Defence Expenditure: Value for Money (Hansard, 6 May 1986)

§ Lord Orr-Ewing
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur)
My Lords, we are continuing to increase the use of competition in defence procurement contracts and actively developing collaborative opportunities with both our European and transatlantic allies.

§ Lord Orr-Ewing
My Lords, while I thank my noble friend for that reply, can he be a little more specific? Recently I read in the papers that £300 million was saved in the first six months by competitive contracts. Therefore, is it true that we are likely to save £600 million in the year? Is that the sort of aim which the Government are hoping to achieve in the present year?

§ Lord Glenarthur
My Lords, it is difficult to quantify the savings precisely. The Chief of Defence Procurement has suggested that a 10 per cent. saving overall should be achievable, which would take us rather in excess of the £600 million; it would be more approaching £800 million.

§ Lord Mayhew
My Lords, can the noble Lord the Minister say what proportion of contracts for defence procurement are by competitive tendering? I think that in the last Defence White Paper the figure was 60 per cent., which was challenged by the Select Committee on Defence. Will the noble Lord say what is the current figure?

§ Lord Glenarthur
My Lords, the figure for contracts let competitively rose from 38 per cent. in 1983–84 to 47 per cent. in 1984–85. We expect 1985–86 figures to show a further increase. We hold over 300 competitions per month, with an average of five firms in each.

§ Lord Graham of Edmonton
My Lords, is the noble Lord aware that on 21st March last year, at col. 660 of Hansard, the noble Lord, Lord Trefgarne, said: Our policy is to reduce the cost of defence equipment through the maximum use of competition"?. What are the implications of this policy if it means that foreign companies are successful in obtaining orders when competing against British companies?

§ Lord Glenarthur
My Lords, competition can help, first, by achieving the best value for money; secondly, by the most efficient use of industrial resources; thirdly, by stimulation of new ideas; and, added to that, greater exports, which of course have a consequence for UK firms being more competitive in world marketplaces.

§ Lord Jenkins of Putney
My Lords, would not the best way of saving a substantial sum of money on useless expenditure on defence be to cancel Trident?

§ Lord Hatch of Lusby
My Lords, in relation to defence procurement, is it the case that the Government have added a cancellation sum to their order for the first Trident? Is that an attempt to inhibit a future government in cancelling Trident? Is this part of the Government's way of saving money? It does not seem so to me.

§ Lord Glenarthur
My Lords, my noble friend Lord Trefgarne and others have answered numerable questions from this Box about Trident. If the noble Lord has a specific question, I am sure that I or my noble friend will be able to answer it.

§ Lord Hatch of Lusby
My Lords, that is a specific question, which is very topical, as it has arisen only in the last two weeks.

§ Lord Glenarthur
My Lords, with respect to the noble Lord, the Question on the Order Paper is considerably wider than the narrow question which the noble Lord has asked. If the noble Lord would like to table a specific Question on Trident, it will be answered.

§ Lord Ironside
My Lords, is my noble friend aware that industry puts a lot of money up front for bidding for contracts? Can my noble friend persuade his right honourable friend that it is very important to award contracts on time, in view of the fact that delay means that industry has to service the borrowings which are put up in order to bid? Will my noble friend please bear that in mind?

§ Lord Glenarthur
My Lords, I am sure that those concerned with defence procurement will bear that in mind.

§ Lord Underhill
My Lords, on reflection, does not the noble Lord think that he has been a little hasty in the replies that he has given to my two noble friends, because surely their questions related to obtaining value for money in defence procurement? The noble Lord has not answered their questions.

§ Lord Glenarthur
My Lords, the Question asked by my noble friend Lord Orr-Ewing goes into the whole matter of value for money in defence procurement. If the noble Lord wishes to ask a particular Question about Trident, which is just one area of defence procurement, the best thing to do would be to put it down and then I can look at it in detail.

§ Lord Glenamara
My Lords, will the noble Lord say to what extent, if any, unemployment in an area is taken into account in awarding contracts?

§ Lord Glenarthur
My Lords, contracts for defence equipment involve not just large firms but also small firms. We are doing a great deal to encourage them. We are taking specific steps to encourage them to break into the defence market by simplifying procedures, improving the flow of information, widening contract opportunities, and all that sort of thing, which I should have thought would help in all areas.