Future Aircraft Carrier

HC Deb 30 January 2003 vol 398 cc1026-41 1.24 pm

The Secretary of State for Defence (Mr. Geoffrey Hoon)

With permission, Mr. Speaker, I should like to make a statement on the future aircraft carrier programme.

The 1998 strategic defence review set out the need to improve the capabilities of our armed forces to meet the challenges of a changing strategic environment. The new chapter to the strategic defence review, which builds on our operational experience since 1998 and takes account of events that followed the 11 September attacks, has reinforced those requirements.

Our maritime forces need the ability to project power still further afield. We have therefore set out our most extensive shipbuilding programme for more than a generation. In the next few years, six Type 45 air defence destroyers, six new amphibious warfare vessels and other essential support ships will enter operational service.

Two new, larger, more versatile aircraft carriers will be central to those new maritime capabilities. They will have a vital role in a wide range of military tasks, from peace support operations to high-intensity war fighting. They will offer a coercive presence that could contribute to conflict prevention and provide a flexible and rapidly deployable base when our forces need to operate without host nation support.

As I announced last September, those ships will carry the world's most advanced stealthy and supersonic jump jets—the United States-United Kingdom project for the joint strike fighter. At the same time, I announced that we had chosen an adaptable design for the carriers, which will allow us to make best use of the ships over their projected life of more than 50 years. Both decisions show the Government's determination to equip our armed forces with the capabilities that they need.

The programme is massive and technically challenging, with the two ships alone costing around £3 billion. It will provide employment for up to 10,000 people throughout the United Kingdom. The warships will be the largest and most powerful vessels ever produced for the Royal Navy. At around 60,000 tonnes, they are approximately three times the size of our current carriers. They will rank alongside the most formidable and complex weapons systems deployed by any country anywhere in the world.

The competition for the prime contract has been closely run between the two bidders, BAE Systems and Thales UK. Both are to be congratulated on their proposals to deliver the key new capability to our armed forces. Both are major defence suppliers to the Ministry of Defence. They each make an important contribution to the United Kingdom's economy, providing investment and employment in manufacturing and key science and technology areas. Thales UK employs around 12,000 people throughout the United Kingdom, and BAE Systems, including through its joint ventures, employs approximately 51,000.

A competition of such complexity and scale necessarily involves intensive scrutiny of technical specifications, value for money and wider industrial benefits. We have used a continuous assessment process to evaluate both companies' work and performance. We have assessed their ability to keep to their project schedules and to establish an appropriate relationship with the Ministry of Defence team. That pioneering process has provided us with a wealth of information to help our decision making.

Two key findings emerge. First, both BAE Systems and Thales UK have performed to a very high standard. There is no doubt that competition has led to major benefits and sharpened the performance of both companies. The competition process has produced impressive designs.

Secondly, if the carriers are to enter service on time, both companies would need to augment substantially their available design resources to achieve the necessary maturity before manufacturing can begin.

Our detailed analysis shows that each company has significant strengths. BAE Systems has displayed a sound understanding of the project's complexities in its project management and prime contracting, and has developed a good relationship with all the key shipyards. It also demonstrated the skills that are necessary to integrate the different systems into an effective warship. Thales UK has provided an innovative design that is flexible enough to meet our needs. It has strengths in a number of key areas, including in weapon and defence systems and the interface between the ship, aircraft and flight deck operations.

We have therefore decided that, to deliver value for money and provide the best capability, it is important and, indeed, sensible to exploit all those strengths. We judge that a partnership appears to offer the best means of drawing in the necessary resources and expertise to deliver a programme of such magnitude. We envisage that this alliance will be led by BAE Systems as the preferred prime contractor, with responsibility for project and shipbuilding management. Thales UK will assume a major role as the key supplier of the whole ship design. We foresee that the Ministry of Defence will also take up a formal role in the alliance for those parts of the programme for which we are rightly responsible. That would involve the management of appropriate risk and contingencies and the provision of assets such as suitably trained manpower and the JSF aircraft.

This innovative approach builds on the principles of smart acquisition and the defence industrial policy that was published last October. It will enable us to make the most of the resources and strengths of both companies and the skills and expertise of the Ministry of Defence project team.

Both BAE Systems and Thales UK have indicated their willingness in principle to participate in such an alliance. The approach will be based on proper customer and supplier relationships, working collaboratively to achieve challenging targets. It will be underpinned by a robust contractual arrangement. Risk will be allocated to the party best suited to manage and mitigate that risk and the rewards will be shared so that it is in the interests of all parties for the programme to succeed. Further work will be required with both companies to establish the detailed contractual arrangements.

Subject to reaching a satisfactory outcome to these negotiations, and with subsequent confidence that the alliance is operating effectively during the final part of the assessment phase, we intend to reach the final investment decision in spring 2004. At that stage, we will place the prime contract and permit the alliance to move into the demonstration and manufacture phase, when the ships will actually be built. We remain fully committed to achieving our declared in-service dates for both ships in 2012 and 2015 respectively.

I anticipate that hon. Members will be particularly interested in the shipbuilding element of the carrier programme. We believe at this stage that the best way forward is for the carriers to be built by a combination of four yards: BAE Systems Marine at Govan, Vosper Thornycroft at Portsmouth, Swan Hunter on Tyneside, and Babcock BES at Rosyth. The involvement of other yards has not been ruled out. The precise arrangements will be the subject of discussions between the alliance and the yards, to determine the best value for money and work load capacity. We anticipate that the engines will be provided by Rolls-Royce. It is clear that the benefits for the United Kingdom shipbuilding industry and its related supplier chain across the country are significant. I can assure hon. Members that, despite recent suggestions to the contrary, the vessels will be designed and built in the United Kingdom.

This vast programme of work should create or sustain up to 10,000 jobs right across the country. It offers a significant opportunity not only for the shipbuilding industry, but for many small and medium-sized companies all around the United Kingdom. For example, the Bath-based company British Maritime Technology has played a key role in developing the Thales UK design. Other companies, such as specialist paint suppliers and engineering firms, will also have the opportunity to engage in the programme as it progresses. Ultimately, hundreds of suppliers right across the United Kingdom will be able to participate.

Today's announcement by the Government is good news for our armed forces and good news for the nation's defence. It demonstrates the Government's support for the British manufacturing industry and for British jobs, and I commend it to the House.

Mr. Bernard Jenkin (North Essex)

I thank the Secretary of State for his statement and for giving me a copy in advance, but I have to say to him that this is not so much a decision as a fudge. The addition of two full-sized aircraft carriers to the Royal Navy's fleet, along with the introduction of the new joint strike fighter, will represent a huge increase in Britain's ability to project, sustain and protect military force anywhere in the world. So we welcome any progress towards the launch of the new ships, but we fear that this programme is now beset by uncertainty.

First and not least, there is the vexed issue of money. Can the Secretary of State guarantee that the money for those ships will be available without the need to cut other programmes? The armed forces and the equipment budget are already overstretched. It is clear from the forward defence equipment plans that there is far more on the Government's shopping list than current defence spending levels will support, alongside all of the UK's other defence commitments.

Secondly, the Secretary of State describes his announcement as "innovative", but he is being a little modest. He has not so much announced a decision as the start of a whole new process: the formation of an as yet ill-defined alliance that is entirely unformed and agreed only "in principle". He remains committed to the in-service dates of 2012 and 2015—dates that are long after he is likely to have departed—but if in a year's time his proposed alliance is judged not to be operating successfully, as he put it, where will that leave the Government's programme? The so-called smart procurement policy was meant to avoid the vexed issue of work sharing. This project started out as a clear competition, but has not the Secretary of State bottled out in the past few weeks by unexpectedly deciding to split the work between the two main competitors? Is he not now effectively saying that Thales won the competition, but that British Aerospace is the prime contractor and has to adopt the Thales design?

What is the basis for deciding the split of work, and is it subject to ministerial direction? Will the contract be arbitrated under English or French law, and who will ultimately be responsible for achieving project milestones and holding to budget? Does not this decision artificially to split the contract have very serious implications for the way in which future defence competitions should be conducted? Is it not the truth that the Secretary of State could never have justified awarding the whole project to a French company, given that there is no possibility of the French Government's ever allowing British companies to compete on the same terms in France? Should he not have realised that at the outset, rather than discovering it only now?

We recognise that Thales UK is a major UK investor and employer, and that work placed with it will create British jobs in British factories, but some work will certainly go to France. I merely ask whether the Secretary of State shares the anxiety of many in our defence industries that UK companies simply do not have the same opportunities to buy companies, and to compete in French markets on the same terms. In return for nominating Thales as a "key supplier"—the company is still effectively owned and controlled by the French Government—what is President Chirac giving Britain, except a regular kick in the teeth for the Prime Minister on issues such as agricultural reform, his outrageous invitation to President Mugabe and his determination to split NATO over the issue of Iraq?

Will the Secretary of State now agree that the company to which he periodically refers as "British" Aerospace is in fact a British company? Will there now be an end to the unseemly public criticism of what is Europe's largest defence contractor and one of our biggest industrial employers and export earners, from which he has carelessly wiped millions in stock market value?

This decision raises many questions about the future of defence procurement policy, which the Government will have to address. The final order for those ships is important for British industry and vital for the future of UK defence, but today's announcement by the Government has introduced more risk and more uncertainty—not just for this project but, by implication, for the entire defence equipment programme.

Mr. Hoon

I am sorry that the hon. Member for North Essex (Mr. Jenkin), who speaks on defence matters on the Opposition's behalf, has yet again come to the House with a litany of anti-European—in this case, anti- French—rhetoric. He has a problem, because if he examines the NATO alliance, he will discover that a significant number of European allies are members of NATO, and we work with them regularly. I know that there are many in the Conservative party who would probably like it to revert to its state before the debate on the corn laws, but unfortunately, when the hon. Gentleman talks about projects for the 21st century, his arguments sound distinctly outdated.

The key question that the hon. Gentleman must answer is what would the Conservative party have done differently from the announcement that has just been made. [Interruption.] In all the hon. Gentleman's rhetorical, anti-European flourishes from the Opposition Front Bench, I heard not a shred of a suggestion as to what exactly he would have done differently. [Interruption.] If he says—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. There is far too much chatter from Front Benchers on both sides of the House. We are trying to hear a reply from the Secretary of State.

Mr. Hoon

I am grateful, Mr. Deputy Speaker.

What the hon. Gentleman must say at some stage today—perhaps he will have opportunities other than the one he has just wasted—is whether he would have been prepared to jeopardise this vital programme for our armed forces and the benefits that flow across a range of British industrial expertise, by refusing to take advantage of the strengths of BAE Systems and Thales UK and the various bids that they made. If he is saying that he would choose one bid or the other, he is actually saying that he would rule out of consideration, and exclude from benefit to the UK's armed forces, the considerable expertise that each of those companies would make available. [Interruption.] I can hear mumblings on the Opposition Benches, so obviously in the course of his rambling response, the hon. Gentleman did not make all the points that he wanted to make. I invite him to think carefully about the ways in which such project negotiations are conducted, because if he did so he would see that the proposal set out is very clear, tight and well defined, and is clearly of considerable benefit to United Kingdom manufacturing industry.

Let me comment for the House on just one aspect of the hon. Gentleman's obsessions: the reference to French law. Had he listened carefully, and had he thought for a moment about the benefits to the United Kingdom, he would have recognised, as do many of his hon. Friends, that that was a smear, perpetrated deliberately to arouse the anti-European, anti-French rhetoric that has come to characterise the modern Conservative party. If he does not recognise that that is a disgrace, there are plenty of people on the Benches behind him who do.

Mr. Paul Keetch (Hereford)

I, too, thank the Secretary of State for giving me an advance copy of his statement. The Liberal Democrats believe that the new carriers that the right hon. Gentleman has announced today are essential to the United Kingdom's future expeditionary strategy. I congratulate him, and the Government, on procuring them.

We firmly believe that it is right for the carriers to be built, but we must be careful about the spin on this. It reminds me of Lewis Carroll, whose Dodo said: "Everybody has won, and all must have prizes. We must be sure that the Government can demonstrate that the process has been competitive, not political. In other words, has the alliance turned over the nature of smart procurement?

Will the Secretary of State outline what discussions he has had with his French counterpart about the new French carrier? Does the decision announced today open the possibility of any advantages for the Ministry of Defence in future co-operation and possible future contracts for British companies on that carrier? What discussions has his Department had with the two contractors about the building of a hybrid carrier that could land both conventional carrier aircraft and the STOL—short take-off and landing—aircraft now being suggested? After all, that would ensure that there was proper co-operation with French and American aircraft carriers. Does the decision exclude such a possibility?

Can the Secretary of State confirm—yes or no—that the recommendation from the Defence Procurement Agency was for a single prime contractor? Does not a single contractor represent a single point of control? Who will really run the project? Will it really be BAE Systems? Who will own the rights to the design of the future carrier: BAE or Thales? Can the right hon. Gentleman give a single example of an alliance producing a contract on time and on budget? In short, after a three-year contest, why have the Government decided on such an alliance? If it is such a good idea, why was it not decided on at the start of the contract?

The Liberal Democrats believe that the future carrier programme is essential to our British military future, and we congratulate the Government on fulfilling their obligations under the strategic defence review. I hope that the alliance will work, but it will be for the Secretary of State to demonstrate that that design does not become one of our major overruns.

Mr. Hoon

I am grateful for the hon. Gentleman's support—I think. He asked a number of practical questions, and I shall endeavour to deal with them. Overall, I took his response to be supportive; if subsequent textual analysis reveals that I am wrong, I apologise both to him and to the House.

The great advantage of the approach that we are adopting is that we get the best out of a vigorous competitive process. If there is any doubt in anyone's mind about the nature of the competition, they have only to look at the various press reports about it over the past few months. In that competitive process, real advantages have been brought to bear, in terms both of design expertise and, crucially, of allowing the Ministry of Defence to monitor continuously the process that each of the companies has adopted.

That is unlike what happened in previous competitions, when the first that a Department would see of the competition would be the product at the end, and then it would have to take a decision between two or more finished products. We have been able to monitor the way in which each company has approached the competition, which has had benefits for the companies and, I believe, strong benefits for the country. That is why at this stage we are confident that we shall be able to incorporate the best elements of both companies in the alliance approach, while maintaining an interest on behalf of the Government in how they work together. There are other examples of such co-operation. Type 45 will be built in a co-operative way, and that, too, will involve the best expertise that the United Kingdom can bring to bear.

It is not appropriate for me to comment on advice from officials at this stage, but I assure the hon. Gentleman that at every stage there has been absolute agreement within the Ministry of Defence about the best way forward. That has meant that we can be confident in the recommendations that we are making and the decisions that we are announcing to the House today.

As for the hybrid character of the project, I dealt—last September I think—with the proposal that the carrier will be adaptable. It does not make sense at this stage, either militarily or financially, to develop a carrier capable of taking both types of aircraft, but we are ensuring that the carrier could be converted if necessary, given a further generation of strike aircraft, to accommodate a different type of aircraft. That will guarantee the lifetime utility of the platforms that we propose to build.

Several hon. Members

rose

Mr. Deputy Speaker

Order. We do not have an indefinite amount of time available for further exchanges on the statement, so I appeal to the House for short, single-part questions and crisp answers.

Mr. Bruce George (Walsall, South)

I hope that the Secretary of State will not construe any mild criticism of his decision as xenophobia. I hope that the Defence Committee will soon inquire in more detail into the nature of the decision, but what I as an individual ask for now is some reassurance. The Secretary of State said that BAE Systems would be a prime contractor. Will it have the opportunity to choose systems made by BAE, and not simply be a prime contractor but have to choose all Thales systems?

Does the Secretary of State accept that, as Sir Robert Walmsley said, a carrier is just a box? That is the easy bit. The difficult bit is the systems that go in it and on it—and those are the bits that I want some assurances about. I want to be assured that genuinely British companies will have the opportunity of bidding for and winning the contracts for them.

Finally, echoing the words of the hon. Member for North Essex (Mr. Jenkin), the shadow Defence spokesman, I really hope that this generosity and this alliance will be reciprocated. Otherwise, people will see it in rather more xenophobic terms.

Mr. Hoon

I am grateful to my right hon. Friend for his observations. As he rightly says, it is the weapons systems incorporated in modern fighting ships that are their key characteristic. I assure him that there will be vigorous competition to ensure that not only do we have the best equipment for our armed forces, but the need to promote and protect vital high-tech industries in the United Kingdom is satisfied.

Sir Nicholas Winterton (Macclesfield)

I welcome the procurement decision, but I strongly oppose the decision that the Secretary of State has announced to split the contract. I want to support British industry, and I have done so for all of the 32 years that I have been in this place. The French do not have a very good reputation for building large ships. How many jobs has the Secretary of State sacrificed to the French by splitting the contract, rather than giving the order to BAE Systems, whose proposal 1 have strongly supported all along?

Mr. Hoon

The answer to the second part of the hon. Gentleman's question is that not a single job has been sacrificed to the French. As I emphasised, unless he and some of his hon. Friends are suggesting that Bath is now somehow part of greater France—

Mr. Don Foster (Bath)

No.

Mr. Hoon

The hon. Member for Bath (Mr. Foster) is protesting that that cannot possibly be the case, so the design work was concluded well within the territory of the United Kingdom. That will remain the position. However, I know that the hon. Member for Macclesfield (Sir Nicholas Winterton) is a strong and consistent supporter of UK industry. I am delighted to have his support for this proposal.

Mr. Alan Campbell (Tynemouth)

Those of us with an interest in shipbuilding in the north-east and memories of the closure of the Swan Hunter yard some eight years ago will greet the announcement as excellent news for the region. Does my right hon. Friend agree, now that a Labour Government have created this opportunity for the revival of shipbuilding on Tyneside, that it is up to companies and the work force to make the most of it?

Mr. Hoon

I am grateful to my hon. Friend. I visited Swan Hunter some years ago and recognise the revival that has taken place. Opposition Front-Bench Members may bluster, but the previous Conservative Government did not come to the House once in 18 years to announce the construction of two carriers of this size and type.

Rev. Martin Smyth (Belfast, South)

I regret that the Harland and Wolff yard was not included in the announcement, but may I welcome the inclusion of four British shipyards, along with Thales? They will contribute to the economy of Great Britain and Northern Ireland.

Mr. Hoon

I am grateful for the hon. Member's support. Thales is an important employer in Northern Ireland, where the Ministry of Defence already has a ship under construction. We have played our part in respect of the people there, and want to continue to do so.

Linda Gilroy (Plymouth, Sutton)

In his statement, my right hon. Friend said that the involvement of other yards, besides the four that he named for building, would not be ruled out. Will he give an assurance that the proposals for certain aspects of design, commissioning and through-life support that were part of the Thales bid by Devonport Management Ltd. are not ruled out? Will they still receive full and fair consideration?

Mr. Hoon

As I said, the benefits of this massive programme will spread right across the UK. I do not rule out any contribution that can be made. Obvious benefits will accrue to certain shipyards as a result of my announcement, but there will also be real benefits across the UK, involving many companies situated far from the sea. It is important that we bear that in mind.

Mr. Mark Hoban (Fareham)

What reassurances can the Secretary of State give to Vosper Thornycroft, which employs many people across south-east Hampshire, about the share of the shipbuilding work that it will get as a result of today's announcement?

Mr. Hoon

Clearly, as must be the case in any event, that remains to be negotiated. However, I am sure that the company, its employees and the people living in the immediate area will be delighted that the yard will be one of those responsible for the massive amount of work that will come to the UK. Following so closely on the work being done on Type 45, this is a very important opportunity for a significant UK employer.

Mr. Frank Field (Birkenhead)

Thankfully, more than 1.5 million more people are in work than when the Government were first elected. However, that prosperity has not yet spread to all our shipbuilding constituencies. If the tide of joblessness is to be reversed, it is crucial that my area can win some of the subcontracting work. Will my right hon. Friend give some idea of the number of new subcontracting jobs that will be created by his announcement today?

Mr. Hoon

The overall estimate is that some 10,000 jobs will be created or preserved by the announcement. Clearly, there will be significant opportunities in subcontracting, not least in areas of high expertise such as the one represented by my right hon. Friend. We shall monitor that very carefully as the benefits of these decisions spread throughout the UK economy.

Angus Robertson (Moray)

May I thank the Secretary of State for the advance copy of his statement, and welcome the announcement of domestic procurement? Last year, the Ministry of Defence said that, in procurement terms, there was a shortfall to Scottish taxpayers of £670 million. How will priority be given to sourcing work to the Clyde, Rosyth, Greenock and Nigg, which has an outstanding fabrication tradition?

Mr. Hoon

Given the very considerable benefit that will flow to Scotland as a result of an announcement made by a UK Secretary of State for Defence, perhaps the hon. Gentleman should say whether an independent Scotland under the leadership of the Scottish National party would contribute to the programme—or even whether such a country would want to be defended by these ships. The policy of the hon. Gentleman's party is to take Scotland out of NATO, so I assume that he would abandon any requirement that the ships be used. If so, he should tell the people of Scotland how his party would defend the country in that eventuality.

Tony Worthington (Clydebank and Milngavie)

This is a very welcome announcement for Clydeside. It gives the area's shipbuilding industry the biggest boost that anyone can remember, and we must use the opportunity. However, will my right hon. Friend the Secretary of State clarify one point? He said that he sees the role of the Ministry of Defence as providing assets such as suitably trained manpower. I hope that that is so, as I do not think that either of the contractors realise how much education and training is needed to rejuvenate the industry. We must make sure that the education and training sectors can meet the challenge being set them.

Mr. Hoon

The matter that my hon. Friend raises has been discussed across Government, and a number of Cabinet colleagues are concerned to ensure that it is resolved in the way that my hon. Friend describes. Clearly, with a project of this kind following so closely the Type 45 announcement, the benefits to Scottish shipyards are obvious and palpable. Equally, however, as those benefits come onstream, we must ensure that we have the right sort of trained personnel to take advantage of what is a significant opportunity. I am grateful to my hon. Friend for his support, and I shall look to it again as we deal with the challenging tasks ahead.

Richard Ottaway (Croydon, South)

I welcome the Secretary of State's interim statement, although the crunch statement will come in spring 2004, as I think he said. However, Britain is the world's fourth-largest economy, and it is the nation that built the generation of carriers that included the Eagle, Victorious, Bulwark, Hermes, Invincible, Illustrious and Ark Royal. How have we got ourselves into a situation that means that we have to rely on the expertise of a foreign country to produce the best possible contract? Will the right hon. Gentleman conduct an inquiry into what has gone wrong with our defence industry, to ensure that this embarrassing situation does not arise again?

Mr. Hoon

I shall say this once more, for the hon. Gentleman's benefit. The Bath-based company, British Maritime Technology, played the key role in developing the Thales UK design. It is based in Bath and, as far as I am aware, it employs people from the locality. I am not aware that there is a huge number of people in Bath of French origin or nationality. It would not matter even if there were, as the benefits of that excellent design will still flow to the UK. I am tempted to give the hon. Gentleman a detailed account of the failures of 18 years of Conservative government, when no warship orders on this scale were placed. There were massive cuts in the amount of money spent on defence, and a significant rundown in the equipment available to the UK's armed forces. This Government are having to make good that legacy.

Mr. John Lyons (Strathkelvin and Bearsden)

Any fair-minded hon. Member will welcome my right hon. Friend's statement. His name will be toasted on the Clyde and elsewhere this evening when the very good news gets out. Rolls-Royce's involvement is important and will be welcomed across the nation. I welcome the proposal to involve a project team. Will my right hon. Friend consider speaking to BAE Systems, which has listed 200 redundancies? It would be great if that threat could be removed and everyone could participate in the work.

Mr. Hoon

I am grateful for my hon. Friend's fair-minded support for the project, and for the way in which he has pointed out the wider industrial benefits for Scotland's shipyards, and for companies such as Rolls-Royce that operate in England and Wales as well as Scotland—[HON. MEMBERS: "Northern Ireland."]—and Northern Ireland. The decision will be of real benefit to the United Kingdom and should be welcomed by all Members and by great companies in the UK and their employees.

Mr. Don Foster

I share the Secretary of State's concern that the Conservative tirade against Thales totally ignores the fact that many excellent British businesses were involved in its side of the deal. I thank the right hon. Gentleman for his specific reference to the excellent work of British Maritime Technology, which is based in Bath, and assure him that today's announcement will ensure that the company can go forward with bids to do work in other countries as well as in the UK.

Mr. Hoon

That really is a complete answer to the xenophobic nonsense that we have heard from the Conservative Front Bench. We live in an increasingly integrated global economy, and unless Conservative Front Benchers recognise that, rather than sniping constantly at our partners and allies, they will have little future in the 21st century.

David Cairns (Greenock and Inverclyde)

When I sat through many briefings from both companies, it was clear to me that each had major strengths. My right hon. Friend has outlined in his statement a creative and imaginative solution.

May I make one specific point? In previous programmes on which there have been overruns, there has been a fault line between those who design the ships and the shipyard management. Is my right hon. Friend completely confident that that major part of the programme will be carefully managed so that those who hold the jobs that will undoubtedly come to the Clyde will create best-quality ships that will in turn attract other orders from overseas?

Mr. Hoon

A key strength of the BAE Systems bid was its relationship with the shipyards and understanding of the problems posed once a project moves from design to manufacture. That is a strength of the company, and one that we identified as part of its contribution to the bid.

Mr. Ian Liddell-Grainger (Bridgwater)

The House has a habit of saying, "It's good to buy British.- Can the Secretary of State confirm that the propellant for the 800 tonnes of ammunition that the ships will carry is made by BAE Systems in my constituency, which proposes to move production to America? If buying British is best, will the Secretary of State ensure that the propellant continues to be made in the United Kingdom?

Mr. Hoon

The range of competitive pressures on UK companies clearly leads them to source material from different places. What is important to the UK economy is that they should do so cost-effectively while guaranteeing the supply of equipment—in this case, propellant. I assure the hon. Gentleman that the Ministry of Defence pays close regard to that.

Mr. Ian Davidson (Glasgow, Pollok)

As secretary of the all-party shipbuilding and ship repair group, may I say how much that group welcomes today's announcement? The carrier order is probably the biggest boost to British shipbuilding for many decades, and it is particularly welcome coming, as it does, against a background of siren voices of Conservative Members who said that it would never come to pass.

Can the Secretary of State give us an idea how many carriers he thinks would be ordered by the navy of an independent Scotland? People on Clydeside will want to be clear about that when they realise that the jobs announced today have come while we are part of the Union. As we move towards Scottish elections—I make the point not for partisan reasons, but for the sake of public information—it is essential that people realise that.

Given that the Secretary of State has announced a challenging organisational way of moving forward, can he guarantee that there will be no delay in the work, particularly in steel, because men on Clydeside are ready and waiting to start building the ships?

Mr. Hoon

I am grateful to my hon. Friend, and I shall of course not answer him in a partisan way. I must point out that in the role that he ably holds on behalf of the British shipbuilding industry, he last said that I had given British shipbuilding its biggest boost the last time I announced an order, which was the Type 45 order. I am grateful for his consistent observations, and I know that the Government are consistently grateful for his support.

Mr. Davidson

Only when you deserve it.

Mr. Keetch

Not always!

Mr. Hoon

We are always grateful for my hon. Friend's support.

I have already dealt with the points that my hon. Friend made about Scottish nationalist policy. I recognise the SNP's difficulties in sustaining its argument when it comes to defence-related jobs. It is a great privilege to be Secretary of State for Defence for the United Kingdom. and I think that my hon. Friend made his point well enough.

As for delays, I emphasise the need to ensure a mature design before any steel is cut. One reason for past cost overruns has been that steel has sometimes been cut before the design has been properly matured. That is why it is important to hold effective contract negotiations over the next 12 months in order to secure a proper outcome for employees in and around our great British shipyards and for the Ministry of Defence.

Mr. David Chidgey (Eastleigh)

Returning to the Secretary of State's comments on the partnership role of the MOD in regard to trained manpower, I am sure that he will be aware that Vosper Thornycroft has headquarters in Eastleigh. In the package that it put forward in the bidding process in partnership with BAE Systems, Vosper Thornycroft offered to provide high-skilled training for 1,000 people over the course of the project. That is vital to the future economy of my constituency and the wider area. Can the Secretary of State assure the House that that part of the BAE Systems proposal remains part of the project?

Mr. Hoon

It would not be right at this stage for me to give specific assurances of that kind. What I can say is that there will be enormous demand for high-skilled employees as a result of our decisions, and Vosper Thornycroft's investment and commitment to the skills of its work force has been enormously impressive as it has taken on a number of challenging contracts that ultimately come from the Ministry of Defence. I have every confidence in the company's ability to deliver on shipbuilding and on the training required for a skilled work force.

Mr. Kevan Jones (North Durham)

I warmly welcome today's announcement, which is good news for the north-east economy and particularly for Swan Hunter on the Tyne, a company that was closed by the Conservative Government but given a bright future by Labour. Can my right hon. Friend assure us that the MOD and contractors work with organisations such as Northern Defence Industries to ensure that the maximum number of small and medium-sized enterprises can obtain work from the massive contract, which will be a great boost to the north-east in general.

Mr. Hoon

I have been in regular correspondence with Northern Defence Industries, which performs a valuable role on behalf of the defence industry and defence companies in the north-east. As one who represents an entirely land-locked constituency, I can say that one of the significant consequences of the announcement is that the benefits clearly available to the north-east and other shipbuilding areas flow right across the United Kingdom.

Mr. Henry Bellingham (North-West Norfolk)

The Secretary of State did not point out that a commitment to build two strike carriers appeared in the 1997 Tory manifesto. I am glad that he has caught up with our plans and ambitions.

Why is the Secretary of State withdrawing Sea Harriers before the two strike carriers come into commission? Will that not leave the Royal Navy vulnerable? Would it not be possible to bring forward the in-service dates, given that 2012 is a long way off'? After all, it took the Germans just two years to build Bismarck and the Americans two and a half years to build USS Missouri. I appreciate that those were less sophisticated vessels, but is there any chance of bringing forward the in-service date?

Mr. Hoon

The hon. Gentleman unfortunately overlooked the fact that the two huge new carriers will be equipped with the latest and most technologically advanced stealthy aircraft—the joint strike fighter. I would be more enthusiastic about his questions if, rather than just talking about investment, he had been more enthusiastic about the massive investment that the Government have made.

John Robertson (Glasgow, Anniesland)

As the Member of Parliament who represents the Scotstoun yard, I hope that its name was missing from my right hon. Friend's statement only because Govan includes Scotstoun. I welcome the statement with open arms as it is good news for the Clyde and the country as a whole, but I am slightly disappointed that BAE Systems did not win the design part of the contract. In Scotstoun, a magnificent design office has been set up, especially for the Type 45 destroyers. It is an unmitigated success, but with the announcement of 265 job losses last week, I am concerned that there might be problems for that drawing office in years to come.

Mr. Hoon

My hon. Friend has been a constant champion of the Clyde and has argued long and successfully for precisely the kind of investment that we are now able to make in relation to the Clyde and BAE Systems' role there. I know that my hon. Friend will continue to ensure that his constituents are properly represented in guaranteeing that the kind of work available to them will continue long into the future.

John Thurso (Caithness, Sutherland and Easter Ross)

Although I generally welcome the jobs that will be coming to Scotland, may I draw the Secretary of State's attention to the potential of the Nigg yard in Easter Ross? Given that the people of Easter Ross have borne with fortitude the inconvenience of the bombing range at Tain, would it not be a just reward for some of the jobs from the contract to come to Easter Ross, too?

Mr. Hoon

In my statement, I made it clear that the involvement of other yards was not ruled out. I have already pointed out, in response to a question from one of my hon. Friends, that I anticipated a significant amount of subcontract would benefit parts of the UK other than those that I have identified specifically so far. I am sure that the hon. Gentleman will be able to make representations in due course.

Andy King (Rugby and Kenilworth)

I, too, welcome my right hon. Friend's statement. I am extremely concerned on behalf of the 3,000 workers at Alsthom in Rugby, 200 of whom are to be made redundant in March owing to the failure of international contract and who will be greatly relieved that there will be work for the manufacturing industry. As my right hon. Friend said, the contracts relate not only to shipyards but to manufacturing as a whole. How many jobs are there likely to be in the manufacturing industry, especially at Alsthom, which is a major part—supposedly—of the foreign business partnership?

Mr. Hoon

As I have already indicated, we anticipate that about 10,000 jobs will be either created or preserved as a result of the announcement. There will be significant opportunities for landlocked constituencies such as that of my hon. Friend and indeed mine to benefit from the subcontract work that will flow from these decisions. I look forward to hearing from my hon. Friend that that is indeed the case for his constituency.

Mr. Mark Francois (Rayleigh)

Does the Secretary of State agree that the welcome for his statement from the Liberal Democrat Front Bench was a combination of four classic naval commands—full ahead, full astern, abandon ship, and make smoke—all at the same time?

May I ask the right hon. Gentleman about the implications of his announcement for procurement policy? The history of defence procurement under Governments of all colours is littered with examples of projects that went horribly wrong because it was never clear who was actually in charge. How can the Ministry of Defence credibly run future competitions if bidders see that despite all their efforts—and irrespective of the merits of the two bids in this case—Ministers can intervene at the last minute to create what is in effect a shotgun marriage between two different bids?

Mr. Hoon

If the hon. Gentleman will forgive me for saying so, there might be a fifth naval command that applies to the Conservative party: take to the lifeboats.

As far as—

Mr. Francois

Answer the question.

Mr. Keith Simpson (Mid-Norfolk)

It was supposed to be a joke—very funny.

Mr. Hoon

I am grateful for all the applause I can get.

I dealt with the specific question put by the hon. Member for Rayleigh (Mr. Francois) in my answer to the Opposition spokesman. By incorporating the best elements of both bids we obtain the best British manufacturing contribution to this excellent British project.

Mr. John Burnett (Torridge and West Devon)

I foresee that the robust contractual arrangements that the Secretary of State described will provide a rich harvest for the legal profession in due course.

The Secretary of State listed four shipyards where the main sections of the carriers will be built. Will he confirm that all UK shipyards, including Appledore in my constituency, will have a fair opportunity to tender for all subcontract work for the vessels?

Mr. Hoon

Having just answered a similar question from one of the hon. Gentleman's hon. Friends in relation to a different yard, I can assure him that the same opportunities will be available. I am sure that his former colleagues in the legal profession will welcome the contractual work that the decision offers.

Dr. Vincent Cable (Twickenham)

Now that BAE Systems has won this major and lucrative contract, will the company be required to honour outstanding cost overruns on existing contracts, such as the submarines and Nimrod, thereby sending a clear signal to all partners in the aircraft carrier contract that contractual failure will be penalised and not automatically paid for by the taxpayer?

Mr. Hoon

It has never been suggested that, under existing contracts, the taxpayer will automatically have to fund any cost overrun. Indeed, that is central to the discussions that are being held between the Ministry of Defence and the company concerned. I can assure the hon. Gentleman that this contract has been dealt with by both companies in an extremely professional and sophisticated way, and that the United Kingdom should be grateful that there are two companies operating in the country that are capable of producing such outstanding work.