HL Deb 12 December 1985 vol 469 cc344-5

3.10 p.m.

Lord Orr-Ewing

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what proportion of new defence contracts has been been placed competitively in the last 12 months and what estimate the Ministry of Defence have made of the savings resulting from their policy.

The Minister of State for Defence Support (Lord Trefgarne)

My Lords, in 1984–85 the proportion by value of work placed in a competitive environment was 46 per cent., an increase of 8 percentage points on the proportion for the previous year. A further significant increase is expected during 1985–86.

Lord Orr-Ewing

My Lords, can my noble friend give an indication of what is anticipated in the coming year? Will this percentage figure rise by over half? Secondly, can he give an estimate of how much money has been saved by going to competitive tendering? If he cannot do it globally, perhaps he can give us one or two examples of contracts which have shown substantial savings.

Lord Trefgarne

My Lords, it is difficult to give a global figure in answer to my noble friend's question because we cannot know what prices we would have been offered in a non-competitive situation. However, my noble friend may recall the example of the two-seat basic trainer ordered for the RAF earlier this year, which resulted in a contract price some £60 million below the original budgetary estimate. As for the percentage of our work being procured on a competitive basis, that, as I said in the original Answer, was 46 per cent, last year. I should expect it to approach something like 60 per cent, this year.

Lord Graham of Edmonton

My Lords, can the noble Lord tell the House whether the Government have decided to apply a similar principle to that applied in accordance with federal law in the United States; namely, that in a competition for defence contracts it is the cheapest offer that wins? Alternatively, will the Ministry of Defence pay attention to the social and long-term economic consequences of a given decision? For example, when the choice of the new aircraft trainer was made, did the question of employment prospects arise, or was the cost the only consideration? I wonder whether I may remind the Minister—

Noble Lords

Too Long!

Lord Graham of Edmonton

My Lords, I shall come back again. I am grateful to noble Lords.

Lord Trefgarne

My Lords, as I think I have said from this Box on more than one occasion, the implications of the decisions we make in this regard are of course taken into account. However, in the case of the two-seat trainer, to which the noble Lord referred, as it happens the economic considerations and the social considerations seemed to be coincident.

Lord Shinwell

My Lords, perhaps I may ask the Minister this question. Is it good enough for the Government for months and months to praise the virtues of competition and, when they are asked a question as to whether they are making any savings from this workable virtue of competition, all they can do is indulge in very vague talk about percentages? What we want to know is: are we saving any money? If not, why not tell us?

Lord Trefgarne

My Lords, I referred to the £60 million which I believe we saved in respect of the two-seat trainer. The noble Lord may care to reflect upon the £100 million that I think we saved on the MCV 80 contract.

Lord Shinwell

But, my Lords, in what respect of defence have we saved £60 million? Is it good enough to tell this House of intelligent people—without exception, intelligent people—that we have saved £60 million without specifying on which particular item we have saved it? The fact is, we have saved nothing.

Lord Trefgarne

My Lords, I endeavoured to explain that the £60 million was on the contract for the Tucano two-seat basic trainer aircraft for the Royal Air Force. The £100 million to which I subsequently referred was on the MCV 80 armoured personnel carrier which we have recently ordered for the British Army.

Lord Orr-Ewing

My Lords, would my noble friend agree that this has been a useful reform, and that it is moving in the right direction? Ought we not now to come into line with other countries, particularly the United States, by being a little more revealing on what the price was at which the contract was won? We have been very careful never to reveal these matters whereas they are open facts given to Congress. We should be better able to see what value for money we are receiving, which would be wholly salutary and in keeping with the competitive philosophy of this Government.

Lord Trefgarne

My Lords, I have a good deal of sympathy with my noble friend on that point. However, as he says, it is a matter of long-standing practice that these prices are not revealed, and, indeed, we should wish to reveal them only in accordance with an agreement reached with the contractors themselves.

Lord Jenkins of Putney

My Lords, referring to the Government's addiction to competition, would it not be a good idea if they were to re-create the War Office, the Admiralty and the Navy, so that they could all compete with each other in the good old way and we could abolish the Ministry of Defence, including the noble Lord's own job?

Lord Trefgarne

My Lords, the trouble with that kind of competition is that it is rather wasteful.