§ 9.31 p.m.
§ The Earl of Kimberley rose to ask Her Majesty's Government when they expect to announce their decision on British Aerospace's ship-launched Sea Eagle missiles.
§ The noble Earl said: My Lords, the very name Sea Eagle must surely conjure up a sleek, powerful and predatory bird of prey. There is the high-speed wave-skimming flight, coupled with extraordinarily keen vision, evolved by Marconi Space and Defence Systems, to seek out its prey. Add to this the talons and beak of the warhead, and we find that we have one of the most sophisticated missiles yet invented by man, and in particular by British Aerospace.
§ I do not apologise if I speak for 11 minutes instead of 10, because I think this is a very important subject; but I cannot apologise for the lateness of the hour. However, following the ravages of nationalisation and the subsequent Government-sponsored rationalisation, we are left in this country with one guided weapons company, British Aerospace, which is then expected to compete against foreign companies for a slice of the United Kingdom defence procurement budget.
§ A more recent innovation has been the introduction of the cardinal point specification, against which competing weapons are judged. If any noble Lord is doubtful I will give a very short précis. A cardinal point specification is a definition of a potential purchase, and it limits itself to the prime and essential requirements of the customer. It is then up to the supplier to provision equipment to meet or better the cardinal points and to interpret those aspects which are not specified but which are, or could be, attractive to the customer.
§ Personally, I have no objection to this because it must provide a keener edge to the competition. In the same vein it must be said that if British Aerospace wins a home contract in the face of foreign competition, then the company's chances of winning when it enters the overseas market must be enhanced. However, it is of interest to note that this single British source of guided weapons was not consulted during the specifying stages of the current competition to provide a new surface-to-surface guided weapon for the Royal Navy. I should like to know from my noble friend why the Royal Navy did not consult on this matter. Either way, British Aerospace has proposed a ship-launched variant of their Sea Eagle missile as the surface-to-surface guided weapon to equip a later version of the Type 22 frigate as well as the now well-publicised Type 23.
§ The company is competing against the United States with Harpoon, and against the French and Italian weapon proposals. My information is that the British Aerospace price on the table is highly competitive and that their proposals meet the operational requirements of the navy and, in many cases, far exceed them. Sea Eagle, I should add, has already been purchased by the Royal Navy and the Royal Air Force to equip Sea Harriers and Buccaneer attack aircraft. In other words, the Government have already made a considerable investment in this 748 weapon, and what is now being proposed by British Aerospace is a modest further development investment with the benefits of larger production. Last July, after months of negotiation when faced with an almost identical choice concerning missile procurement for the Royal Air Force, the Cabinet finally decided to buy British in order to ensure that key technology remained in these islands.
§ The SSGW provides the surface fleet—our fleet—with its primary anti-ship or offensive weapon. Royal Navy warships, whether deployed in NATO areas or in other parts of the world, cannot always depend upon air cover in an offensive situation. Because, therefore, the SSGW is the major offensive but conventional weapon, the Royal Navy should have firm control over the weapon supply and they must also be assured that any developments or modifications to meet an increased or changed threat will be rapidly and securely responded to. An overseas buy cannot assure this; a purchase of the ship-launched Sea Eagle will.
§ Let us not forget that weapons designed by the United States, or other offshore weapons designed by other countries, are produced to meet the threat to their country of origin. It would therefore seem a strong probability that a weapon designed in the United Kingdom could meet, and continue to meet, a threat to the realm. Experience gained in the conflict in the Falklands demonstrated to the entire world the capabilities of British Aerospace and other British defence companies to meet the requirements of the weapon users.
§ In the field of technology, the investment in Sea Eagle has already been made; indeed, British Aerospace has already received an export order and it is hoped that there are more in the pipeline. It would, therefore, be a waste of resources if an alternative and offshore SSGW were to be purchased for our own surface ships. Despite protestations in some areas that an offshore buy would yield employment in this country, that employment would not be of a high technological nature and would probably be production-based with little prospect, if any, of re-export. There would be little or no employment in development, which must surely be the source of our future prosperity.
§ It can be argued that a weapon such as ship-launched Sea Eagle purchased at home would be cheaper than one of similar price from abroad, due to direct and indirect taxation returns to the Treasury. The Treasury would argue that such comparisons are the result of double taxation. Nevertheless, it is difficult to dispute the fact that a home purchase will yield funds to the Treasury from taxes and export levies. Thus, the sterling returns will at least offset a requirement in any one year for Government borrowing.
§ I have already mentioned that one member of the Sea Eagle family of weapons is to be exported, and it is to be exported to India. It is only a few months ago that the Indian Defence Minister implied very strongly that they would like to purchase 12 more Sea Harriers from Britain to add to the eight that they already have, as well as British Sea Eagle helicopter-launched missiles and British ship-launched missiles for their 749 navy. So the competition to sell ship-launched missiles is high, but the market is expanding and British Aerospace is already receiving requests from other navies besides India to buy Sea Eagle. If the Royal Navy does not buy it, then it is unlikely that anybody else will want to buy it, and the country will lose a potential valuable export market, as well as one of the finest of missiles.
§ Much is made of employment and its expansion. In the case of the ship-launched Sea Eagle, British Aerospace is emphasising security of employment and retention and expansion of the technological base. Only then can there be employment expansion. We can at this moment accommodate the home market, but employment will also increase considerably if we have export orders.
§ British Aerospace is confident that they can supply on time and at the right price. To this end, considerable sums of money have been spent and committed to ensure that delays in decision-making are not reflected in the programme. The supplier of the missile home head, Marconi Space and Defence Systems, has also invested private venture funding to ensure that the schedules are met.
§ In summary, in the ship-launched Sea Eagle the Royal Navy will have the best surface-to-surface guided weapon available on the market today and in the future. A decision to buy any other would deny our navy its lines of supply and future design control and would deny British industry technological expansion in a field which will yield large exports.
§ I should like to ask my noble friend the Minister four questions. First, in their considerations on the future surface-to-surface guided weapon for the Royal Navy, have the Government taken into account that whichever weapon is chosen, be it Sea Eagle or Harpoon, it will form the primary offensive weapon of our surface fleet, and, as such, can the Government really be sure that they will have absolute control over supply and further design, should the decision go offshore?
§ Secondly, do the Government concede that an onshore purchase of the future surface-to-surface guided weapon for the Royal Navy—that is, British Aerospace's Sea Eagle—will, in Treasury terms, yield more, and predictable, feed-back to the Treasury, resulting in there being some reduction in Government forward borrowing?
§ Thirdly, do the Government concede that an offshore buy of the future SSGW for the Royal Navy could effectively put an end to future developments of this type of weapon in the United Kingdom and destroy the progress that has been made with respect to the Sea Eagle anti-shipping missile?
§ Fourthly, have the Government, in their deliberations on the future surface-to-surface guided weapon for the Royal Navy, taken into account the benefit to be gained by choosing the British Aerospace Sea Eagle in terms of the possible boost to exports, and in particular the support which a total British weapon fit could give to warship exports?
§ My noble friend will not have forgotten the battle that raged a few years ago over the initial launch of Sea 750 Eagle, nor will he have forgotten Harm and Alarm, the Heavyweight torpedo, the Stingray torpedo and a few others. I maintain that it would be a tragedy if, after the air-launched and the helicopter-launched Sea Eagle, the ship-launched Sea Eagle were not given the go-ahead by Her Majesty's Government. These delays and indecisions cause much unnecessary hardship to our manufacturers, and in many cases the product in the long run turns out to be more expensive. Therefore, my final question tonight is: when do Her Majesty's Government expect to announce their decision on British Aerospace's ship-launched Sea Eagle?
§ 9.44 p.m.
§ Lord Bishopston
My Lords, in initiating this timely debate the noble Earl, Lord Kimberley, has performed a service by bringing to the attention of the Government and of the House the subject of the special needs of Her Majesty's forces and how they might best be met. After his commendable speech I shall try to avoid repetition and will seek only to emphasise a few of what I believe to be the most important points.
Those who have to make decisions on these matters have a number of considerations which must be borne in mind. They include, first and foremost, the meeting of the specification and the factors affecting the performance of the project; factors which are crucial in ensuring their fulfilment and their reliability in service.
The need is, as the noble Lord has said, for a new surface-to-surface weapon system for the Royal Navy. In the case of Sea Eagle there are the advantages of a project which is of a known and trusted family of weapons, being yet a further development with the advantages of using the expertise of design, testing, production, logistic support and servicing, with lower cost and proven reliability.
It is always an advantage when we know the stable from which new ventures come. British Aerospace has over many years made an outstanding contribution to the needs of Her Majesty's forces. I am proud that for most of my working life outside the parliamentary scene I was engaged in the design of service and civil projects in companies which are now included in British Aerospace. I have maintained my professional links and I have had the benefit of some years as a United Kingdom delegate to the North Atlantic Assembly. That is to be recommended for anyone wishing to be fully conversant with the role and needs of Her Majesty's forces.
We are impressed not only that Sea Eagle is one of a family of weapons, but that it is being produced by a proven team of designers and manufacturers whose skills and know-how are available not only for that project but for our country's future needs. This, of course, is a very great asset when foreign suppliers are in the bidding. The new project is aided by using the advantages of past and present team effort through cost effectiveness, planning larger purchases of raw materials and sub-systems, and in-service savings with economy in terms of spares, support facilities and post-design services. Vital, too, is the security of re-supply and MOD control. These are great advantages over foreign suppliers.
751 British supply of products and systems means also having our own control over changes necessary to meet new threats as the South Atlantic campaign proved. Most important, there is the export potential which can lead to an increasing vital overseas trade. Exports depend, as we know, on showing that the British Government have confidence in a project by themselves buying what they have the confidence to offer abroad, securing British jobs with the follow-up of spares and servicing, aiding longer-term employment prospects in many areas of Britain which have need of jobs at this time. Also important are the follow-up facilities which ideally, for reasons of security and supply, should be within our influence and not in overseas hands, as the noble Earl demonstrated.
To sum up, Sea Eagle, which is now on offer, is the development of a project which has already proved itself, as has been said, satisfying the Government's aim for a system aligning future requirements with equipment development planned by industry for world markets. It is part of a family of weapons already attracting overseas interest, as the noble Earl said, which may lead to significant export orders. It will ensure re-supply of this weapon with modifications under British control necessary to meet a changing threat.
Finally, the producers of Sea Eagle SL have the resources, the proven and skilled manpower and the design teams which must be kept working together not only for the sake of this project but if we are to get other projects as well. In addition, it has the cost effectiveness of an on-going programme. The present production is moving into a development project going into the future. It has the benefits, as the noble Earl said, of a pricing policy and a return on the significant investment by the Government and other sources in the development of Sea Eagle within the time-scales. Weighing up these vital factors so necessary to come to the right decision is never easy, but I trust this short but concerned debate may assist in that process.
§ 9.50 p.m.
§ Lord Trefgarne
My Lords, my noble friend Lord Kimberley, in his characteristically informed way, has raised a subject which is both of importance and, understandably, of interest to many of your Lordships. I trust, however, that my noble friend will not be too disappointed, or even surprised, if I say at the outset that it will be some little while yet before my right honourable friend the Secretary of State will be able to announce any decision on the procurement of a new surface-to-surface guided weapon for the Royal Navy. I am afraid, therefore, I can only say that a decision will be taken as soon as is practicable and possible—words which will be not unfamiliar to my noble friend.
My noble friend has explained what the new missile system will do, but I should like to explain briefly why it is we require to order a new ship-launched missile at this time. The need for a surface-to-surface guided 752 weapon which could be fitted to a wide range of ships arose in the late 1960s, and as a result the Exocet MM38 was adopted in 1970. As we found to our cost during the Falklands conflict, the Exocet family is an effective weapon system, but with the passage of time, and particularly in the face of improvements to Soviet defensive systems, it is now inevitably in the process of being overtaken.
The Type 23 frigate, the approved design of which was announced last October, will form the backbone of the Royal Navy's anti-submarine warfare surface force by the year 2000. To do this, the Type 23 will have an impressive performance and fighting capability, exploiting the very latest technologies—the new Spey gas turbine engine in its maritime form; vertical launch Seawolf; Stingray lightweight torpedoes and a 4.5 inch gun; in addition to the second generation surface-to-surface guided weapon system. In essence, the Type 23's combination of quietness, weaponry and sensors will make it an extremely effective antisubmarine frigate with a powerful general purpose capability. The ship will also provide a greater radius of operation and, with the benefit of modern technology, will require a smaller ship's company of only 143 men compared with 250 for the Type 22.
Thus, the destroyer/frigate force planned for the next two decades will have a hugely improved capability compared with the same force of even a decade ago. It is of course essential to ensure that every opportunity is taken to improve the fighting capability of the surface fleet by incorporating, in the design of warships, the flexibility to accept the very latest weapon technology developments. In this way, the Royal Navy will be able to maintain a credible and effective deterrent against the offensive capability ranged against us by the Soviet Union.
The surface-to-surface guided weapon is a major example of the Government's policy of competition in the field of procurement of material for the armed services. We place great emphasis on competition, and the discipline of the market place is often a very effective way to ensure that industry produces the right equipment for the services while giving the best value to the taxpayer.
In the implementation of our competition policy we try to align the Navy's needs with industry's abilities and interests. My noble friend referred to cardinal point specifications (or CPS), which are a fairly recent derivative of the performance specifications which have been used in defence procurement for some time. The CPS given to industry for a proposed project contains the briefest possible statement of the basic features of performance and support considered necessary to meet the Royal Naval application. The method is especially useful in equipment where firms have developed or are developing equipment to meet wider markets. Firms enter the competition on an entirely voluntary basis and the winner is selected through our normal procurement evaluation process.
It is therefore a principal feature of CPS that industry is invited to submit detailed proposals for the specification of equipment to meet the Royal Navy's basic operational requirement. I can assure my noble friend that in the case of the SSGW, British Aerospace were indeed invited to submit their proposed detailed specifications.
753 It was in response to a CPS for the new surface-to-surface guided weapon that firms submitted bids: British Aerospace with a ship-launched version of the Sea Eagle missile; Aerospatiale with an advanced version of Exocet; Matra and Oto Melara with versions of the Otomat missile; and McDonnell Douglas with the Harpoon.
My noble friend asked whether we were sure that we would be able to control supply and further design if the decision went offshore. The security of supply and access to future developments are, of course, among the factors we are taking into account in reaching our decision. However, I should point out that we would not have contemplated inviting tenders from overseas if we had not been satisfied that the security of future supplies could he assured.
It is not surprising that there are a wide variety of factors which are involved in reaching a decision between contending systems. We have made great progress in our search to achieve better value for money and to enhance the competitiveness of United Kingdom defence industries. However, value for money is not synonymous with selection of the cheapest tender. When deciding on the purchase of an item of defence equipment, we have to take into account not only the initial cost, but, as far as we are able to calculate these things, the running costs and spare costs of the equipment, and we compare them with those of other options available to meet our requirement. Those calculations are not straight-forward. They create problems for items of equipment that might be at the frontiers of technology, but we do our best to make as complete and reliable an assessment as possible. In addition, performance, timescale, the results of an investment appraisal, and general economic, industrial and employment implications, including overseas sales potential and offset proposals, where relevant, are factors which we have to take fully into account.
My noble friend mentioned some of these considerations. He suggested that a purchase of Sea Eagle would yield more and predictable feedback to the Treasury than an overseas purchase. But I have to tell my noble friend that the acceptance of a United Kingdom tender which is internationally uncompetitive can have adverse effects upon the economy in terms of public sector borrowing, interest rates, rate of inflation or the exchange rate, which may outweigh any short-term economic or employment benefits.
My noble friend also suggests that a failure to purchase ship-launched Sea Eagle would effectively destroy all future prospects for the air-launched version of the missile, which is currently under development for the Royal Navy and the Royal Air Force. I must say that the Government have considerably more confidence in air-launched Sea Eagle than my noble friend seems to. Our decision to procure it for the Royal Navy and Royal Air Force, and the export success which has followed, were based firmly on its merits as a system, and did not depend on the subsequent or parallel development of a surface-launched version of the missile. We are, of course, taking account of the existence of the air-launched Sea Eagle programme in coming to a decision on our future surface-to-surface guided weapons, but this is only one among many factors to be considered. 754 Incidentally, we already have several variants of one of the other competitors, Harpoon, in service.
My noble friend also referred to the export potential of surface-launched Sea Eagle, as part of a total warship package. This point also is one of the factors we have to take into account in reaching our decision. We are, of course, anxious to give support and encouragement to British industry and exports, but at the same time it is vital to ensure that the equipment chosen will meet the Royal Navy's operational requirement in terms of performance and timescale, and is competitively priced.
My right honourable friend is concluding with his colleagues a detailed evaluation of the tenders, and we are currently ensuring that we have the most up-to-date information possible. A decision will be made as soon as this process is complete. As I trust my noble friend will appreciate, it would not at this stage be appropriate for me to discuss the merits of each system. However, I can assure your Lordships that we are taking all the relevant factors into account—including those that my noble friend has mentioned—in reaching our decision.