every rifle misfires at one time or another, and in difficult conditions all rifles misfire more often than they would otherwise. I happily admit that the SA80 took a long time to introduce. There is no doubt that it is a very high-tech, excellent rifle. Any decent marksman will say that they would as soon use the SA80 as any other rifle in service, because they know what the result will be when they fire it. Those who are not interested in achieving a specific effect can use any rifle, no matter how poor its tolerances, to spray bullets all over the place. However, that is not what we use the SA80 for.

As anybody who has served in our armed forces knows only too well, the SA80 is an extremely accurate rifle that is reliable in all conditions. The modifications were tested in Kuwait, which has very similar—if not identical—conditions of heat and dust as those in Afghanistan. The rifle performed admirably under those conditions, which is why we have such difficulty in coming to terms with the fact that it failed to work in Afghanistan. For that reason, I will not make a premature announcement about the findings; we must wait until we have them at our disposal, and until a full and proper examination has taken place. We want to get to the bottom of the matter—after all, we have spent extra money on the SA80. We have what appears to be an excellent weapon at our disposal, and we hope that that will continue to be the case. However, I cannot make any predictions as to its future. Let us wait and see.

Mr. Gerald Howarth

Will the Under-Secretary give way?

Dr. Moonie

No, I really do not have time to give way.

The question of the Sea Harrier comes up time and again, so let me deal with it briefly. We must remember that the risk involved in upgrading the Sea Harrier is high, by which I mean that the risk of not being able to upgrade it is high. We must remember the need, under the strategic defence review, to retain an offensive capability. Nowadays, carriers are used for projecting force. We must also remember that every spending decision involves an opportunity cost: if the money is spent on one thing, it cannot be spent on another. We must further consider the very wide range of threats to which a carrier and any other surface vessel is subjected, only one of which is air attack. As has been pointed out, the Sea Harrier is of absolutely no use against sea-skimming missiles, which are the main threat to a ship. Of course, the Phalanx system with which carriers are equipped is specifically designed to allow for that threat.

Mr. Howarth

Will the Under-Secretary give way?

Dr. Moonie

I am afraid that I have no time to do so—I am trying to cover all the points.

We are concentrating on force projections and the advice from the services has been that, on balance, we should phase out the Sea Harrier. We must remember that the choice is not between upgrading the Sea Harrier successfully or getting rid of it. The chances are that any upgrade would fail. Not only would we then have to phase out the Sea Harrier anyway, but we would also have wasted money on the upgrade. The services are right in their advice that, on balance, it was better to carry the small additional risk of operating without the Sea Harrier for whatever period that was necessary. That was their advice: they are the professionals. I am more inclined to take their advice than that of Opposition Members or, for that matter, of my hon. Friends.

Several hon. Members

rose—

Dr. Moonie

I really cannot give way. I do not have time. [Interruption.] That is a silly thing to say.

Let us dispose of the argument about the cannon once and for all. The minimal operational utility of the Eurofighter gun is outweighed by its support, fatigue and training cost implications, especially bearing in mind the historical pattern of operations over the last decade and the improved capability of the advanced short-range air-to-air missile with which the aircraft will be armed. There is no need for a cannon. The ASRAAM will perform adequately in close combat.

On the issue of sonar, it is true that in 2001 the PAC questioned the chief of defence procurement and the deputy Chief of the Defence Staff about the logic of sending the first Type 45 to sea without a sonar, as that would limit the deployability of ships. At that hearing, they stated that it had already been decided shortly before that the sonar would be fitted on build to all Type 45s. The prime contractor announced on 18 January this year that it had selected Ultra UK as the preferred supplier of the medium frequency sonar. Ultra will build the sonar and take full responsibility for integrating it on to Type 45s. The contract has been let and the sonar will be fitted to the ships.

The issue of Swan Hunter was raised on a couple of occasions. Our policy that warship building should be conducted in the UK remains in place. It follows that we would have preferred Swan Hunter not to subcontract the build of the bow sections abroad, but we should put that into context. The work constitutes some 4.5 per cent. by weight of the hull. We have now incorporated a clause into the ALSL contract that prohibits the company from awarding subcontracts for fabrication or assembly work on the hulls without the prior consent of the MOD. That clause will also be incorporated into all future shipbuilding contracts. We would allow fabrication or assembly work on hulls to be subcontracted abroad only in exceptional circumstances—for example, if no domestic supplier were physically able to carry out the work.

The Defence Science and Technology Laboratory rationalisation is an important issue, and the organisation forms part of my departmental responsibilities. It is an MOD-owned agency whose purpose is to provide world-class scientific and technical advice to us. I have accepted the arguments from management at DSTL that considerable benefits will accrue, both in the quality of research done and in cost—that is important, because if we spend money on maintaining more sites we have less to spend on research. If we concentrate on three main sites, clear benefits will be felt from bringing our scientists together, in terms of creating new synergies, and from operating efficiency. The proposals have been the subject of consultation with staff at all stages and are now under consideration by the trade unions. We believe that the proposals will ensure the long-term future of DSTL and the best value for defence.

My right hon. Friend the Member for Walsall, South (Mr. George) suggested that the Conservatives were following Frank Allaun's defence policy, and I found that amusing. To be honest, on probably every occasion that they cut the defence budget a Labour Member could be found to say that it had not been cut enough, so we should not go too far down that road. However, my hon. Friend the Member for Vale of Glamorgan (Mr. Smith) made the point that some of the Tory cuts might have been made more cleverly.

Hon. Members mentioned delays with Astute. We are deeply concerned about those. We have continually moved from one pattern of submarine design to another, and design problems have caused these delays. We will do all that we can to return the programme to schedule, but it is only fair to say at this stage that Astute's entry into service may well take place later than the time indicated. We have left the manufacturers in no doubt about our concern, and I know that they are working hard to remedy some of the damage. Presumably if there is a gap in capability, we will have to see what can be kept going. It is difficult to envisage keeping the S class of submarines going much beyond their present lifetime, but there is capacity in the T class.

Mr. Francois

Will the Minister give way?

Dr. Moonie

Very briefly.

Mr. Francois

The Minister said that if there was a gap in capability, we would keep capability running. If that applies to submarines, why does it not apply to Sea Harriers?

Dr. Moonie

Again, I suppose that the reason is the balance of risk, and we must consider the balance of risk when making decisions such as this. We three Ministers—four if I include Lord Bach—are not perverse people who sit down and say "Just how are we going to cock up the armed forces today?". I apologise for the language, Mr. Deputy Speaker. In fact, we act on the advice of some very senior people, and I have yet to leave a meeting with the feeling that that advice has been wrong. We must not assume that upgrades will succeed; they may fail, and that is the great problem with the Sea Harrier. We might end up spending a great deal of extra money without having an aircraft available.

My hon. Friend the Member for Dunfermline, West (Rachel Squire) rightly pointed out that we need equipment that works. I assure her that any defence Minister would heartily agree. She gave the example of Bowman. which, as everyone knows, has a long and sorry history but now appears to be on target—a very challenging target. I acknowledge that that was welcomed by the hon. Member for Aldershot (Mr. Howarth). We have introduced personal role radios. We have shown that we can be flexible and make very little of procurement of this kind, provided that we are sensible and seek upgrades in the future. That will enable all capability requirements to be met very satisfactorily.

Like my hon. Friend, I pay tribute to the first-class facilities at Rosyth. Let me say in passing that a branch of the Defence Diversification Agency is located there, and is paying off very well in terms of interaction with local companies, technology exchange being its function.

I was interested by what my hon. Friend said about the Babcock facilities in Australia and New Zealand for the repair of HMS Nottingham. We have not yet reached a decision, but I am sure that we are keeping Babcock in mind. I noted her concern about the future of the yard. Let me stress that it has proved itself to be extremely competitive, which should stand it in good stead when it is competing for work.

My hon. Friend drew attention to the particular difficulties of making quick decisions about the cancelling of equipment that does not work and will not work. Long lead times apply to much of the equipment that we need. When a lot of capital has been invested and a project has been worked on for a long time, cancellation is very difficult to stop. I know that, because I had to cancel projects myself when I worked in the pharmaceutical industry.

I do not need to spend much time on the A400M. As Members know, the problem is having to wait for a signature from the Germans, but we are convinced that it will come and that the programme will be finished on time. The German election is in September, and I do not think it will be delayed much beyond that.

I think the points made about St. Athan by my hon. Friend the Member for Vale of Glamorgan (Mr. Smith) were answered by my right hon. Friend the Minister of State. If they were not, I shall be happy to deal with them.

I have answered questions about Royal Ordnance in some detail in other Adjournment debates. We cannot discuss such matters as the level of stocks that we keep, because that is an operational matter, but I can say that we keep adequate levels to maintain any foreseeable operation. We are convinced that in different circumstances British Aerospace would be able to resupply.

There is also the matter of developing insensitive munitions. New products are more difficult to introduce, but I pay tribute to the concern—

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