Defence Procurement

HC Deb 23 October 2003 vol 411 cc803-75

[Relevant documents: The Eighth Report from the Defence Committee, Session 2002–03 (HC694), Defence Procurement, and the Government's response thereto, Fourth Special Report from the Committee, Session 2002–03 (HC1194).]

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

1.14 pm

The Minister of State, Ministry of Defence (Mr. Adam Ingram)

Last week we had an informative and useful debate on defence policy, recognising at the time that today's debate on defence procurement would deal in detail with the equipment issues essential to the delivery of our strategic policy aims. I shall, therefore, deal primarily with those issues in today's debate.

This is the second procurement debate that I have opened, and I note the poor attendance on the Opposition Benches. I can only guess—[Interruption.] I hear a sedentary comment from the Opposition Benches that the attendance there is the same as on the Government Benches, but as I said the last time the matter was raised, Government Members are comfortable with our policies. As we are constantly reminded, it is the role of the Opposition to oppose the Government. I can only guess that the reason for the sparse attendance is that Opposition Members are all scheming and plotting somewhere, hoping to procure a new leader for their party. If so, I suggest that they use smart acquisition as a means forward. The way they tried to do it last time did not produce a very good result, and they may have to live on with the legacy systems.

It is important to set procurement policy in context. It would be helpful to define the key purpose of our defence procurement. It is people who are at the heart of our procurement and equipment policies. In the simplest terms, our job is to provide the best equipment and support that we can for the men and women of our armed forces, in order that they can best do what we ask of them. Alongside that, we must always remember our responsibility to the taxpayer, which means striving for the best value that we can achieve when procuring the systems and items that we need.

We are no different from any other Department in that we need to manage our funds carefully. As my right hon. Friend the Secretary of State pointed out in last week's debate, we face fluctuating pressures on our budget. Recently these have included recruiting well above our expectations—which is good news but costs money—the changing exchange rate, and managing the—impact of operating full resource accounting and budgeting for the first time. All this means that we must spend our money as wisely as possible.

David Wright (Telford)

With regard to spending our money efficiently, can my right hon. Friend assure the House that he factors into that process the issue of buying British, and that he uses a qualitative analysis on that basis to make decisions?

Mr. Ingram

I know that my hon. Friend takes a close interest in these matters because of the industrial footprint in his constituency. The defence industrial policy, which I shall mention later, shows that we are working with a clear focus and in close harmony with UK industry. We consider what is right for industry, but the equipment that our people need must be the main driver in this. If British is best, it will be purchased. That is why British industry must strive to be the best. There are many examples where it outshines its international competitors. I shall mention some of the procurement decisions that have been taken recently, which I hope will provide the assurance that my hon. Friend seeks.

Mr. Ian Davidson (Glasgow, Pollok)

Given that the Minister is stressing the willingness of Britain to buy abroad when the equipment is better, have any comparisons been run between Britain and other major industrial powers? Is it not the case that other countries are far less likely to buy from us than we are from them? What is he doing to open their markets to our efficient producers?

Mr. Ingram

I compliment my hon. Friend on his hard work for his constituency and the associated industries, particularly shipbuilding. I was not saying that it is imperative that our purchasing focus is on products from abroad. I was seeking to say—my hon. Friend may have misunderstood me—that our focus in terms of defence industrial policy is always to try to buy from the home base, but the equipment has to be good enough to match the very best that is out there internationally.

Joint ventures and partnerships are increasingly becoming the norm, both in Europe and with our partners in the United States. As my hon. Friend will be aware, a company that is seen as a UK company may be majority shareholder owned in another part of the world. There are always moves afoot as regards amalgamations. In that context, a procurement decision based on "buy British" does not mean much. What is important is that British-based companies receive the best support to enable them to produce the best for our armed forces—and, importantly, for export purposes. I hope that my hon. Friend shares my concern about the lobbying to try to stop the export of British-produced armaments, which significantly attacks British jobs. I look forward to him joining me in the campaign to make people more aware of the importance of the armaments industry to the United Kingdom.

Mrs. Anne Campbell (Cambridge)

Does my right hon. Friend agree that it is important to take into account a manufacturer's length of experience when considering it for a procurement contract? Will he take this opportunity to congratulate Marshall Aerospace in Cambridge on the 20th anniversary of its involvement in the conversion of the RAF tanker fleet? I hope that he will bear that in mind when he comes to make a decision about the future tanker project.

Mr. Ingram

I am always prepared to congratulate companies on the length of time for which they have been committed to such work and to wish them many more years based in the United Kingdom, and I do so in the case of Marshalls in my hon. Friend's constituency. However, I should not discuss from the Dispatch Box the sensitive negotiations about the future strategic tanker aircraft, which are reaching their conclusion. Our judgment will be based on what is best in terms of the needs of our armed forces in delivering our objectives.

The people who make up the armed forces enable us rightly to proclaim them as among the best in the world; in the modern age, we must ensure that our procurement programmes help them to maintain that crucial, battle-winning edge, now and in future. I hope that hon. Members agree that that should be our overriding priority. Getting it right means not only providing the right kit for today, but trying to read the strategic future well enough to ensure that we do so for tomorrow. The pace of change in the new strategic environment, which we examined in last week's debate, is challenging. As my right hon. Friend the Secretary of State informed the House, in the past been there have been periods during which we faced a static, if technologically evolving, threat. But there have also been key moments when significant shifts in defence posture were needed. The threat that we face at present is far from static, and we face another of those moments when a substantial shift in defence posture is essential if we are to continue to be effective. Change is the key—but not for the sake of it or because we have got it wrong in the past. As our defence posture changes, so do the tactics and strategies that we employ and, in turn, the equipment that we use to do the job.

The strategic defence review got it right in 1998. I doubt that anyone would seriously argue against the overall focus that it placed upon readiness, deployability, sustainability and flexibility of forces. It would be wrong, however, to allow any set of conclusions to remain inviolate. We owe it to our servicemen and women to review our conclusions and, where necessary, to redirect our efforts and to make changes to our plans. We must also respond to changes in the security environment such as those which, sadly, took place on 11 September 2001, three years after the SDR.

We used the new chapter to tune our assessment of where we were and where we needed to be. It considered how best to build on the SDR in countering international terrorism and the increased threat of asymmetric attacks. Its aim was to ensure that our armed forces have the right capabilities to play their part. At the heart of that is network enabled capability, about which I shall say more later. The new chapter came to some distinct conclusions about the way forward in policy terms, highlighting issues of technology, interoperability, flexibility and speed. It is clear that to achieve our aims, we need to invest heavily in new technologies and capabilities. Of course, like all Departments, our funds are not infinite—that will necessitate some tough decisions.

As my right hon. Friend the Secretary of State said last week, in investing in areas that are so crucial to the present and future we must recognise that systems that are rendered less effective as a result of the changing security environment will have to make way for those that can help the armed forces in the tasks that lie ahead. It would be very wrong to maintain ineffective structures and systems when we know that others would be better to meet our front-line needs. Sentiment for older pieces of kit is understandable, but sentiment will not give us that battle-winning edge. We should not assume that the future threat will neatly conform to a traditional notion of how the armed forces should look. Defence capability cannot be preserved in aspic—it needs to evolve to meet the new threats and challenges that we face.

Dr. Julian Lewis (New Forest, East)

I endorse what the Minister is saying. Does he accept, however, that when procuring systems such as aircraft carriers and other pieces of equipment that take many years to build and have to be in service for many years, their specifications must allow them to be as versatile as possible, because we cannot predict how threats will come and go, develop and complicate over that very long period?

Mr. Ingram

I agree with that view, generally speaking, but not necessarily in terms of the aircraft carrier. The lifetime of an aircraft carrier may be 50 years, but that of other equipment systems will be shorter. Some may be much more easily adaptable than others due to the nature of what was procured. I shall deal specifically with the aircraft carrier procurement decision later.

In terms of equipment, we need to have the right industrial policies, the determination to drive through the benefits of smart acquisition, and an equipment programme that is designed to ensure that the armed forces retain their decisive edge. Much has happened since we last debated defence procurement in this House in July 2002. The Defence Committee's thorough and thoughtful annual report on defence procurement, published in July, and the Government's response, which was published only two days ago, demonstrate a wide range of activity in terms of industrial policy and important developments in a number of key equipment capability projects. Most notably, we have seen our armed forces engaged in major war-fighting operations in Iraq, where they faced, and continue to face, tough challenges.

I want to focus on the implications of those operations and the lessons that we draw from them for our equipment programme. First, I shall deal with how our equipment performed during recent conflicts. We intend to publish a full report on operations in Iraq in December, but I can offer the House a number of key conclusions relating to equipment. There was much good news from recent operations in Iraq. The RAF's newest air-to-ground missile, Storm Shadow, was used operationally for the first time and showed astonishing precision. Our Tomahawk land attack missiles fired from our attack submarines once again proved their worth, enabling accurate attacks at long range. We also showed progress towards our goal of integrating sensors, weapons and decision makers to deliver military effect more rapidly and precisely. In the past, the thorough planning of Tomahawk missions took days. In Operation Telic, the time line for Storm Shadow and TLAM planning was reduced to just a few hours, revolutionising the responsive nature of the capability.

It is worth noting that lessons were implemented from previous operations. Kosovo showed us the need for an all-weather precision-guided bombing capability. As a direct result, we procured enhanced Paveway bombs, which were used to great effect in Iraq. Similarly, the AGM-65 Maverick anti-armour missile had its first operational use in Iraq, integrated on to the Harrier GR7 aircraft. Approximately 85 per cent. of air-dropped munitions were precision guided. We re-emphasised the importance of smart weapons with the announcement in June of the selection of Raytheon's Paveway IV munition as the new precision-guided bomb for the Royal Air Force. It is due to enter service from 2007.

Afghanistan showed us the need for an improved maintenance regime for the modified SA80 A2 assault rifle. That ensured that it could cope with the hot and dusty environment in Iraq and early reports suggest that it was a success. The SA80 A2 was used for the first time in Iraq in combination with the new head-mounted night-vision system. That enabled our infantry to move and acquire targets simultaneously at night—a potent and lethal enhancement.

In the ground campaign, our Challenger 2 main battle tanks and the Warrior armoured fighting vehicles made an outstanding contribution to the speed and decisiveness of the coalition intervention. Their enhancements for desert conditions were a great success. Early reports suggested that they achieved an availability rating of around 90 per cent. during operations. In addition, fitting bolt-on armour considerably increased their protection. The AS90 self-propelled gun also performed well, delivering a great weight of accurate fire support with 95 per cent. availability.

All recent operations have highlighted the importance of the ability to deploy, sustain and recover our forces. Our strategic air and sea-lift capability, notably the C-17 and C-130 aircraft and the roll-on/roll-off ferries, were decisive in enabling us to deploy and sustain a force in Iraq the size of that deployed in 1991 but in half the time. That fully justified the emphasis we have placed on that aspect of capability from the time of the strategic defence review.

Mr. Colin Breed (South-East Cornwall)

I applaud the successes that the Minister enumerated. However, does he acknowledge that the threat that we anticipated was significantly less than that in previous operations and that success of our equipment and men must be set against that? I am pleased that they were successful but we must recognise that threats in future may be considerably more difficult to surmount. We need to measure that.

Mr. Ingram

I do not agree with the hon. Gentleman's analysis because the potential threat was great. I remind him of our discovery after the conflict of buried effective equipment, which the Iraqi forces did not use but had purchased for use. It was probably available for use and people had probably been trained to use it. The threat in the air and on land could have been great. The potential numbers in the Iraqi army were great and the concept of the operation was designed to degrade the Iraqi forces' capability of mounting an effective threat to our advancing forces. That is why I mentioned precision bombing, which took out communication lines thereby hitting the command chain network of the Iraqi senior command structure. That was important in achieving our success. Without that capability, there might have been a different sort of ground campaign. The joint approach—marrying the three elements of our armed forces—is vital. It was the underlying principle of the strategic defence review and the expeditionary concept implied in it.

On future threats, I was making the point that we live in a changing environment and that we must always make our best guess. If the hon. Member for South-East Cornwall (Mr. Breed) has greater insight than the military planners who advise the Ministry of Defence, I look forward to his contribution and his perception of how the threat will develop and evolve in the months and years ahead.

Although we learn from operations and necessarily look at a distant horizon when planning to meet equipment need, we must recognise that each operation has its specific challenges. We therefore optimise our capability through urgent operational requirements. That allows us to take advantage of the latest technology. The comments of the hon. Member for South-East Cornwall fit comfortably with that point because we have the capability to be flexible and adaptable, depending on the circumstances. Let me give an example.

For operations in Iraq, the Ministry of Defence procured 190 urgent operational requirements at a value of approximately £510 million. The Select Committee on Defence is currently conducting an inquiry into that and we shall assist its understanding on a confidential basis with background information.

In some cases, UK industry had to supply equipment at extremely short notice. Industry and our organisations such as the Defence Aviation Repair Agency, ABRO—Army Base Repair Organisation—and the Defence Storage and Distribution Agency, responded magnificently to the surge of requirements in the build-up to the operation, thereby proving the value of the partnering approach that the Ministry of Defence has developed in recent years.

Some urgent operational requirements involved accelerating existing programmes such as the procurement of the temporary deployable accommodation and the head-mounted night-vision system. Others, especially the measures to enhance interoperability with coalition allies, were new procurements made within short time scales. However, the process is not flawless.

Peter Bradley (The Wrekin)

My right hon. Friend is right to credit the achievements of DSDA and ABRO, which are in my constituency, but will he extend his appreciation to the private sector, especially Alvis, which sent personnel to the Gulf to undertake modifications to Challenger 2, thus making a considerable contribution to the effort in Iraq?

Mr. Ingram

Yes, I shall. I said industry and our organisations. [Interruption.] We are reminded that the company's name is Alvis Vickers and there is obviously some competition on the Labour Benches to acknowledge the contribution. I acknowledge the role of Alvis Vickers and many other companies, which contributed in so many different ways. The Select Committee on Defence will be advised of that when it conducts its inquiry. Much of the information is given in confidence and I am sure that hon. Members understand that it is not appropriate to give all the details publicly. However, I know that the Committee will give the information that we provide full and detailed consideration.

Mr. Siôn Simon (Birmingham, Erdington)

Will the Minister go further on industrial policy and perhaps learn a lesson from abroad? After going through the defence industrial policy process and considering the four key factors and the seven wider factors, will the Department ensure that the work is always given to a British company, preferably a Birmingham company?

Hon. Members

Answer that.

Mr. Ingram

Indeed. I could end up in a trading position, suggesting various cities and regions, including East Kilbride. British industry has tremendous capabilities in delivering for us—there is no question about that. I shall deal with defence industrial policy later, but buying what is best for our forces, not industry, must be the prime consideration. Members of the armed forces could be called upon to make the ultimate sacrifice in defence of the realm and our national interest. They would not respect us for saying, "Off you go and use this equipment because it's got a British flag", whether it came from Birmingham, East Kilbride or elsewhere. However, I pay tribute to the strength, depth and commitment of the United Kingdom industry.

I rightly considered our successes and the way in which our procurement policy progresses, based on previous conflicts and the most recent conflict. However, the process is not flawless. Although it would be inefficient and unaffordable to buy and maintain equipment for every contingency in every climate, we shall undertake further analysis to improve our understanding of the likely time scales in which different capabilities can be procured.

I make it clear that we will not fall into the old trap of planning to fight the previous war. Our plans revolve around the future, not the past but we must learn lessons from the conflicts and deployments in which we have participated.

I accept that there are areas in which we could have done better and in which lessons for the future have to be learned. No operation on the scale of Iraq can ever proceed perfectly in every detail. It has been a huge undertaking and has tested the organisational as well as the fighting capabilities of the MOD. Our people have met this massive challenge with commitment, professionalism and, ultimately, with decisive success—a fact not always acknowledged.

I recognise, however, that despite our best efforts, working night and day, we did not meet every unit's requirement for desert clothing and boots, and that some personnel experienced some shortages of other items of personal equipment. Action to improve asset visibility and tracking in theatre is something to which we must look to improve our capability. We have launched a no-holds-barred "lessons learned" process, the first reflections from which were published in July. The final report is expected at the end of the year. We want to ensure the continued high performance and capability of our equipment in any future operation and that we continue to meet the standards that our service people rightly expect.

We have a responsibility to plan for an uncertain future. That means concentrating on the key SDR capability goals and the network-enabled capability that will allow us to develop the effects-based approach that my right hon. Friend the Secretary of State described to the House last week. We intend to keep network-enabled capability at the heart of our approach to future equipment. As Operation Telic demonstrated, and as we foreshadowed in the SDR new chapter, this has become a fundamental part of almost every aspect of modern war on land and sea, and in the air. Any country that neglects this will find itself outclassed and outperformed on and behind the battlefield, whatever mass of individual equipment it can muster. Ultimately, it will enable us to link our intelligence, surveillance and combat capabilities together faster, giving us the ability to achieve decisive effects on the ground. It is also vital in helping us to link up with our allies and coalition partners.

The network, integration, test and experimentation works programme, or NITE works programme, a three-year project that will serve to bring the MOD and industry into a partnership intended better to integrate existing assets to maximise operational capability, was launched in August. This process of practical testing and experimentation within synthetic environments has impressive potential advantages, and British industry has responded positively to the partnership approach on this programme. Another key enabler project is the Bowman tactical radio system, which remains the Army's No. 1 equipment priority, and which will supplement the personal role radio already in service. We intend to meet the demanding March 2004 in-service target date for this piece of equipment.

We also expect to place a contract for Skynet 5 with Paradigm Secure Communications very shortly. This private finance initiative contract will provide modern, robust and flexible worldwide communications for the front line and is very good news for the armed forces. Added to this, services will be offered to friendly third parties, such as NATO, opening up possibilities of enhanced inter-operability and improved value for money. It is also good news for UK industry, as just under 2,000 people will be in jobs associated with the programme at its peak. The north-west and south-west of England, south Wales and Northern Ireland will all benefit from this programme.

While sensors and networks are critical, we must also invest in the platforms that allow us to respond swiftly and flexibly. We are doing that across all three environments—land, air and sea. I would like now to deal with each of those in turn. We have recently entered stage 3 of the assessment phase for the future aircraft carrier, the CVF, providing further impetus to alliance operations and the constructive relationship with BAE Systems and Thales UK. This assessment stage will increase the maturity of the design, optimising capability and value for money.

Mr. Kevan Jones (North Durham)

Will my right hon. Friend comment on some of the headlines that have appeared in the north-eastern regional press? The Newcastle Journal has one that reads: Delays on ship deal put jobs in danger. That refers to work that could go to Swan Hunter. Obviously, the procurement of the CVF will have a great impact not only on the north-east but on other regions. Will the Minister scotch some of the more alarmist rumours that have been put about in such articles?

Mr. Ingram

I do not know whether it is because I am from Scotland that my hon. Friend is asking me to scotch those rumours. We should not respond to lurid press headlines as this process develops. Every procurement process has decision-making points at which we have to get it right, otherwise we cannot move to the next phase. Clearly, the bigger and more complex the project, the tougher that task is. I understand my hon. Friend's very strong commitment to the shipbuilding industry in his own constituency and region. I have already made the point that we should not necessarily focus on what is right for industry. We should focus on what is right in terms of the eventual capability. It takes a lot of fine tuning and precise planning to get that right, both in terms of structure and, importantly, delivering on time, which can be critical.

I would love to be able to say that everything runs smoothly in every procurement, but it does not. So far as this particular procurement is concerned, there has been a lot of comment about the way in which we put together the strategic partnership between BAE Systems, Thales UK and the MOD. People said that it was flawed and that it would never work, but the opposite is happening. We now have a very committed high-grade project team driving forward to meet the tough demands that we at the MOD insist on.

Dr. Julian Lewis

I thank the Minister for giving way again. Of course, he is making reasonable points in a general sort of way, but this cannot all be put down to lurid press reports, can it? The Minister may recall that the Secretary of State said in his statement about the future aircraft carrier on 30 January this year: At around 60,000 tonnes, they"— the aircraft carriers— 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 in the world."— [Official Report, 30 January 2003; Vol. 398, c. 1026.] Whereas in August, in a response to a question from me about the size of the aircraft carriers and the rumours that they were to be much reduced, the Minister said in a written reply: In the strategic defence review published in 1998, it was envisaged that the two new future aircraft carriers would be in the order of 30,000 to 40,000 tonnes."— [Official Report, 16 September 2003; Vol. 410, c. 703W.] That is not the press making things up; those are two different messages from two different Ministers in the same Department.

Mr. Ingram

I should like to reflect on that, and obviously I shall read Hansard to see the context in which those questions were raised and the responses given.

Mr. Gerald Howarth (Aldershot)

Will the Minister give way?

Mr. Ingram

Let me deal with the intervention of the hon. Member for New Forest, East (Dr. Lewis) first.

The relationship between cost and capability forms a normal part of any assessment phase, and formal cost and performance parameters will not be set until the main gate decision. The hon. Member for New Forest, East said that I made my point in a general way, but it was also a specific way. As we define capability needs, in which nothing is static and everything is evolving, against certain fairly firm criteria—although they may be subject to change—the cost implication must come into play. We have to marry up those two important elements to deliver what has rightly been described as a decision that must be flexible and adaptable over the lifetime of these vessels, which will be in the region of 50 years. While it is right for the hon. Gentleman to continue to probe and to tie us down to specifics, that contradicts what he was asking for, which was to ensure that we had a procurement process that took account of his earlier concerns.

Mr. Howarth

I am grateful to the Minister for giving way, because this is an extremely serious issue. As my hon. Friend the Member for New Forest, East (Dr. Lewis) has pointed out, the Secretary of State made great play of this issue in January, having seen two specific proposals from two major contractors for large vessels of the order of 60,000 tonnes. In August, the Minister suggested that the figure had been retrenched to between 30,000 and 40,000 tonnes. That is a substantial difference, and the House deserves a more specific answer than he has been able to give us. Has there been a huge change in the configuration of the aircraft carrier that warrants such a dramatic change, or is the truth that the cost implications that he has just mentioned are the driving factor?

Mr. Ingram

It is not the truth in the way in which the hon. Gentleman puts it, but there must be an element of truth in it. Cost is a part of any consideration about the capability that we seek. I heard the First Sea Lord say recently that it did not matter how long, how tall and how fat ships were; what mattered was what they delivered in naval terms—the punch that they afforded the Royal Navy.

It would be wrong to say that the consideration was driven primarily by cost. We hear a lot about that when industry makes announcements about capability, or about the concept of a particular procurement, but when the concept is examined in detail, the need to ensure flexibility over the likely—in this instance, the known—lifetime of a carrier must come into play. Smart acquisition is all about that process of refinement.

Dr. Julian Lewis

Will the Minister give way?

Mr. Ingram

I must proceed, although I am not running away from the issue, and I am sure that Conservative Members will return to it.

Mr. Davidson

The Minister tells us that any changes are driven by capacity rather than cost. Can he assure us that the original plans for two aircraft carriers carrying approximately 48 planes have been retained, and that the number of planes that a carrier will be able to bear has not been cut? Can he also confirm that the Ministry is still working on the basis of the estimated dates of 2012 and 2015 in terms of capacity and delivery?

Mr. Ingram

As I said earlier, delivery on time is critical, and we are continuing to work according to that timetable, although it will depend on the capacity and ability of industry to deliver. We are dependent on its expertise. We cannot necessarily drive developments from the top. Sometimes there is a shift in the timetable because of changed requirements related to the evolving nature of our understanding of the threat or of the capabilities available.

It is best to wait for the main gate decision. This is one of the things that we must get right according to the criteria that I have established. As I have said, the situation is evolving. I repeat that we are not building these ships for industry, or for shipbuilding areas; we are building them to meet the needs of the Royal Navy, and to supply part of its contribution to the expeditionary force and the punch that it must deliver along with the RAF and the Army.

Mr. John Wilkinson (Ruislip-Northwood)

Will the Minister give way?

Mr. Ingram

No, I must make progress.

These vessels will meet the requirements set out in the strategic defence review. Operating the short take-off/vertical landing variant of the joint strike fighter and a range of helicopters, they will constitute the most capable carrier force outside the United States.

Last December, considerable interest was generated by the Astute class attack submarines and the Nimrod MRA4 maritime patrol aircraft programmes. Those are hugely complex systems, which have presented significant challenges to the Ministry of Defence and BAE Systems. February saw the announcement of an agreement on the way ahead for those two important projects, putting the programmes on a much sounder footing for the future through restructured contracts and a reduction in overall risk. Both sides are now working on the basis of the agreement, and my noble Friend Lord Bach was in Barrow-in-Furness only yesterday to attend the keel-laying of the second Astute class boat, HMS Ambush.

Although risks and challenges remain, this represents a major milestone for the Astute programme, and further demonstrates our commitment to deliver these important capabilities to the armed forces as soon as possible, along with the company. Hard lessons have been learned from the challenges by both the MOD and BAE Systems, and we are applying them widely in order to go on making progress with smart acquisition.

Mr. Davidson

Will my hon. Friend give way?

Mr. Ingram

I have already given way generously to my hon. Friend.

One of the largest programmes is the joint strike fighter, a collaborative venture led by the United States but now involving many contributors, the United Kingdom being the main partner. We are very proud of the extensive role won by UK industry, a role that could reap as much as £5 billion worth of work for the UK in the current system development and demonstration phase, safeguarding many thousands of jobs and our leading position in the aerospace industry. A further £24 billion could be in prospect for downstream production activities.

Typhoon, our next-generation high-performance fast jet, will serve as the cornerstone of the RAF's air defence capability in the future. The project achieved a major milestone in June, when type acceptance was completed. The UK remains committed to the Typhoon programme, and discussions with the four nation members and with industry on tranche 2 are continuing.

Mr. Gerald Howarth

Will the Minister give way?

Mr. Ingram

I do not want to have to extend my speech as much as I did when we last debated this subject, and to take every intervention to make up for the fact that hardly any Opposition Members are present. The hon. Gentleman will be responding for the Opposition, and my hon. Friend the Under-Secretary of State will deal with the issues he raises.

Our priority is to ensure that industry's proposals for the programme are soundly planned and are based on mature designs. Austria's decision to place an order for 18 Typhoon aircraft clearly supports the export potential that the aircraft offers, and Singapore has also shortlisted Typhoon to meet its future fast-jet requirement. It was partly to meet the new demands of training pilots for front-line service in the Typhoon and the joint strike fighter that my right hon. Friend the Secretary of State selected BAE Systems' Hawk 128 as the next advanced jet trainer for our armed forces.

Subject to the successful completion of contractual negotiations, we intend to make an initial purchase of 20 of the new training aircraft, with options to buy up to a further 24. The value of a full order for 44 aircraft is expected to be worth some £800 million. They will enter service in 2008.

The choice of Hawk offers the best aircraft for the training of pilots of our future advanced fighter jets. Importantly, it will also sustain a number of jobs at the BAE Systems factory in Brough, and numerous others in the UK supply chain. More than 800 Hawk 128 aircraft are currently in service with some 19 customers, and future sales prospects for Hawk are extremely bright. The recent decision by the Indian Government to select Hawk as their new advanced jet trainer clearly supports that.

On 5 March 2002 the hon. Member for Twickenham (Dr. Cable), now the Liberal Democrat treasury spokesperson—I hope that he did not get his promotion on the basis of what he said then—observed The system whereby British officials and ambassadors and the Ministers who direct them are running round the world, as the Foreign Secretary did with BAE Systems last week, selling Hawk jets to India, is not the sort of thing in which the British Government should be engaged." —[Official Report, 5 March 2002; Vol. 381, c. 189.] It is precisely that, which is why I have spoken about the scale and the scope of the project and its importance to British industry.

On the land side, there is a need to modernise elements of the armoured vehicle fleet. That gives us an opportunity to develop medium-weight forces in the Army, and to deliver a solution exploiting network-enabled capability. The programme is known as future rapid effects system, or FRES. To assist its progress, work is already in hand to investigate a number of new technologies.

Although it has taken longer than anticipated to launch the project on its assessment phase, the Ministry believes that additional time invested now is essential to ensure that it has a good prospect of meeting requirements. We hope to have a decision on the way ahead for FRES later this year.

Peter Bradley

I understand that the Government have a commitment to royal naval vessels being built in British dockyards. If that is the case, why cannot that privileged relationship be extended to British industry when it has the capacity to provide for our needs? FRES is a case in point.

Mr. Ingram

I understand where my hon. Friend is coming from with regard to the figures. I cannot address special pleading for individual industries from the Dispatch Box, because all the decisions are based on the capability and capacity of British industry to deliver. As for my hon. Friend's point about the shipbuilding industry, if we did not have a shipbuilding programme for building naval ships in British shipyards, we would not by and large have a shipbuilding industry. That does not necessarily apply elsewhere, but the defence industrial policy, which I shall touch on later, aims to make sure that we seek to get the best from the best of British industry. However, it is up to British industry to be the best. I pay tribute to the companies that I have mentioned for delivering at an extremely high level, which gives us a great deal of assurance and comfort for the future.

I mentioned the new FRES project, an exciting and important project for the Army. However, that is not to detract from the battle-winning qualities of our heavy armour. Operation Telic served to underline the crucial role that main battle tanks still possess, but that punch comes at a price in terms of deployability. We regard medium-weight forces combining ease of deployment with more firepower as an important force element for the future.

All decisions on individual equipment projects are viewed against the backdrop of our defence industrial policy. Government and industry have worked together for many years on defence industrial issues, but the publication of the policy last year galvanised both to adopt new ways of working together, which has resulted in a joint approach to implementation and the development of a joint action plan. I praise industry for its hard work in making that a success which, coupled with the support from the trade unions and the work force, gives us a strong base for the future.

We are determined to reduce the barriers to cooperation with our allies and partners, and have made good progress on doing so with our European partners through the letter of intent. We are working closely with the US Administration to secure a waiver for UK companies from the US international traffic in arms regulations. We are concerned about moves by the US Congress to restrict procurement for US armed forces to American companies. We and the US Administration regard that as a retrogressive and impractical step that would ultimately harm US interests as much as our own. We are taking every opportunity to explain our thinking to our US counterparts, and I shall do so again next week when I visit Washington.

We are constantly making our US counterparts aware of the importance of not saying "Buy US, for the US." However, in today's debate, there is an element of "Buy Britain only." We cannot live in that world. If we are trying to open up markets to the quality of our goods, we have to expect competition. If we examine what is happening in defence procurement—I have spoken about partnership between companies and takeover—we can see that the industry is changing rapidly. It is important to make sure that we have good access to other markets.

Mr. Michael Jack (Fylde)

Can the right hon. Gentleman give me an assurance that in his discussions next week in the United States he will raise with our American colleagues the question of having full access to all the technologies that underpin the joint strike fighter?

Mr. Ingram

I will make every point that I can on behalf of UK interests. I am sure that that will be in my briefing pack and, if it is not, I shall certainly ask why. It is important that this country punches at its highest and best weight, and the right hon. Gentleman has raised an important aspect of our doing so.

Our procurement strategy continues to be delivered through our smart acquisition policy. The ethos behind smart acquisition has always been to acquire defence capability faster, cheaper and better while deepening and broadening the key principles of the original smart procurement initiative. We are currently looking in great detail at other areas to identify where improvements to our processes can be extended. We recognise that that is a continuing challenge—still more needs to be done, particularly regarding project slippage. We need to look at ways in which we can become much quicker and more agile in our procurement processes. As part of that ongoing work, we are discussing measures with industry that could be introduced to improve project management on major programmes.

Equipment procurement can sometimes appear to be for the benefit of industry, constrained by budget considerations. The reality is that we must all remember what that equipment is for. Ultimately, it helps our people to win on the battlefield—it increases their chances of doing so and coming home safely, which is why we must get it right. That means not only making bold and well-considered decisions about new kit but making honest assessments regarding old kit. We know what works, what is no longer effective and what we need to work in future. Everything that we are now doing is aimed at that goal. Changes must be made, and they will be made. We ask a lot of the men and women of our armed forces, which is why we are determined to do what needs to be done to equip them to be as outstanding in the 21st century as they were in the last.

2.5 pm

Mr. Gerald Howarth (Aldershot)

On a slightly sad note, may I send condolences from Conservative Members and, I am sure, the whole House, to the Minister's predecessor, the right hon. Member for Warley (Mr. Spellar), who has just suffered a bereavement? I extend our sympathies to him and his family on the loss of his wife. He was an assiduous debater on defence matters in the House before he moved to the Department for Transport and beyond.

The Minister drew the short straw in having to open today's today. The Secretary of State obviously decided that it was warmer in Iraq than here, to escape having to answer for the debacle of the CVF—carrier vessel future—programme. The responses that the Minister gave his hon. Friend the Members for North Durham (Mr. Jones) and for Glasgow, Pollok (Mr. Davidson) will have given them no more reassurance about the project than it did us. I remind him that we supported completely the Government's decisions to order two substantial aircraft carriers and on their configuration. We welcomed the fact that they chose the STOVL—short take-off and vertical landing—version of the joint strike fighter to equip those aircraft carriers, and even issued a statement congratulating them on their decision. Needless to say, that did not get printed, because it is only the adversarial aspects of Parliament that strike a chord with the media. We welcomed the fact that the design of the aircraft carriers could incorporate retro-fitting of a catapult system in the event of the joint strike fighter not incorporating a STOVL variant. That is entirely dependent on the US marine corps deciding to choose that version—if it does not, there will be no STOVL version for the United Kingdom to acquire.

I take strong issue with the Minister's assertion that the question of the length and diameter of hulls and so on is not material. It is important that the dimensions of those aircraft carriers are sufficient for them to deploy 48 fighter aircraft—the hon. Member for Glasgow, Pollok sought reassurance on that—because that is the basis on which the project was put together in the first place. I hope that when the Under-Secretary winds up, he will be able to reassure the House that it is still planned that the sortie generation rate will involve 48 aircraft operating from those hulls. If not, the prospect that we face is very different from the one we welcomed in January, when the Government made their decision. Clearly, however, the speculation in the press is entirely right and proper—it is well focused and spot on. I am afraid that the Minister of State has failed to reassure anyone in the House, and many companies and constituencies around the country will be alarmed by what they have heard today.

This debate takes place in the context of a nation that has five times embarked on serious military operations in the six years of this Government's life, and in the context of widespread rumours that next month's White Paper will bring a further round of swingeing cuts to the defence budget, not limited to the carriers. Industry claims that the procurement budget is already underfunded, and now informed defence commentators are speaking of cuts well in excess of £1,000 million. We read that Lieutenant General Rob Fulton, Deputy Chief of the Defence Staff, has instructed his capability managers to find £1,000 million of savings across each of the military's 12 "capability areas" over the next 10 years.

Reports suggest that the order for the Type 45 destroyers is likely to be cut from 12 to eight. As we have heard, the order for two new aircraft carriers is becoming ever more precarious and, as we have discussed, they are shrinking in size.

Mark Tami (Alyn and Deeside)

Will the hon. Gentleman perhaps tell us what the cuts were over the last 10 years of the last Tory Government?

Mr. Howarth

I remind the hon. Gentleman that the Labour party conference voted for defence cuts of one third and that Labour was for ever pressing us from the Dispatch Box, when we were looking to refocus Britain's defence interests after the fall of the Berlin wall, to go further and further than we did. His accusation is a boomerang that has come back to hit him. In fact, many of the success stories to which the Minister of State referred were projects that were started by the Conservative Government and of which this Government are fortunate enough to be reaping the benefits. The AS 90 is one of them. The Minister of State mentioned that.

The Minister of State also mentioned the Typhoon, another project that is looking vulnerable, with reports that the number is to be cut from 232 to 130. Little wonder, then, that the Chief of the Defence Staff, General Sir Mike Walker, was reported in The Observer last Sunday as saying privately that he found the proposed plans to be "incomprehensible." What a way to pay tribute to our armed forces for the fantastic job they have done in Iraq!

This is the third of the annual defence policy debates that we have held since the summer recess, yet publication of the White Paper has been conveniently delayed until after the debates are over. It is extremely unfortunate that the timing could not have been better ordered to enable the House to have the benefit of the Government's latest thinking on the safeguarding of our national security. This question arises: how can a Government who are so keen to project British power and influence around the world and who have committed Her Majesty's armed forces to a major and continuing operation in Iraq justify a reduction in investment in those forces? I remind the hon. Member for Alyn and Deeside (Mark Tami) that defence expenditure under this Government has fallen to 2.3 per cent. of gross domestic product, by comparison with 2.9 per cent. of GDP when the Conservatives left office in 1997.

Peter Bradley

Will the hon. Gentleman confirm that, after the excellent performance of British and other troops in the Gulf in 1992, the then Government cut defence expenditure by a third in the following years?

Mr. Howarth

It was not cut by a third. I think that the hon. Gentleman was in the House at the time and I was not. Whatever cuts were made, they were far less than his party was demanding of the Government of the day, at a time when I think he was in the House and I was not, so he is no position to make that accusation—certainly not when he is seeking to bat for Alvis Vickers, which has an important facility in his constituency that he knows I have had the pleasure of visiting.

Mr. Jack

Would my hon. Friend care to reflect on the fact that the previous Conservative Government looked at their spending in the light of the changed threat at the time, which if anything was reducing, whereas at the present time threats seem to be increasing?

Mr. Howarth

That is the typically perceptive point that I would expect a colleague of mine who held a responsible position in Her Majesty's Treasury to make. The House is better informed as a result. My right hon. Friend is absolutely right.

The Government know that they are caught between a rock and a hard place, and in the past few months have been engaged in a desperate softening-up operation in advance of the White Paper. Even this afternoon, the Minister of State has told us that some capabilities will have to go. Unfortunately, he cannot tell us now what those will be, but we have been warned that some capabilities will have to go. That is part of the operation. As Lord Bach told The Economist and the Jane's conference on Tuesday, platforms are not the key; it is capabilities that count. In a sense, he is absolutely correct but surely the one thing that the Iraq operation told us is that numbers do count. We were hard pressed to field enough aircraft; we relied heavily on reserve forces; and the provision of £500 million-worth of urgent operational requirements illustrated how bare the resupply shelves had become. Indeed, the Government's determination to apply industrial "just in time" practices to the defence of the realm is potentially a recipe for disaster. As my hon. Friend the Member for North Essex (Mr. Jenkin) reminded the House last week, General Sir John Reith acknowledged to the Defence Committee earlier this year that we had come "perilously close" to being unprepared for the start of the Iraq war.

I do not want to imply that there is no common ground between us and the Government, because there is. I should think the public are rather fed up with incessant yah-boo politics. There are things we disagree about, but also things we agree about. We accept that, in the post-cold-war world, new challenges arose. My right hon. Friend the Member for Fylde (Mr. Jack) made that point. The defence posture required to confront a threat from across the north German plains was very different from the one required to move swiftly to a trouble spot anywhere in the world. Indeed, we fully support the concept of expeditionary forces. Furthermore, I personally believe that our default setting should now change from operations in a temperate climate to the expectation that operations will take place in a hot climate.

Let me run through some of the particular projects. We have covered the carriers, on which I hope the Minister will be able to enlighten the House further at the end of the debate. I turn to the Eurofighter Typhoon. That is unquestionably a superb aircraft, probably the finest air superiority fighter in production today. However, thanks in part to the drag effect of European collaboration, it is late entering service and over budget.

The Italians have already signalled that the project will be cut by a third. Alessandro Pansa, chief financial officer of Finmeccanica, our Italian partner, was reported in the Financial Times as saying: Tranche three of Eurofighter is something that is doubtful. The second tranche is also running into difficulties. The Germans were reported in the Financial Times on Monday to have become frustrated with what has been described as foot dragging by the British Government. Can the Minister say when he will approve the order for tranche 2, scheduled for delivery in 2006?

At oral questions last month, the Secretary of State told my hon. Friend the Member for Vale of York (Miss McIntosh) that there will be no changes in the Government's plans for procuring Eurofighter Typhoon", but he went on: We anticipate changes to the way in which those aircraft are configured, but those matters will be set out more clearly in the forthcoming White Paper."—[Official Report, 8 September 2003; Vol. 410, c. 2.] What does that mean for the project? It is unsatisfactory that this important procurement debate should be held without the Government revealing what changes in configuration they have in mind. For our part, we believe that the Government should now bring forward development of the ground-attack variant of the Typhoon. It should be capable of 24-hour all-weather operations; be equipped with global positioning system and laser designators; be able to deploy ALARM—airlaunched anti-radiation missiles—and other air-to-ground precision munitions; and have electronic scan radar, enhanced sensor suite and open architecture to accommodate later upgrades. If we were able to do all that, the UK would be provided with a potentially formidable aircraft to complement the carrier-borne joint strike fighter. It would also enhance the aircraft's attraction to allies and be available before the JSF enters service.

On that note, may I invite the Minister when he winds up to be a little more specific about the export opportunities for the Typhoon? I understand that Singapore and Greece are interested. If we could get ahead of the game in converting tranche 3, perhaps, into the ground-attack variant, we would have a formidable aeroplane that would not only enhance our own squadrons but be available in an export market—something which, as the Minister himself said, is extremely important. I agree with every word that he said about the Liberal Democrats. They parade around the country pretending to be in favour of defence, only for their spokesman on Treasury matters then to say that we should withdraw all financial support for our export efforts. To do so would of course kill those efforts, so the Minister was absolutely right.

I hope that the Minister will look at my suggestions, because decisions have to be taken now. If our partners in the Typhoon programme are reluctant, the UK should proceed alone, with the others continuing to develop the core programme. Whether or not the Government proceed now with development of the ground-attack variant, they must sign this contract off by the end of the year, or risk a costly production gap. A Ministry of Defence spokesman was quoted in Monday's Financial Times as saying that we have not ruled out a full order by the end of this year, but given the obvious importance of the contract our priority is to ensure that industry's proposals for the programme are soundly planned and established on adequate design maturity"— whatever that means. Are the Government committed to the full order and to signing up to tranche 2 by the end of the year?

On the future rapid effects system, the Chief of the General Staff, General Sir Mike Jackson, told the Royal United Services Institute in June that it was clear to him that the concept of the Future Rapid Effects System is critical to the British Army's future capability. If we accept FRES's importance to the British Army's future capabilities, the difficulties that the MOD has run into become more acute. We expected progress to be made on this project in the summer. We were then told that it would be made in the autumn, but autumn is upon us and there is still no tangible progress. The Minister said that we should expect some form of decision later this year, but there is not much of this year left. Indeed, I understand that the Government recently and somewhat peremptorily rejected a joint proposal from BAE Systems, Alvis Vickers and Thales for a three-way alliance to supply FRES, not least because the procurement strategy for this programme is under review. Given the importance of this project to the British Army's future capabilities, as indicated by the Chief of the General Staff, why are the Government still only at the stage of reviewing the procurement strategy? How on earth can they hope to meet their projected in-service date of 2009 if they are still fiddling about working out what the strike procurement strategy will be? That is not a very fine example of smart procurement, if I may say so. Given the importance of this issue, the Government have to give us more information during today's debate about exactly what is proposed. As the hon. Member for The Wrekin (Peter Bradley) rightly pointed out, the continuation of British manufacturing capability is critical.

If, by some chance, the FRES project were to meet its projected in-service date of 2009, how would it be affected by our limited strategic lift capability? The in-service date for the A400M is 2011, two years after that for FRES, leaving FRES without adequate strategic lift for its first two years in service. I can only conclude that the delay is designed to coincide with the introduction of the A400M, but that has already itself been beset by serious delays. We are a decade into this project and still no nearer to cutting metal. As I am fond of saying to BAE, "When are we expecting to cut the first cardboard?" This project has not had a happy history to date. The requirement for a strategic lift capability, which the A400M is designed to fulfil, could have been provided by an off-the-shelf solution such as the C-17. Again, we salute the Government's decision to take on four C-17s, although I am not sure that the decision to lease them actually provided the best value for money in the circumstances. As the Minister knows, those aircraft played a key role in the recent Iraq deployment. The decision to opt for the collaborative A400M seems to have been as much about European politics as the need to develop a strategic lift capability for Britain's armed forces.

Examination of these individual programmes leads to the wider issue of defence industrial policy, and in that regard I want first to consider research and technology. Today's front-line military equipment is the product of yesterday's investment in that technology, most of which, I remind the Minister, came from the previous Conservative Government. Without the continuation of such investment, we shall be left with two options: to offer our armed forces second-best kit, or to buy off the shelf from abroad. In effect, that means buying from the United States, a point to which I shall return in a moment.

In 1990, the Conservative Government were spending about £1 billion on defence research—equivalent to 14 per cent. of the amount spent by the US Defence Department. Last year, this Government spent about £450 million—less than half the 1990 figure, and equivalent to just 6 per cent. of US expenditure. Indeed, US expenditure is planned to rise from $27 billion in 2001 to no less than $37 billion by next year.

I want to mention a particular aspect of recent defence research that the Minister has himself referred to. Modern communications have brought high-intensity war fighting into the nation's sitting rooms. There is an understandable and growing revulsion at the loss of civilian life involved in conflict. We all saw on our TV screens the opening shock and awe attacks on Baghdad, which were apparently so violent and extensive that they must have flattened the city. However, having flown over Baghdad at low level in July with my Defence Committee colleagues, I was surprised at how little damage had been inflicted on the city. That civilian casualties were minimised was due in no small part to the use of precision-guided weapons, which have been developed at considerable cost since the previous Gulf war.

There is a message here. The truth is that it would be very difficult for a British Government—and perhaps others as well—to prosecute high-intensity war fighting if the public believed that widespread civilian casualties would follow. The public are reluctant to accept any casualties, but we should note that precision-guided weapons have played a major role in minimising them. We should also pay tribute to Britain's scientists, who were responsible for developing the technology that has enabled us to limit casualties.

Mr. Breed

rose—

Mr. Howarth

Is this Liberal policy coming up?

Mr. Breed

I concur with all that the hon. Gentleman said about the development of precision-guided weapons. Has he read a recent press report about the potential for manufacturing low-intensity nuclear weapons, which might even enhance such developments? Would he like such technology to be pursued?

Mr. Howarth

I am not aware—

Dr. Julian Lewis

That sounds like, "Liberals for the neutron bomb."

Mr. Howarth

Indeed. However, I am not aware of that report and cannot ask "my staff" to look it up because they are not yet my staff. In due course, after the next election, things might be different. I shall certainly do the hon. Member for South-East Cornwall (Mr. Breed) the courtesy of reading the article; if he has it to hand, perhaps he could let me have a look at it.

Unless we as a nation are prepared to invest more in defence-related research, our technology lead—in those areas in which we do lead—will disappear. The Government have placed all their faith in the privatisation of the Defence Evaluation and Research Agency, which is now known as Qinetiq and controlled by the US Carlyle Group. However, as Qinetiq has pointed out to me, it cannot raise funds here and has to tap the US market. What will the consequence of that be? If US taxpayers or US investors provide the funds, they will own the resulting technology and the United States will control the release of that technology to us. Very serious consequences will flow from that Government decision, which was not popular on either side of the House. The Government owe it to us to develop their strategy more clearly to ensure the maintenance of our technology base, so much of which has been derived from Government expenditure.

Conveniently, that point brings me to our relationship with the United States, which is dragging its feet on approving the technical access agreements on the joint strike fighter—a point to which my right hon. Friend the Member for Fylde alluded. The UK does not have design and support authority for the UK-produced joint strike fighters. We failed to secure that with the Apache attack helicopter. We failed to secure it on the Hercules C-130J, although on the much older C-130K, we do have design authority, which has proved by comparison more beneficial to us, especially to the hon. Member for Cambridge (Mrs. Campbell)—who is not in her place—and to Marshall Aerospace in her constituency, which does a marvellous job. That is not an acceptable state of affairs. Will the Minister advise the House on the actions that the Government are taking to secure agreement on those issues? Can he confirm that, without having design and support authority on our own joint strike fighters, we could end up being dependent on the US, which could then exercise a power of veto over our operation of that aircraft?

Mark Tami

The hon. Gentleman mentioned the dangers of handing over such matters to the US. He also mentioned not taking the A400M and choosing the C-17 instead. Does he accept that that would hand over another matter to the US?

Mr. Howarth

No, because I seek to strike a balance. The Minister pointed out the danger of being xenophobic and saying, "Buy British on every occasion", because we are attacking elements in the US for advancing a "Buy American" policy. I believe in a two-way street, as I shall demonstrate shortly. I hope that the Minister will tell the House how well the joint strike fighter project is progressing, because it is currently overweight and somewhat over-budget. What assessment have the Government made of the project proceeding to the next phase of its development?

Our difficulties with the US do not end with the joint strike fighter. The Government have made representations to the US Administration about securing a waiver for the UK from the effects of the international traffic in arms regulations, and I pay tribute to Lord Bach for the vigour with which he is pursuing that matter in Washington. I wish the Minister of State every good fortune when he goes to beat the drum over there next week.

I understand that one of the issues standing in the way of progress on the ITAR waiver is the failure of the Department of Trade and Industry to lay the necessary orders under export control legislation to make it an offence for a British subject or UK businesses to trade on, disclose abroad or export information that they may receive under the waiver. Can the Minister tell us the score on that? Will the DTI move those orders and would that be of assistance in unlocking the impasse with the US?

Reference has been made to the "Buy American" proposal of Congressman Duncan Hunter, which, if successful, would be extremely damaging to British industry. The good news is that it is supported neither by leading US defence contractors nor by the Administration. I emphasise that there is a unanimous view on those matters across the Floor of the House. The Minister will know that the Defence Committee, on its visit to Washington last month, made very strong representations both to the Senate armed services committee and to members of the Administration, including Defence Secretary Donald Rumsfeld and his deputy Paul Wolfowitz. It would be nice if the Minister could acknowledge that it is not only the Government who are batting on this, but that we have formed a united front. We cannot afford to relent on the campaign.

Mr. Kevan Jones

I hear what the hon. Gentleman says about the change in position of the US Administration, but is he aware that as early as last week Paul Wolfowitz was trying to negotiate with Mr. Hunter about his Bill, not to veto it—as we were told in Washington—but to water it down? It would still have grave implications for the UK defence industry.

Mr. Howarth

The hon. Gentleman, who is a distinguished member of the Defence Committee, is right. Whatever protestations the US Administration may make about sharing our view, the fact is that the Hunter Bill is an amendment to a wider appropriations Bill, and it would require the President to veto it. A huge amount is at stake and it is not only the Minister's efforts that need to be harnessed in support of the campaign. The Prime Minister himself needs to be involved.

Mr. Ingram

He has been.

Mr. Howarth

I am sure that he has, but we need to fight those guys hard. When the Americans defend their commercial interests, they fight tooth and nail: let us fight tooth and nail as well. UK-US defence trade is running 2:1 in favour of the US. If those repeated standing ovations in Washington in July, and the repeated and undoubtedly heartfelt tributes to our Prime Minister for Britain's support for the US over Iraq mean anything, the US has to give the UK a fairer deal than is currently on the table. Compromises that result in the UK paying the price are not acceptable.

The defence industry is at a crossroads. If the US does not accord the UK the treatment that we deserve, with access to its market and shared technology, it will risk leaving us with little option other than to throw in our lot with our continental partners. But that would not resolve our problems.

I do not wish to sound unduly negative about European procurement collaboration, but it has proved costly and inefficient, driven more by political than by military considerations. Collaboration with our allies is probably essential in developing our capabilities, but however we select our collaboration partners—whether we choose to go it alone or choose an off-the-shelf solution—our decision must be based on what will best fulfil the requirements of our armed forces in the best possible time and at an acceptable price.

The House of Lords European Union Committee warned that the proposed European armaments and capabilities agency could become a tool of protectionism or constraining the ability of member states to order armaments independently". The Government's response to the ninth report of the Defence Committee said that the Government were opposed to the creation of a closed European market". That may very well be the Government's intention, but that is not what is happening in Brussels. The European capabilities and acquisition agency set out in the Convention on the Future of Europe is part of a plan to create a single European army with a single European procurement process. In their response to the Defence Committee's report, the Government denied that it would act as a tool of protectionism, but failed to address whether it would constrain the independence of member states in their procurement decisions.

What effects will the proposals in the Commission's paper entitled "European Defence—Industrial and Market Issues—Towards an EU Defence Equipment Policy", which was agreed by the General Affairs and External Relations Council in May this year, have on the existing Organisation for Joint Armament Cooperation arrangements? That is another example of unnecessary duplication of existing processes by the EU that the Government are blindly going along with.

How does the NATO Prague capabilities commitment differ from the European capabilities action plan? This is riveting stuff. What progress has been made in achieving our commitments required by the PCC and the ECAP? How do the processes to achieve the requirement of those commitments differ? It is yet another example of unnecessary duplication by the EU in European defence. We support increasing European capabilities and much more needs to be done to close the capabilities gap with the United States, but those aims are best achieved through NATO and with European countries pulling their weight in defence expenditure.

The harmonisation of European research and development is seen as a quick fix to make up for the shortfalls in the UK research budget. Rather than assessing the risks posed to our procurement process and research agenda by such harmonisation at a European level, the Government see it as an easy way to make up for the cuts that they have inflicted upon our research budget. The harmonisation of European rules on procurement and the development of an EU armaments agency would force the UK into a political straitjacket, reducing our ability to make procurement decisions based on British interests. It represents the intention of some in Europe to create a fortress Europe in defence markets and plays into the hands of those in the US who wish to create a fortress US, with the "Buy American" proposals that are making their way through the US Congress. That stand-off in defence markets will result in increased costs and a reduction in competition on both sides of the Atlantic. The biggest loser in any such stand-off will be the United Kingdom, which at the moment enjoys good relations with both the United States and our European partners.

All our experience on collaborative European projects such as the Eurofighter, Horizon frigates, the multi-role armoured vehicle—MRAV—and the A400M demonstrates the difficulties in harmonising different requirements that all too often result in a compromise system that fails to meet the full specification that we need. There is a real risk that the EU armaments agency would lock us into projects that might not meet our requirements. The Government pulled out of both the Horizon frigate and MRAV projects in favour of a UK national solution. The hon. Member for The Wrekin (Peter Bradley) knows that only too well. Would that have been possible if we had been locked into such a project through a common European armaments agency?

The defence industrial policy enunciated a year ago by the Secretary of State has been welcomed by many, although it seems to me little more than a statement of what has effectively been the practice for many years—competition, but with exceptions. The Government are under fire from BAE Systems and others who believe that at least the lion's share of taxpayer-funded defence procurement expenditure should come their way. The chaotic saga of the Hawk advanced jet trainer was a poor reflection of the much-vaunted defence industrial policy. Making the decision just hours before 500 people were to be served with redundancy notices hardly reflected a considered judgment, right though the decision was in the end. The highly publicised uncertainty on the part of the British Government nearly scuppered the aircraft's prospects in export markets; the Minister of State mentioned India.

The Government must develop a clearer sense of purpose in dealing with British industry. Of course, there must be competition, but only from those who open up their markets to us. I shall quote from the excellent Defence Committee report what Sir Richard Evans told us on behalf of the Defence Industries Council. He said: I am not saying that we should necessarily change the policy that we have but we should be doing a hell of a lot more to force the others to actually come in line with us … I do not think protectionism is the answer to this … The answer to this is not to shut the door, it is to exercise quite cautiously the degree to which we allow the door to be opened whilst at the same time exerting the maximum amount of political and industrial pressure on those other markets that are benefiting from entry to the UK to do the same for us. I am sure that the Minister of State agrees with every word. It is common ground, but we have to put that into practice.

In conclusion, this debate comes at a crucial time with a number of procurement projects falling behind. Of the 20 projects in the 2002 major projects report that had reached main gate or the equivalent point, eight have slipped and overrun their time of approval. The Defence Committee's ninth report found that there remains a question about the agility of the Ministry's procurement systems. The Government failed adequately to address that in their response to the report published earlier this week. Evidence of the lack of agility in the smart acquisition process comes from the number of times that that process has been refined and, indeed, renamed. The claim of the chief of defence procurement, Sir Peter Spencer, about the need to "periodically refresh smart procurement" causes one to speculate about the agility of the process.

There is much to be done on procurement. We welcome concepts such as the capabilities-based approach, but as my hon. Friend the Member for North Essex told the House last Thursday, those concepts, such as effects-based warfare and talk of flexibility, must not merely become smart euphemisms for cuts as is increasingly the case in what we hear from Ministers.

I do not underestimate the scale of the task. The Government face difficult decisions in configuring our armed forces into the shape, size and capabilities needed for the post-11 September strategic environment. My hon. Friend the Member for New Forest, East (Dr. Lewis) will refer in more detail to some of those key capabilities, but it is a challenge to provide a continuing ultimate deterrent, develop a modern network-centric capability, maintain conventional forces and provide highly professional and motivated infantry to hold ground and engage in peacekeeping operations.

The Government's own chosen programme entails a great deal of expenditure. I hope that Ministers can convince the Chancellor to pay for the equipment that our armed forces deserve and need if they are to fulfil the tasks that we ask of them. They are the best and they deserve the best.

I said at the outset that this Government have sent Britain's armed forces into battle on at least five occasions since they took office in 1997. Only the United States has been involved in comparable operations. Put bluntly, we buy weapons systems that are used in anger. Too often, compromises on systems have been made for political, and not strategic, military reasons. We therefore need to ensure that our forces have the best and most effective equipment and that our procurement policy breathes life into Britain's domestic defence industry, which employs so many of our constituents.

2.44 pm

Peter Bradley (The Wrekin)

I welcome the opportunity to contribute to this debate and raise issues that are of pressing importance to my constituents. Notwithstanding what the Conservative spokesman, the hon. Member for Aldershot (Mr. Howarth) said, the timing of this debate is appropriate given that decisions will be taken in the coming weeks about the future rapid effects system in particular.

First, I must emphasise how important defence industries are to my constituency. We have in it RAF Cosford, a major RAF training station, and DSDC Donnington, the defence storage and distribution centre. The Army Base Repair Organisation is on the same site at Donnington and Alvis Vickers is at Hadley. I shall focus principally on procurement—on Alvis and the work force there—but will first say a few words about the other defence establishments and their recent past.

We are extremely proud of RAF Cosford and the aerospace museum alongside it. We are proud of its contribution to the community, the local economy and the armed forces. It is worth bearing in mind that about 50 per cent. of ground support crews in the RAF have trained at one time or another there. Indeed, although it is a training establishment, it has sent a considerable number of personnel to the Gulf in recent months.

Cosford has grown in recent years and I am glad of that, but its growth has been at the expense of other establishments, notably RAF Locking at Weston-super-Mare. There have been substantial changes at Donnington too, but more in the nature of contraction than expansion. Within living memory about 8,000 men and women worked at Donnington. Six years ago, that figure was down to 3,000. It is now about 1,800, with 1,000 employed at ABRO and about 800 at DSDC. Every one of the seemingly endless programme of reviews and rationalisations not only reduces the work force at Donnington—it has certainly done so in the past—but creates massive uncertainty and anxiety among men and women who, frankly, devote their working lives to service and who have never failed our front-line troops when their support has been needed.

I am sure that the whole House will join me in paying tribute to the sustained effort that the staff there made not only from the onset of the military campaign in Iraq but long in advance—from the Christmas of last year. When I visited Donnington in March with my hon. Friends the Members for Telford (David Wright) and for Stafford (Mr. Kidney), they had already moved about 500,000 pieces of kit, from small batteries to tank engines and aircraft wings, out to the Gulf, and they were working around the clock, without the public recognition that they deserved, in an unsung but heroic effort. They now face yet another review. Having survived the strategic defence review and the depot rationalisation study as well as at least two major overseas military campaigns, they now face the future defence supply chain initiative. Their fear—it is a common fear—is privatisation, the loss of jobs and in particular the loss of the civil service ethos to which they attach great importance and which is the backbone of their commitment and achievement over many years.

I appeal to the Minister, in so far as it is within his power, to preside over a period of calm and consolidation and to take the opportunity to acknowledge the record of both the DSDC and ABRO at Donnington and to assure the security of their jobs and livelihoods in the future. That is important in my local community and the local economy because The Wrekin is traditionally an area of low unemployment but the price that we pay for that is low wages. The reason for those low wages is the low skill levels in Telford and The Wrekin. The Government rightly attach a great deal of importance to building on our skills base. I suggest that it is important not only to build on that base, but to preserve what we already have. Alvis Vickers makes 90 per cent. of the British Army's vehicles, including Warrior and Challenger 2, so I was glad to hear my right hon. Friend the Minister's tribute to the performance of those vehicles during the recent campaign. Donnington and Alvis Vickers at Hadley are beacons in our local economy in my constituency, because they offer relatively decent rates of pay for high levels of skill. That is why it is essential that they should be protected at all costs.

The recent history of the Hadley plant mirrors a trend in British defence manufacturing. I may seem like an old lag to Opposition Members, but, contrary to what the hon. Member for Aldershot suggested, I was not a Member of this place in 1992, and when I was elected in 1997—although it seems as though I have been here since 1982—the plant was GKN Defence. It was then taken over by Alvis, which was good news for the Hadley work force, but not for the work force at Coventry where Alvis closed its plant and transferred the work to Hadley. As my hon. Friend the Member for North Durham (Mr. Jones) rightly pointed out, the company is now Alvis Vickers. It is crucial that there should be no further contraction in our capacity to manufacture armoured vehicles. If there is, the pips will have been squeezed for the last time: Alvis Vickers is the last company that remains capable of building high quality vehicles for the British Army and for export.

In 1997, there were four factories in the UK: GKN Defence at Hadley, Alvis Vehicles at Coventry and Vickers Defence Systems at Leeds and Newcastle. Just six years later, only two factories are left: Alvis Vickers at Hadley and at Newcastle. During the same period, the number of people employed has been reduced from about 3,000 to just over 1.000, 470 of whom work at Hadley. The work force and unions at Hadley fear that if they do not win significant business in the near future, probably by the end of this year, compulsory redundancies will follow by next spring, as surely as night follows day. We cannot afford to let that happen. The local economy and the local work force and local community whom I represent cannot afford it; nor can our defence industry and the MOD, and it would certainly not be in the national interest. Unless we take a big-picture, strategic view of defence procurement we could lose not only jobs at Hadley and elsewhere, but an entire defence manufacturing sector with all the industrial and security implications that would involve.

Earlier, in response to my intervention, my right hon. Friend the Minister said that the Government had made a commitment to procuring its naval vessels from British shipyards because without those procurement contracts those shipyards would close. The same principle applies in my constituency. If the Government make a commitment to protect jobs on the British coastline, they should also be looking to the protection of jobs inland.

I understand the MOD's difficulties in matching the needs of the armed services to British industry's capacity to fulfil them. I understand that the MOD cannot commission what is not needed and that it must constantly reinterpret the needs of our armed forces in the light of global politics, technological advances, battleground experience and, not least, costs. No one is suggesting that we must procure British kit and equipment irrespective of cost, but the needs of industry must also be recognised, taken into account and addressed. The defence industrial policy that was published a year ago explicitly recognises the need to retain industrial capacity in this country, to preserve security of supply and to maintain our export potential.

I am sure that British business is happy to compete. I take the point that the hon. Member for Aldershot made about the fairness of competition. It is important that if overseas companies are to compete or to enter into partnership with British companies we must have the same privilege in their markets. I am sure that British companies, including Alvis Vickers, are prepared to compete, but they cannot survive simply on hopes and expectations. They cannot keep production lines running and skilled men and women employed without copper-bottomed contracts.

In his opening remarks, my right hon. Friend the Minister said that he is keen to see that the British Army, the Royal Navy and the RAF get the best kit to do the best job. That is important. He said that in ensuring that our procurement policy follows that principle he cannot have regard only for the interests of industry. I agree, but there is no point in the MOD trying to place contracts with British suppliers when those suppliers have been obliged to make their skilled work forces redundant for lack of contracts. Those skills will walk away; they will not come back and we shall no longer have the industrial capacity to respond to demand.

I am saying not that we must buy only British—I am certainly not saying that we should buy British at any cost—but that we should buy British where we can, and that where there is the capacity to produce tested, high quality equipment, such as Warrior, Challenger and other kit, we should seek to procure it. I mentioned earlier the importance of security of supply. If we lose that important sector of our defence industry, who will carry out the kind of emergency work to which I referred in my intervention and which Alvis Vickers personnel undertook in upgrading Challenger 2 in the Gulf and in Kuwait during the weeks and months leading up to the hostilities in Iraq and during those hostilities? Who can we look to if we no longer have the defence capacity to meet that need? On which foreign powers will we have to depend to meet our defence needs? Furthermore, how will we compensate for the loss of export earnings from Alvis and others—companies that research and develop their equipment in this country for the MOD?

I was pleased to receive the Minister's reply to my recent question about the future rapid effects system, which is due to produce the medium-weight armoured vehicle by 2009. He said: The Department is considering procurement options and will have regard to all relevant factors, including industrial issues, in determining the way forward."—[Official Report, 6 October 2003; Vol. 410, c. 1160W.] I very much welcome that and hope that the outcome of the decision-making process will be favourable to my constituents.

I hope, too, that not only MOD Ministers but, crucially, Treasury Ministers adopt the same approach to FRES as they did in making their decision—albeit a belated one—about the Hawk jet trainer. I remind the House that, when making her announcement about the Hawk jet trainer, my right hon. Friend the Secretary of State for Trade and Industry said that the decision underlines our commitment as Government to the new defence industrial policy and manufacturing strategy". My right hon. Friend referred to major economic benefits to Humberside and wider to the UK through key suppliers". If that same—I am struggling not to use the word "holistic"—

Mr. Kevan Jones

Wll my hon. Friend give way?

Peter Bradley

I hope my hon. Friend can offer a substitute.

Mr. Jones

I will try to help my hon. Friend. Does he agree that the strange thing about the FRES programme is the fact that after spending several million pounds, through Alvis Vickers and other companies, on the development phase, the Government have suddenly pulled the plug on the programme? Has not that sent a message to UK suppliers that they may not be in the loop for the next procurement of the project?

Peter Bradley

I agree with my hon. Friend; it is not a good portent. In the summer, a team of about 100 people from Alvis Vickers, BAE General Dynamics and Thales were working on technical studies. They were pulled off the job and the MOD is now considering commissioning an independent systems house. That is not a good portent, not least in the light of the fact that we thought that the medium to long-term future for Alvis Vickers was assured due to the multi-role armoured vehicle contract, which, as the hon. Member for Aldershot reminded us, evaporated earlier this year. It is not a good portent. Mixed messages are coming from the MOD and the Treasury. I hope that, if not the Minister of State, then the Minister who replies to the debate will take the opportunity to clarify some of them.

I repeat the point that I was making when I was trying to think of another way of describing an holistic—perhaps I should say comprehensive, co-ordinated—approach to procurement. If the Government can commit to procuring ships from British shipyards, it surely must be possible to commit to procuring, where possible, armoured vehicles when we have such a respectable track record in that production. Let me spell out why that is crucial to the future of this important defence sector and particularly to my constituents.

FRES is likely to be the only new programme of its kind for the next 20 years. It will provide for contracts of up to –6 billion in value. It has a huge export potential. It is vital to maintain this country's capacity to design and manufacture such vehicles. It could lead to the protection, and indeed the generation, of some 3,000 jobs in my constituency, in Newcastle and in west Yorkshire. It is a 10 to 15-year programme. It is plain to see the huge potential for British industry that arises from this contract and, by the same token, the scale of the disaster if it is not awarded to British, or in main part British, manufacturers.

Earlier this year, as my hon. Friend the Member for North Durham (Mr. Jones) just reminded me, the MOD withdrew funding from the joint team working on the technical studies. I hope that, when he replies, the Minister will explain why that decision was taken and reassure us that it does not mean what those pessimists among us might assume it means.

if Alvis Vickers does not get a lion's share of this contract, there is no prospect of a major domestic order until after 2025. It will have no product to export. That would not only be bad news for my work force and for Alvis but also for the British balance of payments. Alvis's current product range for export will be obsolescent within five years. It will lose the design and development capacity that it has and it will lose the skilled labour that it currently employs, and that will lead inevitably to the closure of factories and the loss of jobs. If the decisions that we expect within weeks on the assessment phase are favourable, it will underpin employment at Hadley and create, I understand, some 50 jobs in the short term in Leeds. If the decision goes against us, we shall be looking at job losses.

I press on Ministers the need for that comprehensive view of our procurement needs, which looks to the interests of our industry and our capacity to support the armed forces in future. I recognise there are no blank cheques, particularly not those signed by the Treasury, but I cannot believe that a Government who have the commitment that they have to British industry and especially to manufacturing, who are aware of the importance of security of supply, particularly in light of recent experiences in the Gulf, and who recognise the British defence industry's contribution to our economy, to our exports and to our armed forces, both historically and in the recent past, will take a short-term decision that will in any way prejudice the future of an industrial sector so vital to our defence interests, and above all so vital to the interests of my constituents. Therefore I hope the Minister will take the opportunity, later this afternoon, to give us the assurances that we seek, that the work force and management at Alvis expect, and that we all would hope for from him.

3.4 pm

Mr. Colin Breed (South-East Cornwall)

I congratulate the Defence Committee on a very thorough report, which I found extremely helpful and readable. The Committee has dealt with defence industrial policy, the defence market and individual programmes, but perhaps, rather than focusing on the individual programmes, I might make a few brief comments about how procurement policy might be further improved.

The Committee's report welcomed the defence industrial policy that it had examined. However, even it acknowledges that the proof of this policy will be in its practice. It is fairly early days but the policy has some shortcomings that can be identified now. The idea that procurement decisions should be influenced by export potential, or even the maintenance of capability to export defence equipment, is wrong. A consideration of security of supply may be legitimate, but export potential should be treated separately. The Liberal Democrats believe that the Defence Export Services Organisation should be moved to the private sector. It was in that context, I believe, that my hon. Friend the Member for Twickenham (Dr. Cable) made the comments to which the Minister of State, and I think the hon. Member for Aldershot (Mr. Howarth), referred.

Mr. Gerald Howarth

The hon. Gentleman has made a very serious point. In suggesting that DESO should be moved to the private sector, he clearly betrays his lack of understanding of how defence exports are organised. Foreign Governments like to deal with the British Government. That is what DESO is for. If it ceases to be a Government organisation, that will undermine the very purpose for which it was set up.

Mr. Breed

I am grateful to the hon. Gentleman and I know there are arguments around that case. I am not saying that the Government would not support a privatised organisation but that we should certainly consider dividing DESO from the MOD, so that export potential does not influence the procurement of any equipment. There is, however, no harm in the Government supporting, as they do, a considerable number of other private enterprises to benefit the UK.

Mr. Wilkinson

The hon. Gentleman's suggestion is naive. Does he not comprehend the importance of defence diplomacy in the overall context of providing armaments to countries that require them, quite properly, for their own defence under the United Nations, maintaining a good relationship with them and mutual trust and understanding between the officials of the Ministries of Defence of the two countries concerned—the United Kingdom and the procuring nation overseas?

Mr. Breed

Yes, I certainly understand that, but I still believe that it is not totally impossible to maintain those very important links purely by moving DESO from the MOD's principal command, so to speak. Obviously there must be good relationships between countries that export and import defence equipment between them, but to separate that function would make for a clearer responsibility for the defence industrial policy.

Whatever factors are considered in procurement policy, as the Minister of State has said on a number of occasions, value for money should be paramount, but when Lord Bach, on 25 June, told the Defence Committee that secondly, we have to maximise the economic benefit to the UK", the Government must ensure that that does not become a smokescreen for inefficiency and undue influence. In many cases, the UK will be one of the most expensive countries in which to build things. Therefore, where the cheaper option is one that does not contribute to the economy of the UK, the extra factors at play will have to be significant in order to outweigh the value-for-money considerations. I am sure that that was part of the process relating to the Hawk advanced jet trainer, which I was very proud to support. I was proud to be in Brough on Monday for a good launch and to celebrate not only the UK's purchase, which was entirely correct, but the Indian Government's welcome decision to buy the trainers after the UK indicated its support for them. The right decision was made, because it was the right aircraft.

Mr. Kevan Jones

I too was at that event. I understand that Brough falls within a constituency that the Liberal Democrats will be targeting at the next election. Will we now be seeing Focus leaflets going out, supporting the defence industry and also supporting the decision to buy Hawk, which was not the Liberal Democrat view a few months back?

Mr. Breed

I have no idea what my colleagues might be doing. What I would say is that in my constituency of South-East Cornwall, which is very close to Devonport dockyard, we are extremely supportive of anything to do with the defence industry in Plymouth, and although that is not in my constituency a considerable number of my constituents work there, so I have a direct interest in what happens in defence industries in that part of the world.

The Select Committee report rightly praises the UK's record on opening up its defence market, which is, indeed, a notable achievement that can only benefit overall the British taxpayer and contribute to global stability in the future. The report also acknowledges, along with the chairman of BAE, that other countries must be encouraged to follow suit. Closing off the British market and procuring only nationally made equipment is not the way to do that. Progressive opening up of the UK market should go hand in hand with political pressure on other countries to liberalise as well.

The framework agreement with France, Germany, Italy, Spain and Sweden on defence liberalisation and co-operation is very welcome, but the key to a fully open and competitive defence market in Europe is to move away from the exemption on defence in the single market. The European Commission's suggestion for a European defence equipment framework represents an attempt to navigate a way round that difficult issue.

I welcome the Government's efforts to support the proposals for enhanced co-operation on defence in the draft EU constitution, but I urge them not to lose sight of the importance of tackling the exemption to establish that Europe-wide defence market. Even without a wider European defence market, there is certainly scope for more European co-operation on defence procurement.

According to some rumours ahead of the White Paper, the British defence budget may be in some peril. It would be helpful if the Minister could confirm in his winding-up speech whether there are plans to purchase more C-17 transport aircraft. Indeed, would it not have been better to purchase those aircraft outright in the first place?

There is a bubble in the procurement budget, which will be felt in about five or six years' time, when many of the big-ticket items currently on the order book come into production. I find it difficult to imagine that the MOD has not done any strategic planning on how it expects those costs to mount up over the coming years. If any such studies exist, will the Government place them in the Library to allow better scrutiny of their decisions? It would be extremely helpful if they did so.

Clearly, if the current Treasury attitude towards the defence budget persists, some radical rethinking of the procurement programme will be required. I urge the Government to consider the consequences earlier, rather than later, so I should like therefore to make some suggestions that I hope the Government will find constructive. If radical rethinks are needed, better and further co-operation with our European partners is something that the Government must consider in more detail.

The European armaments agency—the proposed successor to OCCAR, the four-nation joint procurement agency—is a useful idea in the new draft constitution. The more that we can procure and manage capabilities jointly, the more possible savings will arise for the UK. That is possible in any sector in which the private sector is involved. Indeed, private finance initiative projects are perhaps ideally suited to multinational co-operation. If we are willing to outsource capabilities to private companies, we should have few qualms about pooling those capabilities and sharing the costs with our European allies. No doubt, such ideas will assume more prominence if the international traffic in arms regulations waiver on exports from the USA is not agreed soon.

Mr. Wilkinson

I am sorry to intervene yet again, but could the hon. Gentleman explain a little more clearly how he imagines that defence PFI contracts can be internationalised? They are, of their essence, already extremely complex financially. To organise them nationally is hard enough, so how will that be achieved multinationally? Can the Liberal spokesman enlighten me?

Mr. Breed

I am certainly not saying that that will be easy. The experience of the initial stages of the PFI in this country is one of enormous complication, and a good deal of money was expended for no purpose whatsoever. However, the maturity of those schemes nationally has enabled us to move forward. Greater trust has been shown by both sides in such contracts. In fact, the arrangements have meant that contracts have been more possible, and there has been a proliferation of PFI projects. I do not believe that that excludes the opportunity to conclude international PFI projects. Such projects will be more difficult to establish, but unless we can begin to crack the practical difficulties, we will not obtain the sort of savings that many of us want to achieve, so ensuring that our defence expenditure remains high and that we get real value for money.

In conclusion, of course procurement policy could be improved, and the budget available will reach its limits at some point. I do not know what are those limits and we do not know what value for money calculations are undertaken for each project, but it is right to call on the Government to examine in detail radical ways to find cheaper options, and they should do so soon. That is important not only for the sake of value for money—that is obvious—and maintaining capability, but to forestall future battles that will, no doubt, ensue over priorities for the defence budget. Currently, the tasks undertaken by our armed forces are principally those of nation-building and peacekeeping. Keeping enough troops under arms and keeping them well trained, supplied and well looked after is a priority in that effort, but that priority should not suffer in the future because the MOD refused to think innovatively about its procurement programme now.

3.16 pm

Laura Moffatt (Crawley)

It is incredibility important that we are talking about the resources and the equipment that our armed forces need and deserve. This subject is of particular interest to me, as I was a member of the Defence Committee in the 1997–2001 Parliament, when the whole idea of smart procurement was first mooted in the strategic defence review. Of course, we now know it as smart acquisition. It has been incredibly interesting to see that process not only from the House's perspective but in relation to the way in which companies in my constituency have risen to the challenge of smart acquisition. There is no doubt that it is a challenge to them, but it is a challenge which, for the most part, they relish. They enjoy better relationships with others in the industry and with the Government. That has to be the way forward for the British defence industry, and those companies completely understand that and know that that must be part of their thinking in ensuring that their products are of the highest quality.

I want to say a little about the enormous strides that have been made in the defence industry. Hon. Members on both sides of the House take defence seriously. We may argue about defence budgets, but Labour Members know that the defence procurement budget has served us extremely well and will continue to do so, although we have to consider extremely carefully what sort of equipment we will need in future, and to be very much aware that this is a changing scene.

We know, too, that our most precious defence commodity and asset is the people in the armed forces themselves. When we talk about the equipment that they need to do their job properly, it is important that we recognise their commitment. That was brought home to me just last week, when Lieutenant Colonel Paul Mitchell, the commanding officer of 103 Royal Electrical and Mechanical Engineers, Territorial Army centre in Crawley gave me a briefing on the more than 60 members of that TA centre who are or have been in Iraq in the past few months, and described how those people—both men and women—are responding to the enormous challenge. In fact, they do their procurement themselves, since the REME are, of course, involved in recovery and engineering. They have been working closely with the Iraqi people and the Iraqi forces that are able to work with the allied forces. They are recovering an enormous amount of the equipment and vehicles that have been left behind by Saddam's forces, and getting them on to vehicles back to Basra to have them refurbished, made good and made ready for a new Iraqi force. That our forces are assisting in that process in Iraq today is an incredibly powerful thought, and it was a privilege to hear of their work. Having gone through testimonials of people who are there and looked at photographs, it struck me that they did not complain about their equipment: they were comfortable and happy, and felt that they were being treated properly. Certainly, from the perspective of my Territorial Army centre, that was important.

I want to say a little about equipment for the TA and reserve forces. We often become understandably obsessed with big procurement issues and vital, major projects involving our regular forces. It is essential, however, that our reserve forces have the equipment that they desperately need to do the job we ask of them. Their role has changed so much over the years—they are now very much at the forefront, working alongside our regular armed forces, and they need equipment and training. Procurement must refer to them and to making sure that they have all that they need. I hope that the Minister will respond on that issue, because we must recognise the role of our reserve forces, and that procurement of the equipment that they need is as important as it is for our regular forces.

We would not be doing our jobs properly as Members if we did not stress—as the hon. Member for The Wrekin (Peter Bradley) did powerfully—the importance of defence jobs in our constituencies. I want to talk about a couple of programmes that are very important to the well-being and livelihoods of my constituency of Crawley. Thales, a company of which everyone here will be aware, has 2,500 of its 12,000 UK jobs based in Crawley. That company is doing much of the important work of which many Members will be aware—procuring major projects such as the future strategic tanker aircraft, Watchkeeper, and the simulated vehicle training system. It therefore has an enormous interest in ensuring that the Government make the right procurement decisions, and I hope to spend a few minutes putting the case.

Thales is very important in Crawley. People may ask what is the need to try to secure more jobs and to consolidate jobs in communities in towns like mine, which have very low unemployment rates. Members who are in the same position in their constituencies will completely understand. Given that these jobs are related to good apprenticeships or degree entry and provide a wide range of employment opportunities for our young people, I hope that Ministers will appreciate why we fight like alley cats to ensure that they come to our constituencies. In Crawley, which has Gatwick airport within its boundaries, it is easy to see how much the south-east relies on that airport. Those are good jobs, too, but they are related to the retail and service industries industry. If we do not have a wider range of opportunities, our region will inevitably become over-reliant on one area of investment and economic activity, which is huge mistake. That is why it is incredibly important that we support companies in our constituencies that produce what are excellent materials for our armed forces.

One thing that I would say without hesitation is that our armed forces want the very best they can get. The Minister was correct to reiterate that it would not be right for us to do favours to companies in the UK. The reality, however, is that the British defence industry is now one of the best, and there is no question but that it can rise to the occasion. I firmly believe that the smart acquisition process has made that happen and has pressed it to the challenge, and it is important that we reward it for the work that it has done. It is easy not to appreciate exactly what the industry has gone through. It has gone through enormous change, in terms of accepting the risk, and is now able to say that it is truly partnering Government. As I mentioned that members of the reserve forces from the south-east region are in Iraq, it is also important to say that people from Thales are in Iraq and have been there since day one of the offensive. At the beginning, there was huge nervousness about having such a partnership deal to supply our armed forces. The Defence Committee was nervous that it would not work, and that the people concerned would not have the military ethos to rise to the occasion. I am told from all quarters, however, that the partnership has been extremely successful. We need to thank those people who are not members of our armed forces but who are doing such a good job for us in those scenarios.

We must respect and understand the fact that the industry has responded. We desperately need an active and lively defence industry in the UK for our economy as a whole, and particularly the south-east. We need to support the companies that produce top-of-the-range equipment for the armed forces whom both sides of the House support, and for whom we need to ensure that the very best equipment is available.

This is an incredibly important debate. It is right and proper to make our stand for our constituencies, but we must understand that today's procurement process is leading to a much better system of making sure that we get the best equipment for our UK forces, which must be right.

3.28 pm

Mr. Michael Jack (Fylde)

I acknowledge the important points about partnership under the defence industrial policy and the smart acquisition procedures to which the hon. Member for Crawley (Laura Moffatt) referred. She, like me, has a particular interest in her constituency and her constituents' employment in the defence industry, and I shall talk about that later.

It may be one year since we debated procurement issues but for a constituency such as Fylde, which is dominated by BAE Systems and, thus, aviation defence, it is significant that today's debate is being held during the centenary year of aviation itself. When the Wright brothers first flew, I can hardly imagine that they knew where the use of air power would lead: the embryonic use of air power in the first world war; the importance of it in the second world war; its growing strategic importance in subsequent conflicts, as we have heard; and now the precision use of aerospace weapons as demonstrated in the most recent conflict in Iraq. No one can doubt that we should ensure that our defence forces have the best equipment because the best in the air matters a great deal.

It is also interesting to reflect that articles are being written about whether the B-52 bomber will serve as a weapons system for 100 years. That shows that, if the quality of a system is right in the first instance, and if it is updated and modified, a platform can continue to deliver high-quality 21st-century defence solutions at a reasonable cost because things last longer. That theme underpinned the views expressed by my hon. Friend the Member for Aldershot (Mr. Howarth) when he talked about Eurofighter Typhoon. I shall mention that and other programmes later.

People are at the heart of our approach to defence procurement because it is the intellectual capability of teams in UK companies and agencies that gives us a leading edge. In this day and age, it is relatively easy to make high-quality components almost anywhere in the world, but it is not easy to develop the groundbreaking ideas that keep our defence equipment at the margins of excellence. Hon. Members who have spoken agree with that.

I reflect on the fact that some 17 years ago in 1986, when I became the prospective parliamentary candidate for Fylde, the experimental aircraft programme flew. I expect that most hon. Members have forgotten that the EAP was effectively the prototype for the Eurofighter Typhoon. I reflect further that the definition stage must have been completed five years before it flew, so more than 20 years have passed before the aircraft has been received into service. It is therefore important that we spend a few moments reflecting, as I shall, on factors that will shape the systems that we buy in the future because it takes a long time to get from the concept to the delivery of such systems.

We are very pleased with what is going on at the BAE plant at Warton, and I put on record my praise for and appreciation of its aerospace workers—design engineers, systems engineers and those who assemble aircraft—and their talents and skills because we would have no industry without them. They look to the future and say, "Yes, we can see that the order book is full for the time being with tranche 1 of the Eurofighter, and we hope that the Government will confirm tranche 2, but there is a question mark after that." There is a big question mark because if the Government want to achieve their objective of sustaining a top-quality British aerospace defence industry, we must start to fill in answers to questions about what comes next. We must discuss what is embodied in the present state of the future offensive air system programme and other air-based programmes that relate to such issues as the lack of unmanned air vehicle capability of UK origin so that we can answer questions about what comes next.

I put on record my appreciation of the way in which Lord Bach, the Minister for Defence Procurement, has courteously and assiduously kept me informed of issues that are relevant to my constituency. I would be grateful if the Under-Secretary would convey my thanks to Lord Bach because I appreciate his willingness to answer letters quickly and give relevant information.

I want to compare and contrast the observations and challenges laid down in the report "A Vision for the Future of Aerospace" by the aerospace innovation and growth team, which was jointly established by the Government and the industry to examine aerospace and the aerospace defence industry, with the Secretary of State's remarks on 14 October 2002 to find out how the Government are setting out their stall to meet the team's challenges. In the team's report, under the heading, "But faces a challenging future", it explains: Despite the forecast size of the market, the report shows that the"— aerospace— sector faces a set of significant challenges which will affect the UK-based industry. The report says: There are fewer new programmes for both the civil and military sectors. UK productivity lags behind that of its US and some European competitors. Availability of, and competition for, highly skilled people could limit the UK's ambition. It points tellingly to the observation: U.S. technology leadership could lead to the foreclosure of UK, European and related export markets. Remarks have been made about the imbalance between the roughly $10 billion a year that Europe puts into European aerospace and the $40 billion that the US puts in, which underscores the saying, "What you put in is what you get out."

When the report discusses the defence aerospace sector, it says: There is a danger that the USA will become the monopoly supplier of defence equipment; at the expense of European industry. Changing defence requirements are driving priorities towards systems integration and complex subsystems, rather than individual platforms. US supremacy in technology and defence investment is encouraging companies to direct new investment there. The window to maintain a European capability in post-Eurofighter European combat aircraft or Unmanned Aerial Vehicles is closing fast". Those are big, high-level challenges to which the Government's defence procurement and investment policy in research and development has to respond.

On the vision for the aerospace industry in the UK in 2022, the report says: Aerospace will be at the heart of the UK's knowledge-driven economy … It will be the country of choice for integrating and managing complex global programmes. It will be a leading designer, developer and manufacturer of high-level subsystems. UK engineers will be highly sought-after and valued internationally. In its summary, under the heading, "The consequences of failure", it concludes by saying: Ultimately, the UK aerospace industry declines until it is merely a supplier of subsystems and opportunistic services. That is what will happen if we do not address the issues to which I referred.

One point in the report is especially telling: the implication that we have lost the confidence, or perhaps the vision and ability, to say that we and our European partners will be involved in air system development that produces the complete product instead of acting as the source of intelligent subsystem work. I am aware that we do not always agree with our American partners, so it is vital in the field of procurement and R and D that we invest in a capability that gives us a degree of independence.

On the future of the industry, in his speech on 14 October 2002, the Secretary of State said: But there is a wide range of defence industrial capabilities which we would like to retain in the UK industrial base for economic reasons. These bring valuable employment opportunities to particular regions of the country; they add high economic value; and they can contribute to defence exports to civil applications and in particular to our ability to collaborate on defence projects within Europe. We want UK industry to retain and exploit these capabilities. We take this into account when determining the best way forward for a procurement project. No one would disagree with that, but we should juxtapose those comments with the report's contents. It is important to marry those two strands of thinking together, perhaps in the White Paper, so that we can see with ever-greater clarity how that vision is going to be achieved against the prospect of European or UK programmes of our own origination becoming thin on the ground.

In the same speech, the Secretary of State said: From the Government's perspective, the UK industry is less about ownership than about where the economic value is generated: where the technology is created, where the intellectual property resides, where the skilled jobs are created and sustained and where the investment is made. Again, there are some challenging ideas. It shows that the Secretary of State does not see wholly UK solutions to UK defence procurement requirements. I accept that. In a world where we seek to export, we will have to buy from others if they are to buy from us. That means that we must have products to sell. I am concerned that the cupboard looks somewhat bare. In 10 or 15 years' time, particularly in the aerospace sector, what will we have to sell that is of our own invention and making? Most tellingly of all, the Secretary of State went on to say: there are a very small number of these capabilities which we must retain in the UK for national security reasons". I have ferreted away, trying to find the capabilities that must be retained for national security reasons. My research tells me that those are nuclear matters, nuclear propulsion and encryption. I was disappointed not to find that aerospace or any aspect of aerospace figured on that list. If aerospace is not such a capability, I should be grateful if the Minister, in his winding-up speech or in correspondence later, could explain why not. Already in the debate we have heard of the importance of aerospace in our military strategy. If that is not the type of capability that we must retain for national security reasons, I do not know what is.

I shall deal with a number of issues relating to particular programmes. I put on record my appreciation for the efforts of the Government, building on the success of the previous Conservative Government, in finally securing the order for Hawk aircraft. I am grateful for the efforts that were made, but the way in which the matter was debated in the public prints, where the to-ing and fro-ing about whether we would or would not buy the aircraft, nearly put paid to all that work with India. George Fernandes, the Indian Defence Secretary, made it clear that if we did not have confidence in the advanced jet trainer, neither would the Indian Government. A great debate was conducted in the public prints, with all the damage that that does, when quiet diplomacy and reassuring words might well have helped to secure that order earlier than was the case. None the less, I am grateful for the efforts that were made.

On Eurofighter Typhoon, reference has been made to tranche 2. The Minister will understand that some 6,000 aerospace workers who are involved in BAE at Warton are extremely worried about the fact that there appears to be no clear date for a decision on tranche 2. We are coming under pressure from our partners on the project, who seem to have made up their minds that they know sufficient about the aircraft, its capabilities and its performance to sign up, yet the United Kingdom Government who, in fairness, were in the lead at the beginning of the project, seem to be holding back for some reason. I should be pleased to know when we can expect a decision.

Will the Government sign up to the 88 aircraft? Have they concluded their discussions with the manufacturer about the workflow phasing? Do they fully understand the implications of reaching a decision on the matter, so that the skilled work force can be sustained between tranches 1 and 2, in the interests of the overall size of the project? I should be grateful if the Minister could comment on whether the Royal Air Force will receive the Eurofighter tranche 1 weapons system at the end of 2005, as contractually agreed.

Finally, there are press reports that the Ministry of Defence has commissioned some form of study group into Eurofighter—that an independent consulting firm has been engaged. Can the Minister tell us what that is about, and can he reassure me that if such an exercise is conducted, it will not be to the long-term detriment of the project?

On the joint strike fighter, I commend the MOD for producing the best paperback book I had during the summer, entitled, "Assembling and Supporting the Joint Strike Fighter in the UK—Issues and Costs". It was extremely good reading and I recommend it to all colleagues who want a thrilling tale of how excellence in the UK aerospace industry can be exploited to our advantage. It took an awful lot of prising out of the MOD. After two weeks of correspondence, in which I was told that it contained factual and printing errors, it eventually arrived via the Library. When I turned eagerly, as we all do, to the executive summary and the conclusions, I was thrilled to find that the UK's manufacturing capability presented no barrier to our carrying out final assembly and checkout—I had thought that that was what one did when getting one's coat from the cloakroom attendant—[HON. MEMBERS: "Or at Tescol."] Yes, there are checkouts at Tesco, as well. I had not heard that it was an aerospace supplier, but it is getting into all kinds of things—who knows?

To be serious, given that we are to buy 150 of these aircraft, I was delighted that the MOD decided to commission Rand Europe to assess the feasibility and capability of the British aerospace industry putting them together. I was pleased when Warton emerged as one of the most-preferred sites at which it could be done, and even more delighted to learn that, if the Government decide to spend the money on a repair and operational facility for the aircraft, for only £12.9 million more we can secure the final assembly and checkout facility. Crucially for the future, that would give us the opportunity to secure the update work on the aircraft, bearing it in mind that it is likely to have an in-service life of 20 to 25 years.

Will the Minister explain what will happen in the light of that report and address the comments on page 108 about the US Government's policy in respect of classified military information? I shall not read out a long extract. Suffice it to say that I twice wrote to Donald Rumsfeld about that when we were in the sign-up process—that caused something of a flurry on Capitol hill, because people are not used to MPs writing about such matters. If the United States wants its most loyal ally to have interoperability to fight alongside it, it must entrust us with the full technical capability of the joint strike fighter and agree to provide the information to enable us to have the final assembly plant and, most importantly, to carry out update work in the fullness of time. Otherwise, all the talk of partnership in the United States will be as nothing. I return to the Secretary of State's speech, in which he warned against falling into the trap of considering the industry along outdated nationalistic lines, and observed that both Government and industry have a role in promoting the multinational reality of the defence industry today.

In the past 24 hours, there has been speculation that BAE Systems and General Dynamics are in discussions. There have been similar rumours about BAE and Boeing and Lockheed Martin. I would not expect, nor want, the Minister to fuel those rumours. But in terms of our future defence procurement and the programmes that we have in the UK, if BAE does form some commercial relationship, either by takeover or marriage, with a north American prime, it will raise serious doubts about whether we will be in a position to originate projects of a British or a European nature off our own bat. Joint strike fighter assembly is very important because it gives us experience of a 21st-century aircraft, but the Government must clarify the implications for the future of our defence security if a company such as BAE were to marry with a north American prime.

Can the Minister enlighten us as to precisely what has happened to the future offensive air system—FOAS?programme? It appeared to be up and running, devising unmanned air vehicles for the future, then it disappeared into a Europeanised version of a similar technology development programme, then it started to pop up when people asked about the ground attack capability of the Eurofighter. What is FOAS supposed to be doing, and what will it deliver? It has a vital role in providing projects that will sustain our aerospace industry.

Beyond considering Watchkeeper, what is the United Kingdom doing about having its own unmanned air vehicles? An article in the August edition of Aerospace International reviewed capabilities throughout the world. On the United Kingdom, it concluded: the UK has expertise—but we could benefit a bit by doing the rough'n'ready ourselves with a technology demonstrator—because then you are ready when the call comes. Unmanned air vehicles will play an increasingly important role in any future conflicts and it is a great sadness that we are not involved. We do not appear to say much about the use of nanotechnology in aerospace and we have said nothing about materials development, which is clearly vital to developing stealth capabilities.

There are some extremely challenging issues, whether considered programme by programme or in the context of the future or our aerospace industry and its relationships with other companies in the world. I hope that the Under-Secretary and the Ministry can respond to them.

3.51 pm

Mr. Kevan Jones (North Durham)

The debate is important not only because we are considering the procurement of equipment to defend our nation but because the industry provides highly skilled jobs in many constituencies.

The defence industry welcomed the Government's defence industrial policy, which they announced in the House last year. The document was long overdue, but for the first time it transparently linked providing first-class weapons systems and armaments for our armed forces and the need to support a vibrant and important industrial sector in the United Kingdom.

The document also bravely opened up the UK defence procurement budget to a healthy and globally competitive defence industry". Many criticised that at the time and we have heard some critics again today. However, it was the right decision because it acknowledges that defence procurement is a global business.

United Kingdom defence firms have gained greatly through international collaboration, not only in competitiveness but in research, investment and technology. The UK taxpayer has also gained because we have developed defence systems for our armed forces that we could not have achieved alone, without the international co-operation of the past few years.

We gain from an open international market. However, UK firms should not be hampered by the protectionism that our closest ally, the United States, has recently demonstrated. The transfer of investment, contracts and technology has to be a genuine two-way transatlantic street. The UK defence industry warmly welcomed the Clinton Administration's proposals for UK exemption from the US international traffic in arms regulations, thereby allowing free exchange of technology between the two countries. The general commitment to co-operate on projects such as the joint strike fighter and other examples of close co-operation between UK and US prime contractors was a good development.

However, the current climate is not so positive. The failure of the US Congress to ratify the ITAR waiver and the protectionist proposals in Congressman Duncan Hunter's Buy American Bill are totally at odds with our open market policy and do nothing to generate co-operation between the US and our defence industries. I would argue that that damages not only our defence industry but that of the US.

Reference has already been made to the Select Committee's recent visit to Washington, where we raised our concerns on both those issues on Capitol Hill, in the Pentagon and in the State Department. My right hon. Friend the Member for Walsall, South (Mr. George), the Chairman of the Committee, also raised them at a brief, impromptu meeting that we had with Donald Rumsfeld. We also raised them very forcefully with members of the Senate Armed Forces Committee. I must give credit to the Chairman of that Committee, Senator John Warner. who recognises the damage that the Buy American Bill could do to our co-operation. I would like to put on record the thanks of our Committee for the way in which he received our representation and in which, since then, he has lobbied hard to get the Bill changed.

Alas, our breakfast meeting with Congressman Hunter was less successful. Credit is due to the hon. Member for Aldershot (Mr. Howarth), who delivered a forceful tirade against the Bill. Unfortunately, Congressman Hunter's steak and eggs appeared to be more challenging than the debate that we got from him. The line that we got from everyone in the Administration was, "Don't worry, the ITAR waiver will go through, and the President will, if necessary, veto the Buy American Bill." That view was also reiterated to us when we met the Deputy Defence Secretary, Paul Wolfowitz. It is therefore of great concern to me that, in the last few weeks, the news from the United States is not as positive as we had been led to believe.

Far from vetoing the Bill, the Administration are now entering into detailed negotiations with Congressman Hunter, and I understand that the latest proposals would mean that the Pentagon would have to draw up a list of components that would have to be bought exclusively from the United States. The so-called compromise element of the proposals is that the US Defence Secretary could authorise a waiver to enable buying from abroad. However, the proposals as outlined at the moment would be hugely complex, and would force defence officials to obtain approval to buy components from overseas on a product-by-product basis.

When we returned from Washington, the ears of the members of the Defence Committee were ringing with grateful thanks from US politicians for our Government's support for US action in Iraq. I would argue that that praise will be rather cheap if blatantly protectionist measures such as the Buy American Bill become law.

Mark Tami

Does my hon. Friend agree that we have seen similar action in relation to our already hard-pressed steel industry, when the US decided to impose tariffs to protect its own industry? There has been very little progress towards getting those tariffs removed. I echo the concern that we should find ourselves in this situation when we have been so supportive of the United States.

Mr. Jones

Alas, I have to agree with my hon. Friend. Unfortunately, the climate in the United States at the moment is all about protecting the Americans' interests. I do not think that they realise the damage that that will do to the defence industry not only in the United States but in this country, and also to other sectors such as the steel industry.

If the Buy American Bill goes through, it will sound the death knell of future projects such as the joint strike fighter. It will also drive up the cost of the programme for UK and US taxpayers. The failure to agree the ITAR waiver is already having an effect on the joint strike fighter project. I understand that one third of the project's technology is restricted, which is creating real problems for BAE Systems. My noble Friend Lord Bach and I were in Brough this week to celebrate the order for the Hawk, and a senior executive from BAE Systems there went to great lengths to articulate the problems that the company is already having with the joint strike fighter project. These are not problems that might happen; they are happening now, and we need to recognise that.

Greater co-operation between the two nations will benefit not only the UK taxpayer but the industry in the US. I urge the Minister of State to make those points forcefully when he visits Washington next week. I agree with the hon. Member for Aldershot that the Prime Minister should raise them at the highest level when President Bush visits this country in a few weeks' time.

I have already mentioned the importance of the UK defence industry to our economy. The industry has undergone major rationalisations over the past two decades, owing largely to the general decline of defence budgets not just here but internationally—although that has led to good co-operation and joint ventures on the part of UK, US and European companies. It has also made the industry more diverse, and has brought about sophisticated supply chains involving small and medium-sized companies.

My region, the north-east, was once the armer of the world, dominated by shipyards on the Tyne and famous names such as Vickers-Armstrong. It still sees the defence industry as an important part of the region's economy. The main suppliers are now small and medium-sized enterprises. I pay tribute to the work of Northern Defence Industries Ltd., spearheaded by its chief executive David Bowles, who has brought together small and medium-sized enterprises in the north-east to secure procurement projects not just from the UK, but overseas. NDI now has 170 members, and has benefited from recent UK Government procurement decisions. It would not have been given those opportunities without the work I have described. The companies involved are not just old-fashioned metal-bashing outfits; some are leading practitioners of engineering and electronics technology, and they are important to regions such as the north-east.

I also congratulate the Government on their shipbuilding orders, which have given a great boost to the north-east. The decision to place orders for the fleet auxiliaries Largs Bay and Lyme Bay with Swan Hunter was of symbolic importance to the region, returning shipbuilding to the Tyne and reviving a proud tradition that was ended by the last Conservative Government. The present Government should be given full credit for that.

The Tyne looks forward to working on the CVF contracts, about which I want to ask the Minister a number of questions. According to two headline articles marked "exclusive" in the Newcastle Journal, those projects have been delayed for up to two years, with a potential risk to jobs at Swan Hunter. I accept that yards such as Swan Hunter cannot rely entirely on MOD work, and I think I see the hand of the company in some of the dramatic headlines; but I should like an update on the CVF programme from the Minister and, in particular, a clarification of the procurement process and the issue of size, which will be of major importance to such yards.

My hon. Friend the Member for The Wrekin (Peter Bradley), who is not here at the moment, raised the issue of the future rapid effects system. That development too has been followed closely in the north-east. The MOD's recent decision to halt the project has caused great concern to Alvis Vickers. I know that the Newcastle and Telford plants have looked forward to its securing the long-term future of both sites.

FRES was a key component of the new SDR chapter, and I should be interested to know when a decision will be made on that procurement option. I should also like to know why, following the spending of £7 million or £8 million with Alvis Vickers and other contractors, the project was pulled over the summer, and what the competition will be.

The UK defence industry awaits with interest and trepidation the White Paper that will be published before Christmas. The Government are right to look at defence requirements both post-Iraq and in a world that is now, unfortunately, changing very quickly. There are, however, tough decisions to be taken that will have a great impact on the country's defence industry. Lengthy lead times are a problem for the industry, and I hope that the White Paper deals with that.

Listening to my noble Friend Lord Bach on Tuesday at Jane's defence industrial conference, the clear message was that the future was network-enabled capability. The new chapter of the SDR focused on technology and the need for sensors, decision makers and weapons system to connect on the battlefield, and the White Paper will spell that out in more detail. The emerging technology has benefits, but I would like to sound a note of caution—the lesson of Iraq and Afghanistan is that, no matter how much technology we have, it is still vital to have men on the ground in large numbers, particularly if we ask our armed forces not just to fight a war but police the peace afterwards. Wholesale reductions in troop numbers and reliance instead on technology would be a great mistake. Armed forces personnel cannot, without proper support or logistics, do the jobs that increasingly we ask them to do. No matter how much technology they are given, it is difficult for them to perform in harsh environments, such as the conditions that members of the Defence Committee experienced in Iraq. We need to recognise that the threat has changed. The asymmetric low-tech threat in Iraq and Afghanistan may point towards the nature of future threats. The White Paper therefore needs to look at the way in which our technology deals with the simplistic, low-tech threat to our armed forces when deployed in the world's hot spots.

Any review of the White Paper has to ask some fundamental questions, as any expectation that defence budgets will increase greatly will not be realised. It is important that we review all areas, but we must look at our commitment to the UK's independent nuclear deterrent. The arguments about such a commitment are easier for some colleagues to follow than others, such as myself, who were never members of the Campaign for Nuclear Disarmament. However, it is the right time to ask questions. The Trident project will come to end of its life in 2024, and decisions will have to be made in the next few years on a replacement. No Government, not even the present one with a commendable record of defence expenditure, will increase defence spending dramatically. It is vital, if our armed forces are to be large enough to do the job that we ask them to do with the technology that they need, that every penny of the defence budget is spent to provide support and equipment. It should not just be used to support legacy projects that served us well in the cold war but, unfortunately, are of little relevance to the security threat that faces us today and in future. In conclusion, I again commend the Government on their defence industrial policy, and look forward to the White Paper to provide the best support and equipment for our armed forces for the vital job that we all ask them to do.

4.9 pm

Mr. John Wilkinson (Ruislip-Northwood)

It is a pleasure that the right hon. Member for Walsall, South (Mr. George), the president of the parliamentary assembly of the Organisation for Security and Cooperation in Europe, has attended our debate. He always takes a benign interest in our debates as Chairman of the Defence Committee, and he will have been pleased, as I was, by the admirable speeches of his protégés, the hon. Members for Crawley (Laura Moffatt) and for North Durham (Mr. Jones). I know that the hon. Member for North Durham takes a serious and well-informed interest in defence from our common participation in the parliamentary armed forces scheme. He is an enthusiast as well as an expert, as is my right hon. Friend the Member for Fylde (Mr. Jack). The workers at Warton are very lucky to have my right hon. Friend to represent them, because he is exceedingly forward looking. I thought that his exposition of the challenges facing the British aerospace industry and the importance of the defence equipment programme for his constituents at Warton was a model of its kind.

The factory at Warton, where I worked some 24 years ago on the prototype Jaguar, has produced many remarkable aeroplanes. In those days, Canberras were still being refurbished. The Canberra first flew in 1949 and it is still in front-line service with the Royal Air Force today. It was pleasant to behold demonstrations of the aircraft by the late Roly Beaumont. One could recognise his demonstrations: one had to take only one look at the aircraft to know who was at the controls, the aeroplane was so elegantly manoeuvred into the appropriate aerobatic position. The Jaguar is going strong and looks as if it will continue at least until the middle of this decade.

I am not a particular fan, not instinctively a fan, of the European Union's high representative for common foreign and security policy, Mr. Javier Solana. I wish him well. He is always on the move, a very energetic gentleman, and is the Secretary-General of the Western European Union, on which I serve as well. At least his paper on European strategy, which was produced for the European Council at Thessaloniki in the spring, merits reading, because it stated the four basic security challenges that we face: rogue states, terrorism, weapons of mass destruction and organised international crime.

It is in that strategic context that we need to view our defence programme. It is because we are not given the overall strategic and budgetary context that this debate is somewhat deficient, although hon. Members have spoken well, as I mentioned earlier. I ask the House to consider whether we ought not to discuss defence programmes in the context of a two-day debate on the defence estimates and revert to the single service days. That way, we would get multiple opportunities to discuss strategy and equipment programmes and air systems, land systems and naval systems in the context of the respective services that operate them. I am sure that, as in so many things in parliamentary life, my view is a minority one. However, I do not think that it is a minority one when it comes to the importance of making the broad judgments of the Government's strategic defence review effective, and that is becoming harder and harder for Her Majesty's Government as the money begins to run out.

I say at the outset that in this era of expeditionary warfare, when we seek to meet the challenges to our security as far from our shores as possible, as soon as they arrive or even in pre-emption in the context of the United States Administration's defence strategy, one of the areas of defence spending that merits examination now is whether we ought not to bring the British Army back from Germany. I regard it as a throwback to the old British Army of the Rhine, the old Brussels treaty commitment, which followed the division of Germany and was perpetuated through the cold war. I do not think that it makes sense now for us to be employing German gardeners and cleaners, providing funding for their economy, when, to put it bluntly, there is not always strategic support from the federal German Administration on key issues such as Iraq and others. So that issue merits examination. There are savings to be made, which could then be put into weapons programmes to give our highly mobile, flexible armed forces the equipment that they need.

Before commenting on European co-operation and ballistic missile defence, I hope that it will not weary the House too much if I offer some thoughts on domestic equipment programmes. The Minister of State claimed that the new carrier programme would provide the most capable carriers in the world, outside of the United States. If carriers are to be reduced in displacement from 55,000 or 60,000 tonnes to some 30,000 tonnes, they will not be so different in size from the Invincible class, the Principe de Asturias, which is in service with the Spanish navy, or the Italian navy's Garibaldi. And I doubt whether they will be comparable with the Charles de Gaulle or a successor carrier of that class, which is in service with the French navy.

Of course, if the Government are conducting a fundamental reappraisal of their planned procurement of aircraft carriers, we should ask—I have put this question to the House before—whether it might not be preferable to have three relatively small carriers, rather than two very big ones. One can be certain that when they are needed, one of those two big carriers will be in refit, and the other will be in the wrong part of the world. We certainly could not have won the Falklands war without being able to deploy two carriers on station. One recalls in naval history what happens when major capital ships—the Prince of Wales at Singapore, and the Hood in the north Atlantic—are destroyed. In this age of terrorism and weapons of mass destruction, three smaller carriers might be better than two big ones, particularly if Her Majesty's Government have, in essence, already forsworn, by opting for vessels of smaller displacement, the option of operating aircraft off the deck conventionally by launching them with a steam catapult and recovering them on the wire. It will be interesting to discover what the Government decide.

Of course, Commando Brigade will need new helicopters to replace the HC4 Sea Kings. It is important that the Merlin be produced at the earliest possible date, so that we have commonality with Royal Air Force Merlin support helicopters. It is also important—this is the lesson of combat over the Balkans and Iraq—that we have combat rescue capability. We should therefore consider using the Merlin, a three-engined aeroplane, in that role, and replacing Sea Kings for air-sea rescue use around our coasts.

I wonder whether the Commando Brigade ought to retain its own organic anti-tank helicopters. I doubt whether the Apaches will be fully marinised, and we can be certain that when our amphibious forces want their own integral anti-tank helicopters, the chances are that the Army generals will want them somewhere else. Although I welcome the joint helicopter structure that now exists within our armed forces, I should like that particular decision to be revisited.

I am surprised that the Minister made so little mention of the tankers for the Royal Air Force. Perhaps he feels that the decision-making stage has been reached, and that he cannot therefore share his thoughts with the House. However, I will share mine. I hope that the industrial imperative of supporting the Airbus consortium with the A330–200 aircraft is taken. It will of course be the more expensive option—much more expensive than buying hand-me-down 767s from British Airways. Nevertheless, the tanker will be an aircraft common with other European air forces, perhaps operated in a common tanker pool. The export potential of such an aircraft would be considerable.

Unmanned air vehicle systems and the future offensive air system were well dealt with by my right hon. Friend the Member for Fylde.

I suggest that we need to consider the organisation of procurement. The Petersberg task has set an ambitious headline goal of an Army corps to be deployed up to 4,000 km from Brussels and maintained in theatre for up to a year, with supporting air and naval elements. The capabilities to make good that commitment should have been fully operational by June, but they are not. They require massive investment, especially in mobile systems. Decisions have been made on the capabilities that are deficient, and project groups have been set up to try to meet them. However, the European members of the alliance recognise that for the foreseeable future there will always be some areas of capability that the Europeans cannot meet, including heavy lift, space-based systems, intelligence and several others. Therefore, the European members of the alliance will have to obtain the Berlin plus category of armaments from NATO, with US support, if the European members are to be able to operate independently and autonomously as they aspire to do.

I urge the continental countries to think carefully about their conscious policy of diverging from the US—I mean the French and the Germans, with the Belgians in their slipstream, who are all flirting to some degree with Putin's Russia—and whether they can, in the present political circumstances, depend on the automatic acquiescence of the US Administration in providing the mobile equipment and capabilities that the Europeans themselves cannot provide. I urge our continental friends either to come up with bigger procurement and research budgets to make up those deficiencies or to modify their political postures to try to assuage the anxieties of the US.

We need the US, not least on the question of ballistic missile defence. An extended air defence system is being evolved by the US, with the support of the Italians and the Germans, which will have a theatre capability and beyond. If the threat of weapons of mass destruction is perpetuated in the world, we will need just such a ballistic missile defence capability of our own. I am surprised that the Minister made no mention of ballistic missile defence in his speech. As I said, the Italians and Germans have been working with the US Administration for eight years and will provide 45 per cent. of the funding for the programme. Why have the Government ignored that threat? They will not even share with the House what preparations they are making to meet it, but it is an important issue that cannot be ducked.

We all want operational requirements to be harmonised within the alliance and for alliance member countries to work better together. The hon. Member for North Durham rightly pointed out the dangers of the Buy American legislation before Congress and the risk of defence equipment protectionism that could ensue on the part of the US, at a time when the European and American components of the alliance are beginning to diverge anyway.

An armaments agency is not a constitutional matter. It has nothing to do with the governance of Europe. We want effective armaments co-operation, based on sound commercial principles. We want operational requirements to be not concocted by some bureaucratic agency but clearly defined by the operational requirement staffs of the respective armed forces working together. In other words, it would be a mistake for the operational requirement aspect of an agency to be blended with the normal executive function of the agency in the procurement of equipment.

I hope that the Government will argue hard for the exclusion of operational requirements in the formulation of the agency. There is a risk, however, because the draft constitutional treaty states that the format of the agency shall be decided by qualified majority voting. That is no way for British defence procurement to be worked out.

Mr. Davidson

Does the hon. Gentleman therefore agree that it would be right to have a referendum on that new European constitution?

Mr. Wilkinson

The hon. Gentleman has taken the words from my mouth and on that happy note I conclude my remarks.

4.26 pm

Mark Tami (Alyn and Deeside)

May I begin by reminding hon. Members of the changing strategic context that confronts our armed forces? In his remarks last week, my right hon. Friend the Secretary of State pointed out how the United Kingdom is increasingly involved in ensuring global stability. As he pointed out, to meet that challenge, we need armed forces that are structured and equipped to deploy globally and at short notice.

Obviously, at present, much of the defence effort is focused on supporting operations in Iraq, but let us never forget our commitments to peace support operations in other parts of the world, in particular sub-Saharan Africa. Although there are differences of opinion about British policy towards Iraq, there is considerable consensus, at least on the Labour Benches, in favour of humanitarian interventions in west and central Africa. In addition, as my right hon. Friend also pointed out last week, we need to recognise that the UK is ever more dependent on broad stability in Asia. I am not suggesting that the UK should police the world, but we have to accept that we will be deploying our forces further afield more frequently and more rapidly.

Our focus in the past was rightly to prepare for a threat based on the assumption of a perhaps large-scale Soviet invasion across the plains of Germany. Thankfully, that does not seem a likely scenario today and our strategic priorities have rightly changed. That means that our procurement programmes, in particular those that directly enhance the UK's ability to deploy forces globally, should reflect those new strategic requirements.

The Ministry of Defence has made considerable progress in strengthening our ability rapidly to deploy ground and maritime forces. Similar improvements in the capacity to deploy aircraft are now needed. The MOD's future strategic tanker aircraft programme is designed to meet that gap. The competition is due to be decided by the end of the year, and I urge the Secretary of State to select the AirTanker bid, which has been mentioned. That will benefit my constituents who produce the wings for the Airbus A330 aircraft at Broughton, as AirTanker is proposing. It will also provide the global capacity that our armed forces really need.

Airbus at Broughton will soon become Britain's largest manufacturing facility. It will produce the A330 aircraft, and will account for 1 per cent. of western Europe's gross domestic product—a startling statistic. That is a great success story, especially at a time when manufacturing industry throughout the world is under pressure. As my hon. Friend the Member for Crawley (Laura Moffatt) pointed out, such jobs offer good-quality employment with a large number of apprenticeships, and we all want such jobs and skills for the UK. Opting for the AirTanker programme will build on that success and help secure Britain's place as a leading defence supplier.

Why choose the Airbus option over the Boeing competition? The A330 can carry 50 per cent. more fuel than alternative aircraft, without the need for auxiliary fuel tanks. That means that it can deploy more aircraft further, to frequent destinations such as Bahrain and Canada. Twice as many fighters can be carried by one A330 aircraft. Equally important, it can remain on station longer and refuel more aircraft in operation. The 330 can carry passengers and cargo without the aircraft having to be reconfigured, as the Boeing would have to be. Those are all major advantages in taking the AirTanker option.

The recent Iraq war demonstrated the uncertainty in securing overflight permissions. Turkey's decision to deny coalition aircraft overflight rights has made us rethink the way in which we tackle such operations. The greater capability of the A330 will provide the flexibility to work around such problems. We cannot predict what will happen in future, but there is a distinct possibility that we could experience similar situations in other operations.

The A330-200 offered by AirTanker for the FSTA programme provides the best and most flexible capability for the job. AirTanker is offering the RAF a modern aircraft for a long-term, 27-year, FSTA commitment. Typically, however, the natural life of the aircraft will be about 40 years.

Aircraft provided as part of the FSTA programme will refuel combat aircraft such as the Eurofighter and the new joint strike fighter, which will enter service during the next 20 years. It is planned that they are to remain in service until 2040 and beyond. It is less costly and less risky to convert a modern A330 for air refuelling than older second-hand aircraft. Unlike the alternatives, the A330 requires no major structural changes to its wing to accommodate the refuelling pods.

Airbus is the only aircraft manufacturer with current experience of refuelling pod integration, and Cobham's Flight Refuelling Ltd., which works exclusively with AirTanker and Airbus, is the only company in the world with experience of providing refuelling pods and fuselage refuelling units. Airbus is currently converting A310s into tanker aircraft for the German and Canadian Governments, using the Cobham pods. As a modern aircraft, the A330 will cost less to operate over the 27-year life of the contract than the Boeing alternative.

Importantly, after that 27-year period, we can still expect an additional 13 years of operational life from the Airbus option. That is a considerable benefit to the UK taxpayer, as I am sure that pressures on the defence budget will continue and probably grow in future years. If Boeing won the order, its alternative would be even older at the end of the 27-year contract than the aircraft that it would replace. That is hardly a step forward for our defence forces.

What are the other benefits to the UK economy? A larger amount of high-tech work will be open to British industry under the AirTanker bid, which is based, as I said, on a new, modern aircraft, unlike the alternative bids based on old, second-hand aircraft. Furthermore, we shall have the intellectual property.

There is more than 50 per cent. UK work content in the "green" aircraft. Only AirTanker will carry out 100 per cent. of tanker conversions in the UK—undertaken by Cobham's FR Aviation. The company will install British mission equipment and conduct the aircraft certification programme in this country. AirTanker's bids for the FSTA programme will sustain 7,500 quality jobs directly and indirectly in companies such as Airbus, Rolls-Royce and Cobham, which are all critical to the UK's aerospace industrial base.

Although Boeing promises to create jobs in the UK they will be far from secure, and unlikely to stay in the long term. For without the intellectual property, which will remain in the US, we can expect the production jobs with this programme to follow future export orders that Boeing may receive.

Success in the FSTA programme will provide Airbus with a platform to secure a significant share of the global market for air-refuelling aircraft—potentially 500 aircraft—and, very important, to prevent Boeing maintaining its last global monopoly. Airbus does have prospects of selling aircraft to France, Australia, other NATO countries and even the United States. The A330 is particularly well suited to replace the United States Air Force's 50 KC-10 strategic tankers, for which Boeing does not have a replacement aircraft of suitable size.

Mr. Wilkinson

The hon. Gentleman is making a most important speech and I can concur with all the judgments he has wisely put before the House, but is it not the case that the United States Air Force had the greatest difficulty in putting together a 767 tanker lease programme that could be acceptable to Congress and be proved to work?

Mark Tami

The hon. Gentleman makes a very good point. We have also seen, after the terrible events of 9/11, the lengths to which the American Government went in ordering a large number of Boeing aircraft for the Government's fleet. They would clearly want to follow that road but, as I have said, no available aircraft would really match the needs that the American air force has for its larger tanker aircraft.

Marvin Sambur, Assistant Secretary for Acquisition for the United States Air Force, has said: We've been encouraging EADS to develop a tanker. One of the things that we are concerned about is [avoiding] a homogeneous fleet of tankers, so that if there's an issue, we don't have to ground the whole fleet". If Airbus were to win a conservative 150 export orders, that would sustain 1,000 jobs at Airbus for 20 years and a further 500 among suppliers, on top of the jobs that would already be safeguarded by our opting for the aircraft for ourselves. The UK invented and is a world leader in air-refuelling technology and integration, and this procurement decision is vital for the future of the British aerospace industry.

The choice is a stark one: either we opt for a modern aircraft, suited to its task, with a long-term operational life and good export potential, namely the A330, or we opt for a second-hand, ageing Boeing 767, needing major conversion work, with far less capability and operational range. The latter will not meet our global requirements and would almost certainly be more costly in the long run. I believe our forces and our country deserve the best, and I urge the Minister to ensure that we get the best—the Airbus A330.

In the short time I have left I should like to mention the need for replacement accommodation at our Army bases. I applaud the Government for taking the decision—a decision that should have been taken by Governments many years ago—to replace the very substandard accommodation. The shadow Secretary of State, who was with us earlier—I note he is not in his place now—said in a previous defence Adjournment debate, on 11 September 2003 at column 505, that Army accommodation was "not fit for students", which probably says more about the Conservative party's attitude to education than it does about our armed forces, but I think I understand the point he was trying to get across. Hon. Members on both sides of the House acknowledge that something has to be done and that high-quality accommodation is needed, but it needs to be built quickly and effectively. Building Solutions—part of Corus based a Shotton—offers just such buildings and has the capacity to deal with large-scale orders. Our armed forces have had to make do with substandard accommodation for far too long, and we can hardly expect to improve recruitment figures if we fail to provide liveable accommodation. I urge my hon. Friend the Minister to examine the Building Solutions proposals, which I am confident will deliver quality quarters for our armed forces.

4.40 pm

Mr. Peter Luff (Mid-Worcestershire)

I apologise to the House and the Minister of State—perhaps the Under-Secretary will pass this on—for missing the larger part of his opening remarks. I was lunching with the Prime Minister of Mongolia at the time, and I promised him that I would put on record the appreciation of the House and the Government of Mongolia's significant contribution to the peacekeeping operations in Iraq. I had not been aware that armed forces from Mongolia were serving there. That just shows how wide the coalition in Iraq is.

I speak primarily for two reasons: first, a constituency interest in rocket propulsion systems—this is one speech that really will be rocket science—and, secondly, a two-year attachment to the armed forces parliamentary scheme in the Royal Navy.

First, I wish to make a relatively less strategic point about the procurement process, which has obviously begun to get a great deal better since the establishment of the Defence Procurement Agency. We can have much confidence that the systems now used are a great improvement on what went before. One of the education reforms that the Conservative party introduced was the local management of schools, which devolved to schools some procurement decisions to which they previously did not have access. Large budgets went directly to them to spend as they thought best, rather than being handed down through some remote procurement organisation. Having spent some time with the Royal Navy, I think that the local management of ships might offer a similar advantage to the Royal Navy. Many procurement decisions might be better made at local chandlers shops where large quantities of cheaper kit could be found, rather than by using the more cumbersome procedures that are still forced on the Navy, even for small items.

No doubt the DPA is doing a good job; it needs to, because it is Britain's single biggest purchaser of manufactured goods, which sets the debate in a clear context. The DPA freely admits on its website that it has made mistakes, and it thinks that it has learned from them. It thinks that it has begun to deliver equipment to the Armed Forces 'faster, cheaper and better.' What worries me about that website is that the commitments to the DPA's procurement methodology do not seem fully to reflect the new defence industrial policy published by the Government. We hear a lot about excellence, meeting promises to customers, valuing people and integrity, and the DPA says: The aim of defence procurement is to buy equipment for the Armed Forces that meets their requirements and timescales, while achieving the best value for money for taxpayers. All that is commendable, but I do not hear in all that mission statement stuff the strong regard for a defence industrial base that seems to exist in the Government's fine words in their defence industrial policy. Perhaps that is a question of willing the ends, but not the means.

I note that, in the evidence to the Defence Committee, on page 114, the Defence Manufacturers Association, in referring to the impact of the policy on small and medium-sized enterprises, said: Prime contractors are put under great budgetary pressures by the MOD, operate globally and will seek systems and sub-systems from wherever in the world they can be procured most cheaply for the benefit of the project in hand. That is the tension that exists in UK defence procurement policy at present, and I hope that the Minister will be able to reassure me that I am worrying unnecessarily and that, in fact, the defence industrial policy is being rigorously implemented and considered by the DPA as it does its work.

When I went to Abbey Wood to see the work of the DPA as part of the armed forces parliamentary scheme, I was given a particularly detailed brief on the procurement of the new Type 45 destroyer—an extremely important procurement for the Royal Navy that, in concert with the planned future aircraft carrier, to which I shall address some remarks later, will form the backbone of the Royal Navy's air defences for the foreseeable future. Six ships are currently on contract with BAE Systems. Of course, construction of those ships has begun. They are expensive bits of kit. The contract roughly averages out at about £1 billion per ship, so they are hardly inconsequential items. There is no doubt that they are a great advance on anything that the Royal Navy has at present and that their procurement is greatly to be welcomed. Incidentally, on residential requirements for our armed services, which was mentioned by the hon. Member for Alyn and Deeside (Mark Tami), those ships certainly represent a quantum leap in the conditions for all the officers and ratings on board. The cabins and messes are modelled on those designed for cross-channel ferries, which is a stark contrast with the conditions that I have seen on Type 23 frigates, for example. That is to be welcomed.

There is a nagging doubt, however. The Government have not made clear what their final commitment to the Type 45 is. A class of up to 12 ships is always talked about—"up to" is the magic phrase. Can the Minister further clarify whether that is an aspiration or a firm target? The commitment is to six, but I believe that the Royal Navy needs all 12. I hope that the Minister will reassure us that the pressures on the defence budget will not lead to a reduction in that aspiration for a class of up to 12 ships.

I share the concerns expressed by my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) that there are only two carriers in the future programme. It seems to me that three is the absolute minimum to provide an effective defence platform, as he explained in his fine speech. I appreciate that there is tension in relation to the size, cost and availability of the proposed carrier. I share his view that three would be preferable, but I am reluctant to advocate a downsizing of the ship itself. I would therefore be interested to hear the Minister's comments about the adequacy of that procurement.

The carriers will use the short take-off and vertical landing version of the joint strike fighter. A variant of that fighter with conventional take-off exists, and as my hon. Friend said, we could consider using catapults and wires to retain those aircraft on board. There is concern that the joint strike fighter is overweight, late and over-budget, which could have serious implications for the carrier programme, too. Does the Minister share those concerns?

A lot of doubt surrounded the alliance approach that has been established to procure the carriers. Is the Minister confident that the Ministry can manage the project? Concern has been expressed, as is often the case in public procurement projects in which the private sector is involved, that the Ministry wants to control the project but not to bear a share in the risk that flows from that control. If it wants to control and own, it must share risk, too. There is real concern that that is not happening at present.

I have an interest in the Eurofighter Typhoon procurement, too, not least because Roxel in my constituency will make the motors for the ejection seats, which we always hope will never be used but are a crucial part of the aircraft. I echo all the questions asked by my right hon. Friend the Member for Fylde (Mr. Jack) during his excellent speech. Can the Minister confirm that deliveries will be completed as planned? I think that 50 per cent. of tranche 1 should have been delivered by now. Has that happened? Will the weapons system for tranche 1 be available at the end of 2005? In particular—this is the crucial question—can the Minister say anything clear about tranche 2? We saw the reports in the Financial Times on Monday that called into doubt our commitment to tranche 2, making the clear point that Orders for tranche two must be placed by the year end to avoid a costly production gap. Those are important questions for a crucial part of our defence procurement programme.

Generally, British Governments have not been as good at protecting our defence industrial base as those of other countries—our competitors. When I used to advise a number of defence companies in my happy days in the private sector, the complaint was always how much better the French were at looking after their manufacturers than the British. They would pick winners—which company could bid for which international project—while British companies fought each other to the death, letting someone else through.

I accept that there is a need to reconcile competition in the industry with the strategic interests of protecting certain skills and abilities within the United Kingdom. That is not helped when we have dramatic swings in procurement expenditure, which is a matter of great concern at present. I saw an article in the Bristol Evening Post in September—who are we to argue with the Bristol Evening Post?—quoting Paul Beaver, a former spokesman for Jane's Defence Weekly. He made the observation, towards which I am very sympathetic, that the Ministry of Defence was being forced to make savings to offset its commitments elsewhere and in engagements around the world on the current budget. I fear that that unplanned escalation of British military commitments is adversely affecting the need to plan a properly costed and consistent defence procurement policy. That is a matter of much concern. What worried me greatly was Mr. Beaver's hypothesis that the Royal Navy was likely to bear the brunt of costs with a reduction in the number of Type 45s and nuclear-powered submarines. I have to say that that was compounded by a spokesman for the Defence Procurement Agency who said in response: However, we do recognise that even though funding for defence has increased year on year since the last spending review, future funding remains taut given the range of operational tasks our armed forces have been involved in. That brings us back to the same point, which seems to be confirmed by the Government's own procurement agency.

Virtually every hon. Member who has spoken has rightly paid a lot of attention to US policy. That cannot be reiterated too often because although America is our ally and we are proud to have a strong and continuing alliance with it, there is sometimes a bit of a one-way street. It is important to get movement on the waiver on the international traffic in arms regulations. The provision represents closet protectionism because it means that British defence contractors do not get the necessary information to allow them to bid in good time for Pentagon projects. We need the waiver so that the bidding process becomes fairer and more open. I think that the Government share that view.

The Government are also worried about the "Buy America" provision in the new American defence Bill. I shall not labour this point because other hon. Members have made it, but it is crucial that the provision is resisted. I am confident—I hope that my confidence is not misplaced—that the President would veto such a proposal, and I think that the two Houses of Congress have a difference of opinion anyhow, so perhaps we should not worry unduly about the specific proposal. However, the situation highlights our continuing worry that, although America often preaches free enterprise to the world, it does not always practice it with the same enthusiasm in its practical day-to-day decision making.

That leads me on to a point about offset, which is hugely important given the dominance of American manufacturing in the defence world these days. In a written answer on 14 March, the Minister of State said that the total value of industrial participation obligations is £5.4 billion of which £2.3 billion remains to be completed".—[Official Report, 14 March 2003; Vol. 401, c. 432W.] That is a lot of money. The problem is that we know little about the detail because the information in the public domain gives no indication of geographical spread or the regional value of individual offset arrangements.

That situation contrasts greatly with the US Department of Commerce's attempt to keep its population informed by publishing its report to Congress on offsets in defence trade. The British Government do not publish a comparable report. Perhaps they will consider doing that because we need confidence that offset arrangements are negotiated toughly and properly enforced.

Such confidence is important for Roxel in my constituency, which is a manufacturer, designer and developer of rocket motors and rocket propulsion systems. It was once part of Royal Ordnance but is now jointly owned by a bewildering array of European shareholders. It is the third largest producer of rocket propulsion in the world and it employs some 350 people in my constituency and that of the hon. Member for Wyre Forest (Dr. Taylor).

I am grateful for a helpful letter that I received from Lord Bach—it has been a theme of the debate to pay compliments to him, which I do happily. There has been a great deal of pain in Summerfield and Roxel during recent years and the industry has been in a steady state of consolidation due to domestic and international pressures. Overseas procurement by the Ministry of Defence has not helped. Hellfire missiles for the UK attack helicopter used the US rocket motor, as did the Meteor programmes for Eurofighter Typhoon. Guided multiple launch rocket system procurement has no UK propulsion offset. A further great worry is the fact that investment in rocket propulsion is running at less than 10 per cent. of historical levels, which puts real, dramatic pressures on the industry. Other nations, especially the US, are giving much more support than the UK to their rocket propulsion contractors.

Roxel has an order backlog for a few years, which is encouraging, but a lot of cliff edges will appear by 2007–08. The Government need to take a serious view of that because rocket propulsion is a crucial aspect of many of our defence projects. There has been good news because a three-year propulsion research contract has been awarded for 2003 and a technical demonstrator programme for large diameter insensitive munitions, which is exciting technology, has been awarded. There has also been an award for an extended range guided multiple launch rocket system—ER-GMLRS—which includes a propulsion element.

Although good news exists, the historical levels of research have been slashed considerably and there are many cliff edges in procurement. If the Government are serious about protecting specific key skills—working on such technology is a highly skilled job—they must think what more they can do to safeguard the industry. The company recognises that there is a general need to review and realign defence spending because the world has changed, but hopes that that will lead to a greater focus on ensuring that there is support for the UK defence industry, and especially propulsion, with offset arrangements and research funding.

UK missile propulsion technology must be sustained. We have lost the last indigenous manufacturer of gun propellants. Missile propulsion technology is one of the essential skills and assets in this country. We need to protect it carefully.

4.55 pm

Mr. Bruce George (Walsall, South)

It is a pleasure to contribute to the debate. As Chairman of the Defence Committee, I have the luxury—if it is a luxury—of having hardly any defence manufacturers in my constituency. That allows me to analyse events and what different companies offer from the perspective of what is in the best interests of the country and the Ministry of Defence, not of one's constituency. If I had a large defence contractor in my constituency, I would espouse its cause, but it detracts from the debate if we largely hear "Buy me" advertisements. Frankly, such contributions minimise the importance of the Chamber. We should be considering what is available nationally and internationally.

My hon. Friend the Member for Crawley (Laura Moffatt), who is a good friend of mine, made an impassioned speech for Thales in her constituency. She does a good job in arguing the case for that "British" company. I hope that when she gets to Crawley, she will jump on an aircraft, head for Charles de Gaulle, get a cab to Thales or, better still, the French Ministry of Defence and its procurement agency, and argue as strenuously there for other people's constituents as she did here. Hopefully, the French Government's procurement policy will be as open as ours. If people support the products of foreign companies in this country, perhaps the French, Germans and, indeed, the Americans will follow us down the route of open competition. Protectionism might be good for their constituents, but it is not good for other people's constituents. If our colleagues represent German, French or American companies, I hope that they will argue the case as strenuously as we have heard it argued here.

The Defence Committee, which I am proud to chair, has taken a deep interest in procurement since 1979 when it was established. We have looked carefully at endless defence equipment programmes and have produced endless critical reports on the way in which the Ministry of Defence procures weapons and other defence systems. Our Committee's interest reflects the concern that British forces have the best equipment available, that the British taxpayer gets value for money, and that the British defence industry remains competitive and world class.

The Committee is fortunate. We have excellent advisers and access to good people who bring their expertise to us. We get information from the Ministry of Defence, the specialist media and defence contractors, who are pleased to talk to us because it allows them to argue the case for their system over anyone else's system. They do not trash their opponents. Instead, they give us a few hints about how their system is infinitely preferable to any other system. We have a good relationship with the people who act on behalf of those companies, be they advisers or specialists in Government relations. They have been hard at work in the House of Commons over the past few days. No doubt if I read Hansard, it will confirm my analysis of that.

One member of that despised profession—I am not talking about journalists or Members of Parliament—

Mr. Davidson

And lawyers.

Mr. George

Who would argue with that? Lawyers are uppermost in our minds when we talk of such professions. A very good friend of mine who was an adviser—a person espousing a variety of causes—died last week. I refer to Roger Harding, whom some hon. Members may have known. I deeply lament his death, because he was able and I admired him for the fact that he could give me sound advice, but did not necessarily reflect the interests of those who were paying his salary. I send my deepest regrets to his family and employees. It is ironic that poor Roger, who was a devotee of Portsmouth FC, died during the season of the club's return to the highest echelons of British football. I deeply miss Roger and his advice.

I am pleased that our report, "Defence Procurement", has figured prominently in the debate this afternoon. We have just received a very supportive response from the Ministry of Defence, which causes me some concern. I am not used to the MOD agreeing with almost everything we say. Perhaps we should write a more critical report. I get rather nervous when my views exactly parallel those of the Ministry of Defence. Since the introduction of the annual defence procurement debates, our Committee and its predecessors have undertaken annual inquiries to inform these debates.

I am glad to see that my hon. Friend the Member for Crawley has returned to the Chamber. I shall send her a copy of Hansard, so that she can read how wonderful I said she was, that she was one of my protégés, and that my views on defence are exactly opposite to hers.

The Committee has produced reports to inform these debates. Our latest defence procurement report, the eighth, for the Session 2002–03 was published last July. We examined in depth the Government's defence industrial policy, the opening up of defence markets, the management of risk and the smart acquisition initiative. In our report we consider a series of at-risk projects, which we formally call tracker projects. We ask the Ministry of Defence for a detailed analysis of the status of each of these programmes and we comment on them.

I have heard a little this afternoon about the future aircraft carrier and the debate in the media. Those media comments are slightly alarming to me. When the Government announced in the strategic defence review that they would acquire two real, proper aircraft carriers and have sophisticated state-of-the-art, or rather, state-of-science aircraft on them, I was delighted.

Knowing the MOD from having served on the Defence Committee since 1979, I thought that the Committee would closely monitor the progress of the aircraft carriers. As I know the Ministry of Defence of old, regardless of who the Ministers are, I feared that by 2006 or 2007, some Chancellor might say, "Enough of this. We can't afford it. Let's spin it out even further", so it might be 2015 before the first and 2017 before the second aircraft carrier was delivered. I am a little nervous that we are hardly through 2003, and already people are arguing that we do not need 50,000 tonne aircraft carriers. If we do not want two 50,00 tonne aircraft carriers, we do not want 150 joint strike fighters.

I hope the Secretary of State, if he pops into the Chamber, will tell us whether the aircraft carrier programme is secure, and I hope that he will reassure us that they will be real aircraft carriers, not slightly extended versions of the excellent non-aircraft carriers that we currently have, which have served as aircraft carriers. If there is to be any prevarication, I must express surprise that it has happened so early in the programme. I hope that the two carriers will proceed as they should and that we purchase the aircraft to go on them. We should remember that our whole military strategy is based on expeditionary warfare—in other words, we need the carriers to get our aircraft to where the action is to take place. The last Gulf war showed that very few countries can be relied upon to provide the necessary territory for the deployment of our troops and aircraft. If one has 150 aircraft, a minimum of two large aircraft carriers is essential. I therefore hope that the anxieties will turn out to be merely media-inspired.

Our Committee has produced several reports on procurement. In our forthcoming report on the lessons of Iraq, there is bound to be a strong section on how our weapons systems worked. In Kosovo, the RAF, despite its best endeavours, lacked smart bombs that could land anywhere near the target. It is now in possession of infinitely more proficient and accurate weaponry. My own view, in advance of our report, is that our equipment worked pretty well, and that the failures that occurred were not in war-winning equipment. I am not saying that desert boots are not war-winning—they might be for an infantryman who had been wearing the old-fashioned boots, which were no good anywhere, let alone in the desert.

We are interested in opening up other people's markets to our products in the same way as our markets are open to other countries. As the defence industry continues to rationalise, the number of defence companies continues to decrease. The UK will not be able to rely on open competition if that gives foreign defence companies a level of access to our open defence market that is not reciprocated by other countries. In case our brilliant Hansard writers are not able to see me looking my hon. Friend the Member for Crawley straight in the eye, I hope that she is taking note of my point. I am not opposed to the French defence industry—I just want it to be open to ours. If a British company wants to buy a company in France, it should not be for the French Government to say, "Non." If, say, a French company is going to build another aircraft carrier, but did not do spectacularly well in the building of the last one, perhaps a British company could engage in the kind of competition that French companies—whatever their nomenclature—are able to enjoy in this country. I am not being anti-French, but pro-British. I want British companies to produce quality products that other countries want to buy and to be able to compete on a reasonably level playing field.

Industry witnesses to the Committee told us that the UK is the only major procurer of defence equipment in the world to have opened up its markets. The chairman of BAE Systems, Sir Richard Evans, told the Committee that the Government should not necessarily change their policy, but we should do much more to force other countries to come in line with us.

I detect a subtle change of policy in BAE Systems. If it believes that too many foreign companies are winning contracts in the United Kingdom, it may gain more access to the British market by becoming a foreign company. That leads me to the press speculation, which contains some truth, that BAE Systems has been hawking its wares around the United States and probably Europe, perhaps looking for a suitor to take it over. I shall say more about that later.

Ministers and their officials must maintain the pressure for reciprocal treatment from other defence manufacturing countries. If they do not permit reasonable access to their markets, I would tell them, "We shall look elsewhere. There are other opportunities and if you try to do our manufacturers down, until you change your policies, we will seek partners and purchases from countries other than yours." Ministers must maintain pressure on European and US partners to conclude existing international agreements aimed at opening up defence markets. It is a question not of getting them to change their policies but of their honestly sticking to legislation under which they supposedly operate.

Several colleagues mentioned the United States and the international traffic in arms regulations. I believe—I hope that the Under-Secretary will confirm my view—that our anxieties are more about the role of the US Congress and Congressmen who espouse the causes of their constituents to the exclusion of the national interest and of US allies, which do not include countries that are fervently seeking to penetrate our market. The UK and US authorities had largely secured agreement on the ITAR waiver in 2002, but its progress has been delayed in the US Congress. As other colleagues said, the waiver's importance extends beyond its immediate procedural and legal scope because it is a touchstone of our relations with our closest ally.

I wrote a letter at Defence Committee members' behest to key Senators and Representatives, making our concerns plain. That letter is reproduced in our report on defence procurement. As my hon. Friend the Member for North Durham (Mr. Jones) said, we raised the matter on Capitol Hill with the Administration and the State Department in September.

I shall give hon. Members a preview of my next letter to the Liaison Committee, which comprises a wonderful group of people: "Gentlemen and Ladies, the money you spent on our trip to Washington was 50 per cent. wasted because the meteorological conditions rendered our visit to Norfolk, Virginia hazardous." The entire US navy disappeared into the north Atlantic. I always believed that it was safer to remain in port during a hurricane but I was disabused of that simplistic approach from the Napoleonic warfare era. Perhaps someday we can complete the visit that mother nature rendered almost useless after the second day.

Most people consider the US to be the biggest advocate of free trade in the world. However, the recent "Buy American" policy is no example of that. The proposed defence authorisation Act 2004 would require the US military to procure equipment including specific critical items that are produced entirely in the US. I cannot disagree with the concept of looking after one's strategic assets, but that definition of what is essential is so broad as to include almost everything, and defence manufacturers will hide behind those provisions to make it very difficult—indeed, even more difficult—for European, Australasian and especially British companies to sell into the United States. It is already very difficult to do so.

This policy would have very damaging implications. Only last week, the Netherlands Secretary of State for Defence Procurement warned that international participation in the system and demonstration phase of the joint strike fighter—the F35—could become impossible if the US Congress passed the controversial Buy American Bill. We raised our concerns about the ITAR waiver when we visited Washington in September.

Frankly, I believe that the US Administration will deliver the goods. We said to them, "Who was with you in Iraq? The British and virtually nobody else. Is this the way to treat your allies? If you treat your allies like this, God knows what you would do to those who were not behind you in a conflict." I strongly believe that the arguments put forward by our embassy, by the British Government and, of course, by the Ministry of Defence and many colleagues here, will deliver the goods.

I mentioned earlier the future of BAE Systems. There has been speculation for some time about the future of our largest defence contractor. Press reports in the summer claimed that BAE Systems had rejected an approach from the French-owned Thales—good on it!—and was looking to merge with one of its US rivals, such as Boeing, Lockheed Martin, Raytheon, Northrop Grumman, General Dynamics or probably anyone else large enough. It was reported that discussions with General Dynamics were the most advanced. However, reports in the Financial Times then said that General Dynamics had walked away from this transatlantic merger with BAE Systems.

There would be significant implications if BAE Systems merged with, or was taken over by, a foreign defence contractor. The UK would lose its national defence contractor, there would be serious issues relating to security of supply, and the scope for competition would be further reduced. Jobs in a vital area—particularly high-tech jobs—in the UK would be likely to be lost as a result. A tie-up with a US contractor would also require BAE Systems to dispose of its 20 per cent. stake in Airbus.

I have just received a gesture from a colleague to suggest that the sections of my speech on managing risk and smart acquisition might better be dealt with on another occasion. In conclusion, therefore—this is quite a short speech, for me—I should like to say that the defence industrial policy noted that a manpower-intensive, platform-heavy and predictable doctrine of the Cold War has been replaced by the requirement for sophisticated, rapid and precise military solutions". However, in the Select Committee's report on the strategic defence review new chapter, we concluded that we had seen little evidence of the urgency that the MOD claimed to be devoting to acquiring new capabilities. The way in which new requirements, such as those for the Watchkeeper unmanned aerial vehicle and the FRES armoured vehicle, are managed, and the processes of acquisition involved, will be a test of the MOD's ability to increase its procurement agility and bring important new capabilities into service more quickly. The Defence Committee will, as always, be watching closely to see how the MOD meets those tests.

5.18 pm

Mr. Alan Reid (Argyll and Bute)

I wish to assure the right hon. Member for Walsall, South (Mr. George) that I am not going to make a "Buy me" speech. Indeed, it will soon become apparent that it is a "Don't buy me" speech.

There is an old saying, "Where there's muck, there's brass", and that is as true in the defence industry as in any other. It is important to remember, however, that defence procurement involves paying companies to dispose of old equipment as well as buying new equipment. In days gone by, decommissioning old equipment was often done very simply. It was often a case of simply going out to sea and tossing the old ammunition over the side. Certainly, when Holy Loch was dredged after it had been used by the American and British navies, there was plenty of evidence of the "out of sight, out of mind" policy. Fortunately we take much better care of the environment nowadays.

Some of the most dangerous material that we must decommission is in our decommissioned nuclear submarines, and I want to talk about the options for disposal of that material. The MOD currently has 27 nuclear submarines, 16 still in service and 11 out of service. The 11 are currently lying afloat, some at Devonport and some at Rosyth. Although they are safe in their current state, by 2012 more submarines will have been decommissioned and the current storage space will be inadequate. There is a possibility of more berthing space at Devonport that would allow the current storage afloat to continue until 2037, but it would nevertheless be sensible to try to find safe methods of breaking up the submarines and storing the radioactive and toxic waste inside the reactor components.

When the submarines were originally conceived, the Government of the day planned to dispose of them on the "out of sight, out of mind" principle—to sail them out into the Atlantic and scuttle them. Luckily, international environmental conventions prevent that from happening now.

Mr. Bruce George

And the Defence Committee!

Mr. Reid

I am sure that, even without the international conventions, the House would not approve of such methods nowadays.

Before the first nuclear submarines were decommissioned, the MOD had adopted the policy of temporary storage at Devonport and Rosyth, anticipating final disposal of the radioactive waste in an underground deep waste repository. That, however, is now expected not to become available until 2050.

The prospect of running out of berths at Devonport and Rosyth has led to the ISOLUS project. The acronym stands for "intermediate storage of laid-up submarines". Lancaster university is currently conducting a consultation exercise. Like others, I congratulate Lord Bach on the way in which he is fulfilling his brief. He has certainly kept me informed of the progress of the project as it affects my constituency.

There are two main disposal options. The first stage of either would involve removing the reactor components from the submarines intact, because that is where the dangerous material is stored. The rest of the submarine would obviously be safe, as the crew would have been living there. Once the reactor components had been removed, the first option would be to store them intact for about 60 years, until the radioactive waste inside had decayed. The advantage of that would be the absence of any risk in the opening of the reactor components; the disadvantage would be the fact that each component is about the size of two double-decker buses, and would therefore take up a good deal of space. The other option would involve opening the component, removing the radioactive waste inside and packaging it in a secure container.

Four companies have advanced proposals for the consultation, but two of them, Devonport Management Limited and Babcock, clearly have their own commercial interests in mind. They want to get rid of the old submarines in the yards at Devonport and Rosyth. They were happy to take them, with their nuclear material, while there was money to be made from refitting, but as soon as no more was to be made and the submarines had become an embarrassment, they wanted to be rid of them. Babcock made clear in its submission that although it would be possible to store the reactor components or the packaged waste at Rosyth, it does not want that to be done because of public concern locally, and because it wants to develop the yard commercially. It has therefore come up with two proposed sites for storing the packaged radioactive waste—Sellafield and Coulport, which is on the east side of Loch Long. This is where the "Don't buy me" part of my argument comes in, as the people in villages on the west side of Loch Long in my constituency—Ardentinny, Strone, Blairmore and Lochgoilhead at the head of Loch Goil—are extremely concerned about the proposal. I do not understand why Coulport has been identified as a location. A small amount of radioactive waste may already be stored there, as it is a naval armaments base, but the proposal to store the radioactive waste from 27 nuclear submarines is far in excess of that quantity. We should not be storing bulk radioactive waste at new sites. Sellafield already stores large amounts of radioactive waste, including most of the defence industry's radioactive waste, so it would be a much better option.

There are three sensible solutions. First, we could continue with afloat storage at Rosyth or Devonport. Secondly, we could break up the submarines, but store their nuclear components intact on-site and, thirdly, we could break up the reactor components and transport the packaged intermediate-level radioactive waste to Sellafield, where the majority of similar waste generated in the UK is managed. That approach would also have the benefit of consolidating all the MOD radioactive waste in one location, rather than two locations at Coulport and the original Sellafield site. To adapt an old metaphor, let us put all our rotten apples in one barrel. Those are the options that should be considered, and the option of a new storage facility at Coulport should be rejected.

5.26 pm

Mr. Ian Davidson (Glasgow, Pollok)

It gives me great pleasure to rise again this week in support of the Government. I fully intend to vote with them on any vote that is called tonight and, indeed, shall do so for the rest of the week.

As secretary of the all-party group on shipbuilding and ship repair, I draw the attention of the House to the fact that the future of the British shipbuilding industry has been safeguarded as a result of orders placed by the Labour Government, giving workers in the shipyards the security of employment that they did not have for a long time. That achievement should not go unnoticed. However, I want to raise a number of issues, and if the Under-Secretary cannot respond today, I hope that he can write to me.

First, on the aircraft carrier, I should like further reassurance that any changes will be capability rather than cost-driven. I accept completely the point about a possible downsizing of the carrier weight, but I want reassurance that any downsizing would maintain capability and that 48 planes, and not any fewer, will be flown from the carrier. The Minister of State said that delivery for 2012 and 2015 is still the aim, which I greatly welcome. I hope that the Under-Secretary can give me similar reassurance on the Type 45 order, because it has been suggested that the planned order for 12 ships may well be reduced to 10. I hope that the Government can give me a clear assurance that that is not the case and that the intention remains to order 12 destroyers.

I would also like clarification of the MARS—mobile adjustment ramp system—contract. There is an option to specify a civil order, rather than a military one, so that the system can be built overseas, but I hope that the Government ignore that option. Many Members have expressed their views on the issue of foreign defence procurement, the opportunities to buy from other countries and their unwillingness to buy from us. If a Member has spoken on a subject, I do not necessarily refrain from speaking about it myself but time pressures do not allow that today. I hope that the Minister accepts that if the MARS order were placed with British yards, there would be spill-over economies in the aircraft carrier contract. I hope that there would be sensible procurement policy that looked at the loading of work in the yards on the Type 45s, the aircraft carriers and the MARS contract, in order to allow throughputs of work and sharing of overheads, which would lead to economies being made on all those orders.

On shipbuilders' relief, the Ministry of Defence does not have direct responsibility for that, but it is connected with naval exports. I want to clarify whether the MOD has been speaking to Customs and Excise and the Treasury in support of maintaining shipbuilders' relief for military export orders. It seems that most of our international competitors provide considerable subsidies to their shipyards to supply third markets. If not matching them, we should at least be offering some support and assistance. There is a danger that we will disadvantage our yards. If they can win defence export orders, they will once again be able to share the overheads on the contracts with the MOD, thereby possibly reducing the expense to the taxpayer.

In the circumstances, the final point I wish to make arises from a note that I received from the Hansard writers, who said that the microphone was not on when I intervened on Mr. Wilkinson earlier. For the avoidance of doubt, I was—

Mr. Deputy Speaker (Sir Michael Lord)

Order. The hon. Gentleman must refer to other hon. Members in the correct parliamentary language.

Mr. Davidson

I used the hon. Gentleman's name because I could not remember his constituency.

Mr. Wilkinson

Ruislip-Northwood.

Mr. Davidson

Ruislip-Northwood. For the avoidance of doubt, I was indicating that I was in favour of a referendum on the European constitution as soon as possible.

5.31 pm

Dr. Julian Lewis (New Forest, East)

The mentioning of the MARS vessels by the hon. Member for Glasgow, Pollok (Mr. Davidson) almost succeeded in frustrating what remains my aim, which is to be the first to mention at least one new topic in a debate when making a winding-up speech. However, I still have a card or two up my sleeve.

As was pointed out by my hon. Friend the Member for Aldershot (Mr. Howarth), this is the right debate but at the wrong time. It almost seems as if the Government are intent on trying to cram as many defence debates as possible into the period before what is bound to be a very controversial White Paper appears, so that, after that White Paper appears and we demand answers to very challenging questions in the light of the cuts that it is clearly being forewarned will take place in that White Paper, the Government can say, "But you had all these debates this year." We are used to such tactics, as are the public after so many years of this new Labour Government. I do not think they will be fooled by it any more than we are.

I strongly disagree with the uncharacteristically harsh remarks of the Chairman of the Defence Committee, who, having missed the start of the debate, is showing consistency by not being present at the end of it. He chides hon. Members for representing the constituents and firms in their constituencies who work in and constitute the defence manufacturing industry. I personally think that such contributions show the merit of the single Member constituency system. I do not think that those constituents or firms would be spoken up for half as strongly if we had the sort of list systems that certain minor parties prefer.

That is why I commend the speeches of the hon. Members for The Wrekin (Peter Bradley), for Crawley (Laura Moffatt) and for Alyn and Deeside (Mark Tami), who all persuasively argued the case for UK defence manufacturing work to be undertaken by companies and work forces in their constituencies. Even my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) covered an important local defence industry, but as well as that he ranged over many wider topics, as did the hon. Member for Glasgow, Pollok.

My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) raised several more very important topics. For example, he was the first to mention the difficulty in maintaining the cycle of carriers permanently on patrol when there are only two rather than three, and the first to mention ballistic missile defence.

My right hon. Friend the Member for Fylde (Mr. Jack) showed his absolute mastery of equipment issues, and stressed the importance of an independent UK defence manufacturing base. The Liberal Democrat spokesman put on the record his party's wish to privatise the Defence Export Services Organisation, and his colleague, the hon. Member for Argyll and Bute (Mr. Reid), highlighted the problem of nuclear submarine hulk disposal. My hon. Friend the Member for Aldershot stressed the vital role of our military technology base, and the problems set to affect procurement projects in all three armed services. He also made a strong plea for greater equity in US-UK collaboration in defence projects—a point echoed and reinforced by the hon. Member for North Durham (Mr. Jones).

I am pleased to see that despite his arduous journey, the Secretary of State has joined us for the end of the debate, and I should let him know that the Minister of State rightly referred to some of the remarks that he made during last week's debate on defence policy. Without a conception of the threats that one is likely to face—as well as those that one currently faces—it is neither prudent nor sensible to determine a procurement policy at all. Procurement has to be tailored to meet the threats currently faced, and it has to be designed to meet future threats, which may be wholly unpredictable.

The longer the lead time and in-service time of a weapons system, the more versatile it must be. It should not be necessary for me to remind Ministers that where naval doctrine—maritime doctrine—in particular is concerned, versatility is valued above all. I shall take a moment of the House's time to point out that on Monday, I had the privilege of sponsoring the last reunion dinner of the crew of a wartime aircraft carrier of which some Members may not have heard. It was called HMS Speaker, hence its connection with this House; indeed, I was delighted that Mr. Speaker was able to meet and greet its splendid veterans. You and others may not have heard of it, Mr. Deputy Speaker, because it was an escort carrier—a ship not originally designed as an aircraft carrier, but which was speedily converted into a pocket-size carrier to fill a capability gap that was discovered once the war was already under way.

However, with modern systems we cannot adopt the "adjustable in wartime" measures that served us so well in the past. Indeed, the Secretary of State recognised that fact when he spoke in this House a week ago. He said: Historically, there are periods when major and rapid changes are necessary. That reflects the emergence of new threats and requirements and the passing of former threats against which the armed forces have previously been configured. However, in talking about weapons systems that were retained from the cold war period but adapted to the post-cold war era, he said that such equipment was "not always optimised" for the role that it had to take on. What was top of his list? It was our existing aircraft carriers, which, in his own words, were smaller than needed for significant operations against targets ashore".—[Official Report, 16 October 2003; Vol. 411, c. 273–74.] Let me remind the House about a little of the history of those aircraft carriers, which very nearly did not exist at all. I am old enough to remember a previous Labour Government, who had a well-thought-of Defence Secretary—Lord Healey, as he now is—who attached his considerable intellectual weight to a reassessment of Britain's strategic requirements, and decided that we no longer needed to be east of Suez. Applying logical principles, he said that if we no longer needed to project power east of Suez, we no longer needed aircraft carriers. If it had been left to that Government, there would have been no aircraft carriers, adequate, adaptable or otherwise. The only reason we have the present three aircraft carriers is that the Navy chiefs had the foresight and ingenuity to commission three special cruisers, which they called "through-deck cruisers." If new Labour thinks that it invented the concept of spin, it should look back to the Admiralty of those days, to which we all owe a debt of gratitude.

The aircraft carriers of the future must be capable of meeting unpredictable threats. The House will recall the comments I made earlier when I mentioned the assurance that the Secretary of State gave us early this year that the carriers would be 60,000-tonne ships, and would rank alongside the most formidable and complex weapons systems deployed by any country anywhere in the world."— [Official Report, 30 January 2003; Vol. 398, c. 1026.] I contrast that with the written answer I received from the Minister of State in August, in which he harked back to the SDR in 1998, saying that it was envisaged that the two new Future Aircraft Carriers would be in the order of 30,000–40,000 tonnes and be capable of carrying up to 50 fixed-wing aircraft and helicopters." —[Official Report, 1 September 2003; Vol. 409, c. 893W.] One question that we can expect to be answered today is this: if the aircraft carriers are reduced to 30,000 to 40,000 tonnes, does the Minister guarantee that vessels of that size will still be capable of carrying up to 50 fixed-wing aircraft and helicopters? I hope that the answer is not simply a yes, because "up to 50" could mean only 20, 25 or 30. I am sure the Government would not shelter behind such sophistry—or perhaps I am not so sure.

The Minister even seemed to suggest that if the aircraft carriers were smaller, it would somehow increase their versatility. That is not the view of Mr. Simon Knight of BMT Defence Services, the naval architect in charge of the project—as he was described in a Press Association press release on 12 October. He was reported as stating in an interview with The Engineer magazine: What we had before was a ship that could be a frigate in terms of its self-defence capabilities, and that could be a command and control ship in terms of its communications. It was the Holy Grail in terms of a ship that had everything, and we are now trying to pare it back to just the aircraft carrier role.

I also wish to ask about joint strike fighter numbers—an issue that has been raised before. 1 was told in a written answer from the Minister of State: While no final decisions have yet been taken, our planning assumption is based on 150 of the Short Take Off and Vertical Landing … variant of JSF being acquired to meet the … requirement."—[Official Report, 16 May 2003; Vol. 405, c. 453W.] Does that pledge still stand or has it been thrown into the melting pot together with the great promises that were made about the carriers? We have so often heard from this Government bold commitments that are made at the beginning, only to suffer quiet, incremental retractions as we go along.

I could cover many issues, but I promised to raise one that has not so far been mentioned in the debate, and that is the present threat from terrorism in this context. More attention should be paid than it has been so far to an article in the Financial Times on 20 October by Mansoor Ijaz, entitled "The maritime threat from al-Qaeda". He points out the following facts: According to United Nations estimates, up to 80 per cent. of the approximately 6bn metric tons of cargo traded each year is moved by ship. Of that, almost 75 per cent. passes at some point through one of the five main choke points in the seafaring economy—the Panama Canal, the Suez Canal, the Straits of Gibraltar, the Straits of Hormuz and the Straits of Malacca. A terrorist attack against one or more of those transit areas that disabled it for weeks or—in the case of a radiological 'dirty bomb', for far longer—could seriously disrupt global trade. The economic calculus of moving cargo by sea would be rendered useless.

The Royal Navy is clearly aware of that threat. I was interested to see an article in the current edition of Navy News entitled, "Sea containers may carry next big terror threat." It is a worrying fact that only a minuscule proportion of containers are checked in any meaningful way before they enter this country. Of the 12 questions that I would have liked to put to the Minister, I shall confine myself to one to allow him his full time to answer as much of the debate as he feels able or inclined to do: will the Government seriously consider initiating a screening system at our ports, and if necessary offshore, to improve the prospects of preventing sealed containers from being used to cause terror in the heart of this country?

5.46 pm

The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin)

I thank the hon. Member for Aldershot (Mr. Howarth) for his condolences and good wishes to the Minister of State, Northern Ireland Office, my right hon. Friend the Member for Warley (Mr. Spellar). I will ensure that the best wishes of the House are passed on to him.

The House last had the opportunity to discuss these important matters on 17 July 2002. It is clear from today's debate that much has been happening in the intervening 15 months, affecting the constituencies of many hon. Members on both sides of the House. It is essential that the equipment that we provide ensures that our armed forces remain highly capable and effective and ready to meet the challenges that they face today and in the future.

In opening the debate, my right hon. Friend the Minister of State covered much important ground. There were 10 Back-Bench speeches, made up of contributions from my hon. Friends the Members for The Wrekin (Peter Bradley), for Crawley (Laura Moffatt), for North Durham (Mr. Jones), for Alyn and Deeside (Mark Tami) and for Glasgow, Pollok (Mr. Davidson) as well as from my right hon. Friend the Member for Walsall, South (Mr. George), who is Chairman of the Defence Committee. There were only three contributions from the Conservative party—whose members obviously have issues to discuss elsewhere—from the right hon. Member for Fylde (Mr. Jack) and the hon. Members for Ruislip-Northwood (Mr. Wilkinson) and for Mid-Worcestershire (Mr. Lull), as well as a short contribution from the hon. Member for Argyll and Bute (Mr. Reid).

I congratulate the Defence Committee on its eighth report of this Session, which deals with defence procurement. I commend the Government's response to it. I am sorry that the Chairman of the Select Committee was worried about the Ministry of Defence agreeing with many of the points made in it.

I shall highlight a couple of areas that have been mentioned in the debate, in particular, the question of opening up markets, which is dealt with on page 3 of the Government's response and in paragraph 33 of the Select Committee's recommendations. We are very much aware of the issues that the Committee has raised. Indeed, when the Prime Minister was in Washington in July and the subject was raised during the debate, he secured an important agreement with President Bush radically to improve the sharing of defence information and technology between the United Kingdom and the United States of America.

The hon. Member for New Forest, East (Dr. Lewis) intervened earlier to suggest that the answer that he had received from my right hon. Friend the Minister of State was different from statements that had previously been made.

He has just said that my right hon. Friend the Minister was harking back to the strategic defence review, so I shall set out the answer to his question: In the Strategic Defence Review, published in 1998, it was envisaged that the two new Future Aircraft Carriers would be in the order of 30,000–40,000 tonnes and capable of carrying up to 50 fixed-wing aircraft and helicopters. The intention, as with any other new equipment project, has always been to refine the design during the assessment phase in order to best meet our developing capability requirements."—[Official Report, 16 September 2003; Vol. 410, c. 703W.]

Dr. Julian Lewis

Of course, the Government said that in 1998; they are saying it again now, but why did the Secretary of State make such a song and dance in January this year about the fact that the carriers would actually be 60,000 tonnes? That is what everybody heard and believed at the time.

Mr. Caplin

The two statements are not contradictory.

My hon. Friend the Member for Glasgow, Pollok, in discussing the role of shipbuilding, welcomed what the Government had been able to do with their ordering processes. I take his point, and welcome the start last month of the third stage of the assessment phase, which was excellent news for the project. It continues to provide further impetus to ongoing operations and confirms the Government's commitment to the programme for the future aircraft carrier.

Mr. Kevan Jones

Does my hon. Friend agree that, whether the tonnage is 40,000 or 60,000, the commitment to the two CVFs will lead to large amounts of work for shipbuilding communities throughout this country, many of which went through lean years when the Conservatives were in power?

Mr. Caplin

Things were certainly different when the Conservatives were in power.

In his statement of 30 January, my right hon. Friend the Secretary of State made it clear that various yards—Vosper Thornycroft, Swan Hunter, Babcock at Rosyth and BAE Systems at Govan—would be involved in the projects.

The stage 3 assessment will increase the maturity of the design and optimise its capability and value for money. That progress will pave the way for Ministers to place contracts for the demonstration and manufacture of the ships in spring 2004. The Opposition seem to be obsessed with size, but it is actually capability and assessment that we need to consider.

The right hon. Member for Fylde asked me to thank Lord Bach for the way in which he fulfils his portfolio. I shall certainly do so. Other Members also made that point. I was concerned about the right hon. Gentleman's summer reading choice. May I suggest that John Grisham might be more appropriate? I shall certainly write to the right hon. Gentleman about the aerospace issue that he raised.

Several hon. Members referred to Eurofighter Typhoon, including the hon. Member for Mid-Worcestershire, who asked about tranche 1. The contract was signed in September 1998 and it is a secure contract. We aim to place the tranche 2 contract in the coming months. Commitment to tranche 3 is not expected before 2007. The reason is that discussions with the four nation members and with industry are ongoing.

Mr. Gerald Howarth

The Minister knows that there is concern among our European partners about the British Government's commitment. Can he be more specific about the "coming months"? Is it the Government's intention to sign up for tranche 2 by the end of the year or not?

Mr. Caplin

We are holding discussions and when an announcement is due it will be made in the right and proper place.

The hon. Member for South-East Cornwall (Mr. Breed) added to the varying list of commitments made by his party and its leader recently by announcing that he wanted to privatise the Defence Export Services Organisation. The Government wholly and fundamentally disagree; we have no plans to do that. He also raised the issue of the C-17 aircraft. We have been reviewing future strategic airlift needs and are considering the options for the permanent retention of a small C-17 fleet. However, any fleet of C-17s would complement our C-130J and future A400M fleets.

My hon. Friend the Member for Crawley spoke about the work that the Territorial Army unit from her constituency is doing in Iraq. I know some of those soldiers as they live in my constituency; many Thales employees also work in Crawley but live in Hove. I know that the work that they do is very good indeed.

Like many other hon. Members, including the Chairman of the Select Committee, the right hon. Member for Fylde raised the issue of the "Buy American" provisions. I have to tell the House that the British Government have made clear to the United States our serious concern regarding that so-called provision. Introduction of those provisions would have a significant detrimental effect on the programme and we very much welcome the cross-party support that the House is giving to maintain the pressure on the United States. My right hon. Friends the Prime Minister and the Secretary of State for Defence take every opportunity to raise that issue with their counterparts.

My hon. Friend the Member for Alyn and Deeside mentioned the air tanker programme. Bids are in the process of being assessed and, unfortunately, it would not be appropriate for me to give him further details this afternoon.

Several hon. Members asked about the affordability of our forward plans and speculated on projects that might face cuts or cancellation. I emphasise to the House that that is pure speculation. As my right hon. Friend the Secretary of State said in last week's debate, like any big spending Department, the Ministry of Defence has pressures on its budget, but, as a matter of routine, the Department undertakes what amounts to a capabilities stocktake every year against our future plans. We examine the systems that we currently have in place, those that we have chosen to purchase and those that we may need in future. The strategic environment changes rapidly, and we must ensure that our planning evolves with those changes. Like all Government Departments, the Ministry of Defence has only so much money to spend, and it must be spent effectively.

The increase in the defence budget announced after the last spending review reflects the importance that the Government attach to ensuring that our armed forces have the capabilities that they need to deal with the rising threat of international terrorism, as well as the challenges that we faced before 11 September. What it does not do is stop us continuing our efforts to seek cost-effective solutions to our military requirements. It will not stop us pursuing value for money, through competition and other means, in our defence orders, and it does not mean that we no longer need to prioritise our activities so as to deliver those capabilities we most need while spending our budget wisely.

In Iraq, it is clear that our equipment performed well in the demanding and testing environment of war-fighting operations. Challenger 2, SA80, new precision weapons and many equipment capabilities made an important contribution to the success of those operations. But it is vital to remember that, in modern operations, capabilities should not primarily be measured in terms of platform numbers. A far greater focus has shifted to the decisive effects that we can achieve through those platforms and the weapons that they carry. Ensuring that those are as accurate and effective as possible—and can be deployed and sustained promptly in the field—will enable us to maximise the impact our armed forces can achieve.

Dr. Julian Lewis

Will the Minister give way?

Mr. Caplin

I am sorry; I cannot.

On Tuesday, the Minister for Defence Procurement, Lord Bach, addressed the annual defence industry conference, the first since the successful launch of the Government's defence industrial policy. Reactions to the policy have been highly favourable, as my hon. Friend the Member for North Durham said, and since its launch, Government and industry have worked together closely on putting it into practice. At the launch, my right hon. Friends the Secretary of State for Defence and the Secretary of State for Trade and Industry committed the Government to a formal review. I can tell the House that the review has now been completed and will be published soon.

Peter Bradley

Will the Minister give way?

Mr. Caplin

No.

We are particularly pleased with the way the dialogue between Government and industry has deepened, and we remain committed to high-level engagement with industry through the National Defence Industries Council, and to developing the dialogue that we have established on industrial policy implementation. As more new programmes are conceived and progress through the acquisition cycle, we shall be able to assess the impact of the policy with greater clarity.

I stress that competition is at the heart of the policy, delivering value for money to the British taxpayer and real innovation in the capabilities available to our armed forces. Those are powerful and persuasive benefits, but we are flexible enough to follow other routes—such as partnering, where industry and Government can benefit from stable, long-term relationships—when those alternatives make most sense.

I have two concluding points. First, I was disappointed that the hon. Member for South-East Cornwall did not criticise the hon. Member for Twickenham (Dr. Cable), because I can assure him that we intend to fly the flag for Britain in our defence exports. Taken together—

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