Manufacturing

HC Deb 21 June 2004 vol 422 cc1063-6

5. Jim Knight (South Dorset) (Lab)

What efforts his Department is making to support the British manufacturing sector. [179363]

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

In October 2002 we published our defence industrial policy, which seeks to provide the armed forces with the equipment that they require at best value for money for the taxpayer, while sustaining a healthy and globally competitive defence industry. When acquisition decisions are made, the Government take into account the benefit to the United Kingdom economy arising from defence expenditure, including detailed consideration of the extent to which UK companies will be involved in supplying and supporting equipment and services.

Jim Knight

I thank my right hon. Friend for his reply. I am sure that he will agree that UK defence manufacturers and workers value our special relationship with the United States of America and are keen to see that translate into improved access to US contracts. What progress is being made across Whitehall Departments on negotiating the waiver on the international traffic in arms regulations?

Mr. Hoon

I am grateful to my hon. Friend for raising that important issue. I am certainly disappointed that some in Congress want to damage our efforts to bring down the barriers to improve Anglo-American defence industrial co-operation. We would like the closeness of the wider relationship more properly reflected industrially. The ITAR waiver would certainly be a positive step in that direction. We have made our opposition to the damaging provisions of this year's Defense Authorizations Bill clear both to the Administration and to Congress. We are grateful to the Administration for their robust support in expressing their solidarity with our position.

Sir Nicholas Winterton (Macclesfield) (Con)

Does the Secretary of State agree that it would be of immense encouragement to British manufacturing industry and give a positive indication that the Government support manufacturing in the United Kingdom if the Ministry of Defence gave the go-ahead to BAE Systems' Nimrod MRA4—maritime reconnaissance and attack mark 4—project, which would be built at Woodford, which lies partly on the periphery of my constituency and partly in the constituency of the hon. Member for Cheadle (Mrs. Calton)?

Mr. Hoon

The Government do support manufacturing industry in the United Kingdom. As set out in the principles of our industrial policy, we do so through the use of the defence budget where that is appropriate. It is important that we secure best value for money for the British taxpayer, but in our calculations we consciously and as part of our overall policy take account of the research, investment and benefit that that will provide to British industry.

Mr. Bill Olner (Nuneaton) (Lab)

Does my right hon. Friend agree that one of the most positive ways to show support for British manufacturing industry is to keep teams such as the Red Arrows flying? Will he give an assurance that what we have been seeing in the press is just media talk and there is no option to shut down the Red Arrows and the Hawk aircraft that they fly?

Mr. Hoon

I recently had an extremely good visit to the Red Arrows, and I was as impressed as my hon. Friend by the brilliance of the pilots and their stunning showmanship. I am delighted to endorse their strong commitment to promoting British exports around the world, the excellence of British manufacturing, and the skill of our pilots.

Mr. Patrick McLoughlin (West Derbyshire) (Con)

Is the Secretary of State satisfied that his Department does enough to encourage small manufacturing industry in this country to compete for MOD contracts? Is he aware that such businesses often find getting a foothold in defence contracts extremely burdensome?

Mr. Hoon

The hon. Gentleman makes a good point. Small businesses finding it difficult to secure access to larger contracts is a problem throughout UK industry, whether the contracts are directly with the MOD, which is relatively unlikely for the sort of small business that I believe he has in mind, or for the supply of parts under larger contracts, which are won by larger companies. However, I agree with his basic point: it is important that we encourage smaller manufacturing companies to participate in the defence industrial policy.

Ms Ann Coffey (Stockport) (Lab)

My right hon. Friend will be aware of the importance to the north-west economy of BAE Systems' site at Woodford. When I visited the site recently, I was shown around one of the newly refurbished Nimrods and was impressed by the state-of-the-art surveillance equipment and technology on the aircraft. Will my right hon. Friend say when a decision will be made on orders for the Nimrod? He will appreciate that the orders are crucial to secure jobs and investment in the north-west.

Mr. Hoon

In February last year we reached an important agreement with BAE Systems on Nimrod—a contract amendment that put Nimrod MRA4 on a much sounder footing for the future. Under the restructured contract, design and development and production have been separated as far as possible to ensure that technology is adequately de-risked before making any further commitment to production, price and schedule. The MOD has been approving low-risk production activities when it makes sense to do so and when such activities help to maintain essential skills and product knowledge, as well as preserve the schedule. There is still work to be done before I can satisfy my hon. Friend, but I assure her that we are committed to the Nimrod project, which is important for industry in the United Kingdom and crucial in terms of the capabilities that it will offer our armed forces.

Mrs. Patsy (Cheadle) (LD)

I am happy to hear the Secretary of State give his commitment to the Nimrod project and to hear him say that he is seeking value for money, as are we all. However, does he recognise the tremendous improvement that has taken place both in the operation of the work force and the management at BAE Systems in Woodford?

Mr. Hoon

There has certainly been improvement, but as I suggested in my answer a moment ago, that has come at some cost to the Government. I hope that the improvement will continue to be commensurate with the further efforts that the Government are making to get the project right.

Mr. Kevan Jones (North Durham) (Lab)

Further to the question asked by the hon. Member for West Derbyshire (Mr. McLoughlin), will my right hon. Friend join me in congratulating Northern Defence Industries, which is working with small and medium-sized businesses in the north-east and Yorkshire to gain access to defence contracts? What encouragement can the MOD give NDI and other organisations to ensure that small companies get access to some large contracts?

Mr. Hoon

As I said a few minutes ago, the problem is often that the larger Companies that win those contracts have bureaucratic procedures that they have to go through before they accept bids from suppliers, particularly from smeller companies. However, I agree that it is important that we work with excellent organisations such as NDI to ensure access for those smaller companies, which will one day develop into the larger companies that will secure the manufacturing future of the United Kingdom.

Mr. Gerald Howarth (Aldershot) (Con)

With much of Britain's defence industrial base either already in foreign ownership or about to become foreign-owned, is it not the case than the Government are presiding indifferently over a massive summer clearance sale of major British defence companies, with many attendant risks to our security of supply? Is the Secretary of State's own much vaunted defence industrial policy not a complete shambles?

Mr. Hoon

Opportunism again from the Conservative Front Bench. Our policy was established 18 months ago, and we did not hear a single word of objection from the Conservatives at the time, but now they are taking the opportunity to criticise us in a quite unprincipled way. Their party is supposed to be committed to market forces. Is the hon. Gentleman recommending nationalisation of major defence industries? Is he suggesting that the Government should interfere in the decisions made by private sector companies? Is he suggesting that where the shares are held is more significant than where the jobs, investment, and technology are? Thai is the Government's policy—he did not object to it when it was published, so to do so now is simply opportunism.