Defence Procurement

HC Deb 16 June 2004 vol 422 cc205-26WH

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Heppell.]

9.30 am

John Robertson (Glasgow, Anniesland) (Lab)

Thank you, Mr. McWilliam. It is a pleasure to see you in the Chair. I hope that we will have an interesting debate.

I believe that it was Napoleon who once said that military victory results from three parts courage and only one part equipment. I will not quarrel with such a renowned strategist, given that my military experience is confined to the more humble armed forces parliamentary scheme. Nevertheless, I want to focus on the equipment on which our forces rely, what is needed, where it is bought, and how it is made. First, I shall consider the way in which decisions about defence procurement are made, the security of Britain's defence requirements, and the scarce financial resources with which we must meet those requirements. Secondly, I shall consider in greater detail the marketplace for defence equipment and the role that our Government should play.

The central problem of defence procurement is how to plan for the uncertain threats in a rapidly changing world that the US Defence Secretary has described as "unknown unknowns". We are not certain about the equipment that our forces will require in future campaigns. For decades, the transatlantic alliance was focused on the containment of Soviet expansion, but in the early 1980s how many people predicted the end of the cold war? Likewise, no one could have foreseen the terrible attacks that were launched on the United States on 11 September 2001 and which caused the US and its allies to reassess the nature of the threats that they faced. In the face of such uncertainty, we are right to emphasise the need for broad-based capabilities.

In recent weeks, concern has been expressed about the resources that are available for procurement. It has been reported that the war in Iraq led to the Ministry of Defence's having to borrow £500 million from procurement budget funds to cover short-term costs and that that sum was due to be paid out on the Eurofighter programme in the mistaken belief that it would be delayed and therefore payment would be put off. Will the Minister comment on the procurement budget and update us on discussions between the Secretary of State, the Chief Secretary to the Treasury and the Chancellor of the Exchequer about the defence budget for the years ahead?

Although those concerns about funding are real, we should put them into context. Labour introduced five years of year-on-year real-terms increases in the defence budget, and the last round of spending was particularly beneficial to the armed services. That compares with a swingeing cut in defence spending of nearly one third in the previous decade. I am not making a party political point. Indeed, politicians across the spectrum recognise that the end of the cold war reduced the threats that our conventional forces and nuclear deterrent were designed to repel. I want to emphasise the wider context of these funding issues: massive long-term investment in the armed forces and a vision of the armed services as a worldwide force for good.

Having established the need for strong armed services and the Government's firm belief in the need for effective procurement, there are still controversial issues about what equipment is required. There has recently been controversy over the Royal Navy's needs as it transforms from a cold-war-based service to one that can genuinely project global power. As the Minister knows only too well from my frequent questions, the BAE Systems yard in Scotstoun in my constituency is building the first of the Type 45 destroyers. The decision to buy Type 45s has been much criticised, most recently by Sir Max Hastings in The Spectator and by a retired naval officer, Lewis Page, in Prospect. I want to make the case for the Type 45s, and I would appreciate the Minister's active and vocal support.

The arguments against Type 45s have focused on the changing threat to the UK—the end of the single, overwhelming threat from the Warsaw pact and the rise of less predictable, and unstable, threats from failed states, rogue regimes and international terrorism and crime. Sceptics say that where a global projection is required, destroyers such as Type 45s are of use for little more than as venues for cocktail parties. However, that does not recognise the fundamental role of destroyers and frigates in the successful delivery of maritime force projection. They are equipped with a suite of defensive systems that were vital in the Iraq crisis, during which 95 per cent. of all United Kingdom military equipment travelled to the Gulf by sea. They also contribute enormously to our layered defence. Aircraft based on land, on aircraft carriers and on destroyers and frigates form the outer layer of our defence. Medium-range ships are carried in escorts such as the anti-air missiles in destroyers and the anti-ship missiles in frigates.

Much has been made of the danger of obsolescence, particularly in relation to the Type 42 destroyer. However, I have seen in person the first of the new Type 45s that are being built in Scotstoun, and they are vastly more capable and therefore have the potential to make the Royal Navy even more effective. It is also important to remember that destroyers and frigates are useful and can be utilised when international events take an unexpected turn for the worse. For example, in 2003 the frigate HMS Iron Duke sailed to fulfil our north Atlantic patrol commitment. After it arrived in the Caribbean, the situation in Sierra Leone deteriorated and the ship was sent 3,500 miles to west Africa, arriving in Freetown less than two weeks later. The riverine operations and armed patrols that were carried out by the forces involved were decisive factors in reducing the strength of the rebels at that point. Not only that, but on returning to the Caribbean the Iron Duke conducted counter-drug operations and seized more than 3 tonnes of cocaine. Destroyers and frigates have been able to undertake tasks ranging from high-intensity war fighting in Iraq, smaller-scale regional engagements such as those in Sierra Leone, and humanitarian disaster relief such as that in Montserrat. Does my right hon. Friend agree that those ships are not merely relics of the cold war, but have an active role to play in the 21st century?

Another area of concern is that of equipment and clothing for our armed forces. That was the subject of a great deal of media criticism in the run-up to the war, some of which was fair, some less so. After all, Britain deployed a force comprising roughly the same amounts of men and kit as that which we despatched to the 1991 Gulf war, in half the time. We made great strides forward in the intervening 13 years, and that should be appreciated. Nevertheless, the need to modernise our communications, particularly in-theatre, is seen as of paramount importance. Will my right hon. Friend give an up-to-date position on new communications systems for our armed forces? If that is not possible today, will he be good enough to write to me? Clothing for our front-line troops in Iraq was not all that it should have been, although it was not quite as bad as the media presented. I would argue that a sufficient supply of desert clothes and boots could have been achieved in advance of deploying our forces. In the context of this debate, however, I make no apology for concentrating mainly on naval procurement, about which I have spoken many times in the House. I will continue to fight my corner for shipbuilding on the Clyde.

Now that I have established the strategic need for ships such as the Type 45, I want to examine the ability of the defence market to provide them. The Scotstoun yard, along with its sister yard across the river in Govan, is owned by BAE Systems. We should recognise the benefits that that company brings to the UK economy. In 2002, it employed 40,220 people in the UK and invested £500 million in fixed capital. BAE Systems represents a substantial base of intellectual capital in the UK and continues to invest in maintaining and upgrading that capital. I would therefore be grateful if the Minister gave his views on the need for a defence industry strategy that recognises the need to retain intellectual capital in the UK, because that generates employment and contributes to the independence of our foreign policy.

I want briefly to consider three points: first, the future of the Scotstoun yard; secondly, the performance of BAE Systems; and thirdly, competition in the defence market. As my right hon. Friend knows, there has been speculation about the Scottish shipyards in the media, especially the Glasgow Evening Times. Scotstoun appears vulnerable as more of the work on the Type 45s transfers to the Govan yard. BAE Systems has so far been able to provide little clarification other than to emphasise its obligation to shareholders to consider approaches from all of its businesses. That is of great concern in my constituency.

Decisions about defence procurement cannot and should not be based primarily on the need to protect jobs. The needs of our armed forces must, and always will, come first. The case that I want to make is twofold: first, that as the capabilities of the Scotstoun yard meet our current requirements, it is good for the Navy if those shipyards are secure; and secondly, whatever decision is made about the Type 45s, we owe it to the workers of the yard not to leave them in a state of uncertainty.

Mr. Mohammad Sarwar (Glasgow, Govan) (Lab)

These are not just speculations. When we met the managing director of BAE Systems, he told us clearly that if he received an offer for the shipyard he would sell it. That is causing a lot of anger and uncertainty among the work force in the Govan and Scotstoun shipyards. What does my hon. Friend think will be the impact on the work force if BAE Systems sells those yards? BAE Systems is a very large employer that is vital to the UK economy. Does my hon. Friend agree that there should be a better relationship and understanding between the Government, BAE Systems and trade unions?

John Robertson

I thank my hon. Friend, whose constituency shares the lower Clyde with my constituency, for making valid points to which I shall return later. It is important not only for BAE Systems, but for all shipyards, that the Government and shipbuilders understand what is required in terms of the need to keep shipbuilding both in this country and afloat—if Members will excuse the pun.

Can the Minister give guarantees regarding the contracts on which the Scotstoun and Govan yards rely? Can he confirm that our war vessels will be built only in the UK, and that no work, either for the Type 45 or for any other warship, will be lost abroad? There are rumours about some kind of get-together with the French in their design of the third aircraft carrier—it would be their fin t carrier—so that the work for the three carriers is split between France and Britain. Can my right hon. Friend assure me and workers in British yards that is not the case and that the two carriers will be built in Britain?

My hon. Friend the Member for Glasgow, Govan (Mr. Sarwar) referred to the wider issue of BAE Systems and its relationship with the Ministry of Defence. We all recognise that the position of BAE Systems as the principal defence contractor based in the UK means that the Government must have a close working relationship with it. My experience leads me to believe that both sides can take action to help each other to work together better. BAE Systems has delivered late and over budget on almost every project for years, although, to its credit, its latest accounts show improvements. I am in regular contact with representatives of the company in connection with constituency issues, and many of them are open and helpful. However, the management can be evasive and unhelpful in their contact with politicians. Although such an attitude by no means typical of all in the company, it is a particular problem at the upper management level. Does the Minister have a view about what can be done to improve the situation? Will he put on record his recognition of the improvements that the company is making?

A good relationship between the Ministry of Defence and our prime defence contractor is vital. It is a two-way street, and I hope that both sides will work hard to improve the relationship. During my debates and meetings with MOD representatives, I have found that, although they have the needs of the country at heart, a slight paranoia is creeping into the relationship with BAE Systems. That paranoia is perceived among those on both sides. Will my right hon. Friend try to ensure that the two bodies can get together to work in a constructive manner? That is of paramount importance to the armed forces for whom the company makes its goods.

A happy resolution to this matter would be in BAE System's interests, given the competition that it faces. The Government operate an open procurement system. There are other strong players, such as Thales, and on the continent EADS is working hard to build up its military and space businesses. Defense companies are working hard to break into new markets, and BAE Systems has been successful in that —according to Bank of America Securities, 21 per cent. of the company's sales are made in America.

Governments need to think strategically about cooperating with partners. It is natural that we should look first to our close ally, the United States. There are, however, impediments to US-UK co-operation in defence procurement—for example, America's protectionist legislation, as has been admitted by Bob Bruce, director of Atlantic armaments at the Pentagon. Likewise, the Americans are unhappy because they perceive a fortress Europe of nation; it champions and directed competition. What steps can the Government take to encourage competition and innovation?

I believe that there are many reasons for optimism about Britain's defence procurement policy and its future prospects. I thank the Minister for all his work and for his assistance in my attempts to help the workers of the yards in Scotstoun. I am sure that my hon. Friend the Member for Glasgow, Govan feels the same. I also thank the Minister for Defence Procurement, Lord Bach of Lutterworth, who has been unfailingly helpful and courteous in his dealings with me.

I believe that we are well placed to meet Britain's security needs in the years ahead. I am sure that my right hon. Friend will address the issues that remain to be resolved and that he will do his utmost to respond to my questions and the fears of the workers throughout the country.

9.49 am

Jim Sheridan (West Renfrewshire) (Lab)

I begin by congratulating my hon. Friend the Member for Glasgow, Anniesland (John Robertson) on securing this debate, which is vital not only to the whole of Britain, but to the west of Scotland in particular. He, my hon. Friend the Member for Glasgow, Govan (Mr. Sarwar) and I have the privilege of representing constituencies in that area.

The defence industry is a vital component of the economy of the west of Scotland. I shudder to think what would happen to the economy of not only the west, but the whole of Scotland if it were threatened in any way, either by the Ministry of Defence not placing orders, or—the ultimate fright—by the Scottish people voting for independence, thus destroying an industry with a proud history.

I spent most of my working life in the defence industry, as I am a former worker at Barr and Stroud —now called Thales. I also spent years working in Yarrow shipyard on the River Clyde. I congratulate the people whom I worked beside on the education that I received during that period, for which I am eternally grateful. Working for those companies, I witnessed the deep frustration of both the management and the workers when dealing with the Ministry of Defence. Without being over critical, I have to say that it is one of the most difficult organisations to deal with in terms of procrastination in placing orders. It is extremely frustrating waiting for orders that keep getting pushed further back down the pipeline. Companies and management sometimes have difficulty retaining their work force while waiting for those orders to come through, and in holding on to the spare parts and components needed to fulfil the contract. The Ministry of Defence is not an organisation that one would choose to work with.

One of the benefits of working in the defence industry is the vast amount of money spent not only by Government but by private companies on research and development. A number of research and development offshoots from defence companies have benefited commercial markets, none more so than those in the medical field. I pay tribute to those working in the defence industry, particularly those involved in research and development.

There are also many shipbuilding offshoots. Ferguson, in my constituency, is a commercial shipyard. It does not wait for defence contracts, but goes into the commercial market for work. It is only right to mention the frustration that the management and workers at Ferguson felt recently when they lost out on a Government contract to build a ship for the Department for Environment, Food and Rural Affairs. Of the four companies that tendered, Ferguson was the only British yard, but it lost out to a Norwegian yard.

The most frustrating aspect is that the Norwegian yard will not be building the ship; the job will be subcontracted to Poland to exploit cheap labour in eastern markets. The management and workers at Ferguson shipyard are asking why British yards cannot win British contracts. The complex system of dealing in the European market and having to adhere to European legislation is part and parcel of life, but that does not appease those who depend on the British Government to defend British jobs and give them British work.

John Robertson

I pay tribute to the work that my hon. Friend has done for Ferguson shipyard. I have spoken to him many times about the problems that we have in gaining orders, particularly in contrast with European companies. Does he agree that there are rules in Europe that apply only to Britain? Other countries like to bend, twist and misuse the rules to their own advantage. Why can we not do the same?

Jim Sheridan

I thank my hon. Friend for that timely intervention. There is a perception—unfortunately, I can put it no stronger than that —that the British play by the rules while other European countries do not. I can put it no more strongly than that, because we do not have any evidence. I have raised the subject with the Department of Trade and Industry; it is time for us to take a closer look at how companies from other European countries manage to secure contracts when we in Britain cannot. It is deeply frustrating when British workers cannot get British contracts from the British Government.

Mr. Colin Breed (South-East Cornwall) (LD)

I entirely agree with what the hon. Gentleman has said. I was unaware of the situation at Ferguson, but does he not agree that it is strange that we have allowed a manipulation of the rules? A subcontractor from a business outside the European Union was allowed to subcontract inside it. If that had been done directly, it probably would not have been allowed or possible. It would be interesting to know whether that subcontract was made clear at the beginning. If it was, there has been a clear subversion of European Union rules.

Jim Sheridan

I thank the hon. Gentleman for that valuable intervention. He is right to say that this is an extremely difficult matter. DTI officials have told me that the situation was explained to them. The Norwegian company, whose name escapes me, made it perfectly clear that it would not build the ship in Norway, but that it would take advantage of—indeed, exploit—the cheap labour in eastern Europe to do that.

Not only the workers in Ferguson shipyard, but workers throughout Britain, are asking for a level playing field—no more than that. When they tender for contracts, they want to do so on the basis of fair competition, rather than on the basis of companies being able to subcontract their work to eastern European countries. We must take this matter seriously; perhaps we should look at it again later.

We go through lean periods, so defence companies should not be totally dependent on defence contracts. The country needs a strong defence, but the Ministry of Defence has to work within limits. I encourage all companies currently engaged in defence contracts to look seriously at the possibility of defence diversification where possible. In my trade union life, I spent a number of years working alongside people in the defence industry; I tried to encourage companies to move into defence diversification, but that was extremely difficult.

Let me explain what the situation used to be. When the MOD was not coming forward with contracts, BAE Systems—or Kvaerner, or Yarrow as it was then called—would send its shop stewards to lobby MPs and to say to them, "We won't vote for you if you don't get us an MOD contract." That is how it did its business. If the organisation had put the same energy and resources into trying to get into commercial markets as it put into trying to blackmail and bully politicians to get contracts that were not there in the first place, it might have got the contracts that would have secured the jobs.

We need to think seriously about how companies can get the money, the research and the resources to address defence diversification. Again, the MOD and the Government have a role to play; they have an opportunity to assist companies in their research and development on contracts other than defence contracts.

Another main element of the defence industry is the apprenticeship opportunities that it gives young people. When I visit the yards in Govan and other parts of Glasgow, I am proud when I see young people—not just young men, but young women as well—learning good quality trades that we need in this industry, and in this country. Not everyone wants to go to university; some people are particularly good at other skills. It is important that defence industries such as those that we are talking about are given the opportunity to offer quality training to such young people, because our wider society needs that.

John Robertson

My hon. Friend makes a valid point that I omitted to include in my speech. Although I have attacked various companies for misusing their unions, and BAE Systems is more than a little suspect in that respect, it should be congratulated on the apprenticeships that it has provided on the Clyde. I place on record the fact that more than 100 apprentices came into the yards in Govan and Scotstoun last year, and there will also be 100 in the coming year. That is a sign of what we want to do with our young people—give them proper jobs. My hon. Friend makes a valid point: not everyone goes to university. I did not go to university. I worked hard to get where I am today, and those young people will have the same opportunity to do that.

Jim Sheridan

My hon. Friend is right. When I return to some of the companies that I worked for, particularly Thales in Glasgow, and meet the trade unions and the management, it gives me great delight to see that some of the young people who were doing apprenticeships when I was there are now fully fledged engineers, doing a first-class job and producing high-quality goods, not only for the MOD but for the whole defence industry.

I was one of the people who, during the discussions about the contract for the aircraft carriers, was not tied into the belief that it should go to BAE Systems simply because that was a British company. I did not believe that it was a British company, and I still do not. It is a multinational company, out to make as much money as it can. If there is anything British that we should be celebrating, it is the British workers who produce the goods. When it comes to producing quality goods, British workers are as good as, if not better than, any other workers that I have seen, and the defence industry provides good-quality, well paid jobs. If we lose them, we will all be in serious trouble.

I have worked beside others in the defence industry, and my first-hand experience is that those workers are among the most efficient workers. They are also the most adaptable when it comes to accepting change, and I pay tribute to then for that. My experience of working in the shipyards in the 1970s was that there was a great deal of demarcation, discrimination, and people not being able to get on with their jobs because of outdated practices. However, the defence industry is adaptable, and has been and still is one of the first industries to make changes in that respect. That is no accident; it is a result of the good management of the companies and the pragmatism of the workers and trade unions. At the time that I described, the unions gladly recognised that there had to be change, particularly on the Clyde. If there had not been change, none of us would have survived.

One of the proudest moments that I have ever experienced came when I was working in a shipyard and saw a frigate being launched. It is an extremely proud moment for the workers when they see a frigate that they have worked on slip down into the Clyde, and they know that the product is of good quality and was delivered on time. Equally, from my experience of working for Thales, which builds some of the most complex equipment that the British armed forces use—indeed, it is used throughout the world—I know that it is extremely gratifying to see such equipment being put together at the end of the production line.

However, the debate is not just about ships or weapons; it is about other services in the defence industry that we depend on. I well remember looking inside a Challenger tank—what a formidable piece of equipment that is! Again, we should celebrate the fact that people can produce such equipment. That said, for a time we had some difficulty in marketing the British Challenger tank, particularly under previous Governments, when we had some difficulty in convincing them that that tank was the best. We did so eventually, but if the British Government do not show confidence in British products and British workers, how can we convince others to buy such equipment?

However, as I said, the debate is not just about equipment such as tanks and ships, but about other services that we provide in the defence industry, which are equally important. I shall digress slightly and mention my concern about the possibility of the defence fire service being privatised. Again, that idea should be examined seriously.

Many jobs have been lost in the defence industry over the years. In fact, more jobs have been lost there than in any other industry that I am aware of. I am proud of the fact that that was done by companies and trade unions getting together, recognising the dangerous situation that they were in and taking the appropriate action to deal with it. I pay tribute to them, because if they had not acted at the time, I doubt that we would have any shipbuilding left, particularly on the Clyde.

If we are to have a strong, efficient and robust defence industry, we have to give the management and the workers the tools to do the job. That is why we need a long-term strategy that allows the employer to plan, where possible, some years ahead in placing contracts and getting the tools to do the job. It is not just about the employers, it is also about the suppliers to the major contractors, who have a right to know about that strategy. More importantly, the employees in the defence industry must have some idea about where the Government are going with their strategy for defence and how that will impact on them.

10.6 am

Mr. Colin Breed (South-East Cornwall) (LD)

I welcome this timely debate, and I congratulate the hon. Member for Glasgow, Anniesland (John Robertson) on securing it. It is timely, because we have a considerable military presence throughout the world, and how we perform in that respect will be dependent on the procurement policy that has been developed over recent years.

The formulation of any defence procurement policy must be based on a firm strategy that takes account of the perceived and actual threats and how they will be countered. However, I suppose that we all accept that in recent years, it has been difficult for anyone to decide what the perceived threats are, and where they will come from. The world has become a more dangerous and difficult place, so it is a lot more difficult to produce firm strategies to counter such threats.

Inevitably, cost will always be an important element, but I agree with what we have heard already this morning, which is that it is almost more important that there is a budget with stability over the long term, and that any short-term unexpected emergency expenditure should be found from contingency funding or reserves. Treasury demands for cutting expenditure in the middle of defence procurement programmes inevitably lead to knee-jerk reactions, and when we look back at what was spent and achieved, we often see inefficiency and poor value for money. Far too many defence contracts undergo huge changes during their lifetime, to the inconvenience of the contractor and at the expense of the Ministry of Defence.

We have learned something that the Minister may like to comment on. There is to be a 5 per cent. cut in the funding of the MOD, which will reduce the amount of money that it thought it had to spend next year. Much of that money will be directed towards running costs, rather than the acquisition of new equipment. The meaning of that for our present deployments in Iraq, Afghanistan and the Balkans needs to be explained more clearly. Will those be affordable on current budgets? Where is the additional money coming from?

Iraq is a huge cost. It is estimated that it costs about £80 million a month to keep our 11,000 troops in Iraq. Although I accept that the Chancellor has said that the war will be funded in full, we have not learned what sort of time scale is involved; it could be months or years. In the meantime, it appears that the money, in a cash-flow sense, has to be found from the defence budget, with all the implications that that will have for existing procurement programmes. It is precisely such expenditure that should be found from defence contingency budgets and reserves, and not through unexpected raids on the defence budget as a whole. That funding issue has been at the heart of many problems, and particularly those between the MOD and its contractors.

I accept that there will always be difficult choices to make in this fast-moving and technological world, but it appears to me, and to many others, that too many of our recent contracts have been elongated; they have been drawn out far too long. Equipment almost becomes obsolete before it is delivered—yet our ability to maintain a technological edge is often at the heart of the contract renegotiations that cause the process to take longer and cost more.

Of course, affordability and capability are the key considerations in any defence procurement policy. In the defence White Paper published in December 2003, the MOD confirmed that it had shifted to network-enabled capability, with a stress on anti-terrorism measures such as information gathering. Looking back at the situation before and after September 2001, that seems entirely appropriate.

What needs to be cut to pay for the new capabilities? They are, without doubt, extremely expensive. Some of the expenditure needed may not even be precisely known, and that creates even more uncertainty in the budgets. It is estimated that there could be a shortfall of about £4 billion in the procurement budget as a result of the need to pay for big-ticket items such as the future carrier, Eurofighter and the joint strike fighter in the next few years. Again, there is a cash-flow issue, and we need to know how the MOD is coping with it. The subject was referred to earlier. For companies that have received contracts and are relying on payments, uncertainty about whether they will indeed receive that payment is a worry.

In a former life, I managed many cash-flow situations, and am only too aware that customers often invoke tiny conditions in order to escape having to pay what they should, or dispute such conditions long enough to place contractors in a difficult position—they have had to pay their work force and acquire the material and everything else, so they are relying on payment. Far too often, large companies dealing with small companies, and Departments dealing with contractors, invoke small aspects of the conditions of the contract to avoid making payments on time, placing companies in extreme difficulties.

Clearly, we need a constant review of what is being purchased and of the number of items required. The defence procurement budget needs to be tightly controlled; we all accept that. Certainly, we do not want unnecessary waste, but sometimes we incur it by being too restrictive in our contractual arrangements. Often, there could be a far closer working relationship, which would benefit both the taxpayer and the contractor.

I hope that the Minister can clarify an issue raised recently in the newspapers —the potential sell-off of new Eurofighters once they have been received. I am not certain, but I think that the claims are being refuted. However, while the RAF may well be the primary customer for those Eurofighters, a number have been earmarked for immediate sale. If the contract is big enough, they could even be sold at a loss. I am not certain where that fits in the overall budget, and why it may be necessary, but it is perhaps an example of the fact that procurement budgets need to be more closely managed.

Once we have considered strategies for the countering of threats and the acquisition of appropriate assets, it is also important for a procurement policy to take account of the likely sources to which orders will be given. Reference has already been made to that aspect. In defence, in common with almost every other commercial industry, globalisation is creating fewer but larger suppliers. In telecommunications, aircraft manufacture and the pharmaceutical industry we are moving ever further in the direction of huge global companies.

That is also happening in the service industries. There are only four or five large international firms of accountants, making it almost impossible for some businesses to find alternatives for their auditing requirements. That mainly happens through acquisition and merger, although in this country, in Europe and in America there has been clear competition policy. We have the recent example of the Westland helicopter business becoming wholly owned by an Italian company, Finmeccanica, which formerly owned 50 per cent. of it. There are also continuing rumours that one of the MOD's principal domestic suppliers, BAE Systems, may become owned or partially owned by an American defence contractor.

The Government are on record saying that the ownership of companies or contractors is unimportant, and that only their location and the retention of their intellectual property rights should matter. I beg to differ. Similar arguments were used 20 or so years ago in the south-west when a number of companies were acquired through acquisition and merger. Yes, it was laudable if a business was still Operating there and still had the same personnel, so its ownership was regarded as immaterial. However, in the next 10 to 15 years when rationalisation took place—when there were cuts in the company, or it was acquired by others—it was the peripheral locations that suffered.

Over the last 10 to 15 years we have seen a slow but almost inevitable drift towards closure of those larger businesses. They have moved elsewhere. Exactly the same could happen on a national scale. We used to have large businesses with good research and development operations, employing many people and with worldwide customers. Through a series of acquisitions and mergers we have seen research and development facilities disappear to other places. Only a rump of those original businesses remains.

John Robertson

I am following the hon. Gentleman's arguments closely, and I agree with much of what he says. Can he tell me what he would do about those companies? What safeguards would he incorporate into businesses to prevent that from happening?

Mr. Breed

That is part of our competition policy. It is difficult when we are subject to European competition rules too. I do not disagree with the idea that in order to be competitive on a global scale, many companies need to be on that scale themselves. But certain industries—the defence industry is the key one—need various protections to ensure that the domestic contractor is maintained.

Threats of moves abroad, and of British defence companies being owned by foreign companies, need to be faced by the Government. It is not enough to hope that companies will continue to choose the UK as their base. I hope that Westland helicopters will continue to be a firm provider of good helicopters from its base in Yeovil, but it cannot be beyond the bounds of possibility that if there is a further round of acquisitions, the Italian company itself might ultimately be acquired by someone else. The new owner would examine the operations that Finmeccanica was undertaking and would see that it had a large base, perhaps in Yeovil, and other locations in Italy. The requirements of any company that acquired it might be totally different, and the operation at Yeovil might well be thrown to the winds. There must be far more longer-term strategic thinking about the ability to provide our own defence equipment.

The UK has opened up the defence market, and I accept that the Government's wish to do that is probably the right thing. It will benefit the British taxpayer, and I hope that it will help to achieve global stability. However, it is vital that other countries do the same. In the meantime, I hope that the Government will look closely at the loss of any further domestic defence contractor to foreign ownership. This must not be a case of the UK forging ahead and everyone else protecting themselves in the background and leaving us vulnerable for the future.

Of course, the more we procure and manage capabilities jointly, the more possible savings there will be for the UK and the more so-called "bang for our buck" we will get. We should not worry too much about pooling capabilities and sharing costs with European allies—and, indeed, with the United States. However, it is vital that in concert with that aim there is a clear policy to ensure that cross-border mergers and acquisitions will provide security of supply and maintenance of vital research and development work in the UK, and that intellectual property rights do not disappear from this country. Our troops stationed around the world are engaged primarily in nation building and peacekeeping. Our immediate priority must be to keep them well trained, well supplied and well looked after, and in ensuring that in the immediate future, the MOD thinks radically about its current procurement programme.

We have obvious short-term demands that must be factored into the long-term requirements. Procurement policy must be flexible enough to meet those inevitable short-term demands, but have an inbuilt dependable stability to maintain expenditure on the big-ticket items; that ensures value for money and proper commercial relationships with our defence contractors. The immediate past has been described as not a particularly happy time for balancing those sometimes conflicting objectives. I hope that the Minister will be able to reassure us that his policies will address the vital issues that have been raised this morning.

Finally, may I raise a matter that has arisen during the past day or so? The Minister might be aware of it. There was an incident in Devonport dockyard concerning the slight derailment of a fuel train. Presumably, it involved radioactive material—submarine fuel. It was a minor incident and I am sure that it was handled correctly, but what disturbs me is that when I received a telephone call from the local newspaper, I did not know anything about it; there have been no MOD press releases.

If we are to secure and maintain the public's confidence in our nuclear facilities, it is vital that details of any incident, however small. are immediately published, along with details of what action has been and will be taken. It is difficult for us, who want to support the dockyard with all its facilities, when reporters come along and tell us about incidents involving radioactive material, which should have been made known to us at the earliest opportunity. The incident was minor, but the way in which it has been handled is not helpful to DML—Devonport Management Ltd.—the MOD or us. I hope that in future there will be immediate notification of incidents, as that will secure the public confidence that is so vital with nuclear installations.

10.25 am

Mr. Gerald Howarth (Aldershot) (Con)

I congratulate the hon. Member for Glasgow, Anniesland (John Robertson) on providing us with the opportunity to debate this extremely important issue. The debate has been particularly interesting in that it has revealed a great deal of common ground, at least among hon. Members in the Chamber, on the importance both of the defence of our country and of the contribution that Britain's hugely successful defence industry has to make to the provision of services to our armed forces.

I welcome the general agreement among Members. If I make some critical comments, they are not designed to be dismissive of the Government's overall position. I do not question the Government's commitment to the defence of the realm—I might have done so in relation to previous Labour Governments, but not this one. The characteristic difference between the debates that we hold today and those that were held in the 1980s is that hon. Members from all parties clamour for more business for their constituencies. That is a hugely healthy development in British politics.

The hon. Member for Glasgow, Anniesland talked about BAE Systems in Scotland. The other day I had the privilege of visiting Crewe Toll and seeing at first hand the magnificent work that is being carried out at the forefront of technology—it is very exciting. As the hon. Member for West Renfrewshire (Jim Sheridan) said, investment in that development—£65 million—is being made by the private sector in the defence industry.

I declare an interest in that BAE System's headquarters are in my constituency. However, I take a fairly independent view on such matters. The industry is more important than one company, although BAE Systems is dominant. I join the hon. Member for Glasgow, Anniesland in paying tribute to BAE, specifically its work in encouraging young people, especially those with good qualifications in technical skills, to join the aerospace industry.

We all acknowledge the battle between the Ministry of Defence and the Treasury to which the hon. Member for South-East Cornwall (Mr. Breed) referred. I would say privately to the Minister that I am on his side in that battle, and if he needs my help, I will be there to support him.

It is five years since the introduction of so-called smart procurement—since renamed smart acquisition—and we are well into the second year of the defence industrial policy. I have to say that progress has been disappointing. Ministers trumpet extravagant claims for the success of the new policy, while the noble Lord Bach of Lutterworth, courteous though I fully acknowledge him to be, liberally heaps all the blame at the door of the Conservative Government of seven years ago. All that hype was brutally punctured when the new chief of defence procurement, Sir Peter Spencer, gave evidence to the Defence Committee on 12 May. He admitted that only one of the seven aims of smart acquisition had been met, and cited what he described as a cycle of failure at the Defence Procurement Agency. He also said that on some projects, smart acquisition had not been implemented as it should have been, and expressed concern that certain smart acquisition projects had passed through the main gate—for the uninitiated, the main decision point—without adequate design maturity. Sir Peter boldly observed that achievements prior to his tenure had been limited—I am not sure when he can next expect to share a drink with his predecessor—and said that there was much to do if the aims of smart acquisition were to be realised. In other words, he flatly contradicted all the extravagant claims made by Ministers for the success of the policy.

Time does not permit me to go through a raft of examples, but I shall outline one —the future rapid effect system, or FRES as it is known in the trade. We have no pictures of the series of vehicles involved in that battlefield system, which was described the Chief of the General Staff, General Sir Michael Jackson, as critical to the British Army's future capability". According to Sir Michael, it is required to be in service by 2009 at the latest, but the Ministry of Defence is not even at the stage of appointing a system house to assess the project. We warned last year that the decision to put it out to a system house would delay it by as much as a year; and more than a year since it was announced, the assessment phase has still not begun. In last October's debate, I said that we were promised a decision last spring. That was delayed until the autumn, when Ministers assured us that a decision would be made by the end of the year. We are now approaching this year's summer recess and we are still no further forward. I challenge anyone to give me a picture of what the vehicle will look like. FRES's in-service date has already slipped from 2009 to 2010, but 2011 appears to be the only realistic date.

I readily accept the argument for seeking the maximum de-risking of projects in advance of decisions to proceed to production: that is unquestionably sensible. I do not blame Ministers for delaying a project if they are operating so close to the edge of high technology that they have to undertake another assessment to ensure that they get it right; otherwise, they will be accused of putting a project into production without having de-risked it fully, or at least to a sensible extent. However, all the contractors to whom I speak say that their projects are moving further to the right.

On the aircraft carrier programme, we welcomed the Government's decision to bring together the combined expertise of BAE Systems and Males UK, but early progress is petering out. Why cannot Ministers decide who will direct that vital and significantly expensive project? Have they heeded the warnings given by the Public Accounts Committee in the 1980s that the Ministry of Defence should not seek to make itself the prime contractor? While we are on the subject of the future of the carrier vessel, what precisely was the agreement between the Secretary of State and the French that was signed on the Charles de Gaulle aircraft carrier last week?

In the case of private finance initiative projects, delays in decision making are, as the hon. Member for West Renfrewshire said, driving up the cost of bidding as consortiums have to hold their teams together pending a decision by the MOD.

This debate is not only about smart acquisition and the procurement process, but about the defence industrial base, for which the Government have failed to meet their targets. Since General Dynamics' bid for Alvis and GKN's sale of its stake in Westland —the last British helicopter manufacturer—to Italy's Finmeccanica, the issue of ownership and indigenous defence manufacturing capabilities has been brought to the fore. Commercial activity has been frenetic, but the Government have been virtually silent about the ownership of the UK's defence industrial base. Apart from the understandable concerns expressed by Labour Members about the job prospects of a highly skilled work force, the country needs to know whether Ministers are content to see control of the destiny of the bulk of Britain's defence industry pass out of UK hands. This is not a question of xenophobia: key issues of national security are at stake. The Secretary of State may not believe that ownership is of great importance. but it has consequences for our ability to retain our indigenous defence industrial base and, ultimately, our ability to prosecute military action. That is a material consideration, given that the UK is second only to the United States in committing to a war-fighting role.

The extensive transfer of ownership abroad could have serious consequences. Overseas managers will make investment decisions on strictly economic grounds, taking into account their home market first. As the hon. Member for Glasgow, Anniesland said, BAE Systems has made a significant investment in Crewe Toll. Reliance on foreign suppliers would unquestionably raise serious issues about the security of supply. The ability to ramp up production in time of war may be reduced if those directing the business owe no allegiance 1 o this country. Similarly, where the UK and the home country of the business are seeking urgent supplies, it must be probable that the home country will come first.

Should offshore companies purchase BAE Systems—we know that they are in the market, and that many UK defence prime contractors go abroad—how will the MOD procure major weapons systems? The options are limited to two. First, it could procure off the shelf; that has the advantage of allowing it to obtain developed systems with a proven operational record at minimum risk and with minimum requirements in terms of the execution of the purchase by procurement staff. The primary disadvantages to that approach are the flow of funds offshore, the loss of UK defence-related jobs, and the loss of national engineering and systems integration expertise. Secondly, the MOD could establish a cooperative develop vent programme with another Government for a major defence article. The difficulty for the MOD, with no national prime contractor, would be that all the work allocated to the UK would be fixed-price and second or third-tier companies and assemblies would probably suffer. Intellectual property, systems engineering and integration expertise would reside with the offshore contractor. A significant amount of funding would be provided to the prime contractor, most of which would never re-enter the UK economy.

The Secretary of State considers intellectual property to be of greater importance than ownership. I agree that it is critical, but there will always be the temptation for foreign-owned companies to suck out our intellectual property and transfer it back home. Ministers have to keep a close eye on what is happening at Qinetiq in my constituency. Too often, technology is developed with British brains and expertise but is not followed through and disappears abroad because there is no market here. That is a serious issue that I flag up as a warning to the Minister.

We cannot be sure what is happening as regards the joint strike fighter. Although we are in pole position with the United States in co-operation on building a first-class aircraft, the fact that we are being denied access to some of the source codes means that we do not have control. Ownership will continue to matter for as long as we intend to maintain an independent defence industrial capability

In May, Sir Richard Evans, the chairman of BAE Systems, told the Select Committee on Defence: I think that if we just leave this completely to market forces without actually giving any thought to future potential requirements, which are national interest issues, what we will see is continuing decline in mine and other companies' interests in the UK markets and I think that would be a sad day for the UK. As the former head of the Defence Export Services Organisation, Tony Edwards, said in a letter to The Daily Telegraph last week: The remaining British companies will conclude their best option may be to sell themselves to the highest bidder while their value is at the maximum. Where do the Government stand? Are they prepared to preside over a grand summer clearance sale of Britain's defence industrial base? Britain is at a crossroads, and we have to make some fundamental decisions about where we stand.

I agree with hon. Members who say that there must be a more mature, sensible relationship between BAE Systems and its principal customer. I put it the other way round: the relationship between the MOD and its principal supplier must improve. Those of us who—dare I say it—love this industry and believe it to be the great jewel in the crown of British manufacturing industry look on aghast at the spat that is going on. The only people rejoicing will be our competitors.

In the defence White Paper published last December, the Secretary of State said that platforms and units did not matter as much as capabilities and effects-based warfare, and promised that he would make specific announcements shortly. I hope that that does not happen on the day before the summer recess and that we will have time to consider what we expect to be major Government decisions. I want to remind hon. Members of a significant matter to which I drew attention during the debate on the White Paper, supporting essay 2 of which stated: Since SDR our Armed Forces have conducted operations that have been more complex and greater in number than we had envisaged. We have effectively been conducting continual concurrent operations, deploying further afield, to more places, more frequently and with a greater variety of missions than set out in the SDR planning assumptions. We expect to see a similar pattern of operations in the future. In other words, as I said at the time, the Government expect multiple, concurrent, small-to-medium-scale operations on counter-terrorism, counter-proliferation and enduring peace support that are well beyond the assumptions of the strategic defence review to be the norm, or to be carried out without creating overstretch. That is a massive challenge for any Government.

I recognise that the Government have difficult decisions to make. However, if they fail to ensure that the British defence industrial base retains the skills, critical mass and ability that are necessary to provide what this country needs, they must carefully consider their procurement policy and the risks to their being able to prosecute operations of the kind to which they have set their mind.

10.42 am

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

I congratulate my hon. Friend the Member for Glasgow, Anniesland (John Robertson) on securing this debate. He opened by referring to Napoleon, who apparently said that military victory was three quarters courage and one quarter equipment—I assume that my hon. Friend was quoting accurately. May I remind him that Napoleon lost? What he said may still have some resonance, but recent events in Iraq show that equipment is an important issue, which we have to get right.

My hon. Friend was right to raise in passing some of the difficulties that we experienced in Iraq. We put in place the lessons learned from Operation Telic so that we could be sure about the key ingredient of equipment supplies to our troops, who gave 100 per cent., not 75 per cent., courage in the difficult task that we asked them to perform.

My hon. Friends the Members for Glasgow, Anniesland and for West Renfrewshire (Jim Sheridan) and the spokesmen for the Conservative and Liberal parties raised a number of specific issues, which I will try to deal with. However, it is important first to set out the MOD's overall approach to procurement. This year, the Defence Procurement Agency and the Defence Logistics Organisation will spend almost £13 billion on the acquisition of equipment that allows our armed forces to do their job, usually in difficult and dangerous circumstances.

The Department's job is to provide our forces with the equipment that they need at a price that is affordable to the taxpayer and represents good-value through life. However, given the sophisticated nature of much of the equipment that we purchase, it is not surprising that problems are experienced in delivering to specification, on time and to budget. However, we should not let the projects that invariably capture the headlines obscure the many success stories in defence procurement. For example, operations in recent years have demonstrated the outstanding capabilities of equipment such as the Tornado, the Storm Shadow missile, the Merlin helicopter and the Challenger 2 tank and the Warrior armoured fighting vehicles.

In addition, we have a powerful range of new capabilities that have either recently entered service or are under contract to do so soon. The C-17 aircraft has already demonstrated its worth in providing strategic lift, and the Bowman combat radio system, which entered service earlier this year, nine months ahead of schedule, is a critical enabler for increasing operational tempo, firepower and survivability for all three services.

As we seek to advance our ability to project military force and to provide an effective, flexible response to a wide range of threats, both conventional and unconventional, the equipment that we procure must meet the military user's requirement. Moreover, our armed forces, rightly, want it to deliver a battle-winning edge.

The reality is that most, if not all, of the problem projects relate to a procurement policy that has been consigned to history. There is a new set of processes at the heart of the Department, which is enshrined in the smart acquisition process. The MOD has come a long way on procurement over the past five years. Smart acquisition has delivered integrated project teams, a much more coherent military customer organisation and an increasing sense of partnership with industry. The National Audit Office's major projects report, which was issued at the beginning of the year, recognised that. However, there is no escaping the fact that a lot more needs to be done.

As part of its review of acquisition processes, the MOD has introduced a more rigorous regime of senior level review of the progress of projects and is implementing proposals to strengthen the Defence Procurement Agency's financial management. We have recognised the critical need to tackle project risk early in the procurement cycle, particularly during the key assessment and demonstration phases. With reference to the point made by the hon. Member for Aldershot (Mr. Howarth), that is why we will not move to main gate—when the main financial commitment is made—until sufficient risk has been removed from a project. In that way we will avoid the costs and delays that historically have affected projects late in the process.

Mr. Gerald Howarth

Will the Minister give way?

Mr. Ingram

Let me move on now; I want to deal with a range of issues, but I will see if there is time for me to give way later.

Competition remains the best procurement strategy for delivering value for money for the defence budget. Competition encourages innovation, flexibility, efficient use of resources, and the development of skills and knowledge.

The hon. Member for Aldershot referred to the defence industrial policy, which the Secretary of State for Defence launched 18 months ago. That policy seeks to sustain and enhance the competitiveness of our defence industry while ensuring that our armed forces have access to world-class equipment at the best value for money. The policy also, for the first time, makes it clear that Ministers must have regard to the impact that our decisions have on our domestic industry, which means that jobs, skills and export potential must be key factors in our procurement decisions. I believe that many saw the Secretary of State's decision to choose the Hawk 128 as the advanced jet trainer aircraft for the Royal Air Force as proof that our defence industrial policy meant something in practice. There was a hotly contested debate, but the decision was based on elements in the defence industrial policy. That decision represented a massive vote of confidence in British industry, and in particular, in the 2,000-strong work force at Brough.

However, in defence, as everywhere else in the modern world, the only constant is change. The industry must therefore constantly look to the future and develop the technologies and processes needed to meet the demands of a rapidly evolving international marketplace. In working together to implement the defence industrial policy we have sought to be open about how we conduct our business and how we make our decisions, and we have also sought to understand fully the pressures faced by industry.

The MOD's job is to deliver the equipment that enables the armed forces to mount rapid and sustainable expeditionary operations. That vision of operations was intrinsic to the strategic defence review. It was reaffirmed in the SDR new chapter and in last year's defence White Paper. Maritime platforms—both present and future—are vital in projecting the capabilities set out in those policy statements.

My hon. Friend the Member for Glasgow, Anniesland was right to stress the importance of our future shipbuilding programme and the shipbuilding industry. I will now turn to his contribution to the debate, which, understandably, focused on the shipbuilding industry, and on the Clyde in particular.

The Government it have embarked on the largest shipbuilding programme for the Royal Navy in many years. In the past three years, 15 new ships have been ordered, including six Type 45 destroyers, two amphibious assault ships, two survey vessels and four landing ships dock. I was pleased to be able to join my hon. Friend at the launch of one of those ships, the RFA Mounts Bay, in Glasgow only a few months ago. It was encouraging to see that the next ship of class, the RFA Cardigan Bay, was on the stocks on the Clyde, and that ship will be launched in due course. Given our relationship with BAE Systems, we may be invited to that event too.

Looking further ahead, our shipbuilding plans include the purchase of two new aircraft carriers and the maritime afloat reach and sustainability project to provide new support vessels to replace many of the existing Royal Fleet Auxiliary ships. As my hon. Friends the Members for Glasgow, Anniesland and for West Renfrewshire said, the current shipbuilding programme will crate or secure several thousand jobs in UK shipyards and their ancillary industries throughout the country.

I fully recognise that shipbuilding faces unique challenges at present, not least in Scotland. It remains our policy that all warships for the Royal Navy will continue to be built in the United Kingdom. My hon. Friend the Member for Glasgow, Anniesland asked about the relationship with the French. I do not have time to go into all the details of that now, but I can say that as both the French and the UK Government are involved in a major procurement stream, the industries may find points of compatibility that allow them to maximise best design techniques, knowledge and expertise. Perhaps they can use their skills to ensure that the UK is offered the best price and delivery by companies that are in partnership with the Ministry of Defence.

I do not see that as a threat to the British shipbuilding industry; I see it as in encouragement. We are ahead of the game. Both the French and the UK Government are committed to procuring very advanced ships. Therefore, when we talk about these things, we should ask how we can maximise the best effect for both countries. That is a sensible approach.

Our future programme in the shipbuilding sector is a demanding one, which is why we have commissioned the RAND organisation to examine whether the UK shipbuilding industry has the capacity to deliver our future naval programme. We plan to publish a report of RAND's findings at the end of this year.

The future programme provides a solid basis on which UK shipbuilders can plan. It is essential, however, for industry to seek to widen its customer base, particularly for export orders, by offering attractive designs at competitive prices. Our country's present shipbuilding capacity cannot be sustained on defence contracts alone. We need to be successful in wider markets. We constantly say that to tie shipbuilders, and I know that my hon. Friends who rep resent shipbuilding areas recognise that. We encourage companies to market abroad.

My hon. Friend the Member for Glasgow, Anniesland raised concerns about BAE Systems transferring work from Govan to Scotstoun. [Interruption.] I have got that the wrong way round; it is transferring work from Scotstoun to Govan. My hon. Friend the Member for Glasgow, Govan (Mr. Sarwar) was gesturing that I had got that wrong. I knew that I was trying to please one out of two of them.

Mr. Sarwar

BAE Systems' decision to sell its shipbuilding wing is causing uncertainty in the work force and among the shop stewards. They are rightly extremely concerned, because they have gone through this uncertainty for the past four years. Gone is the time when there were going to be new apprenticeships and people were feeling comfortable. The decision has caused the work force considerable difficulty. BAE Systems is able to sell the yards because of the orders. What assurances can my right hon. Friend the Minister give that the work allocated to those shipyards will not be moved elsewhere if the sales go through?

Mr. Ingram

That would be much further down the line. The fact is that the commitments have been made to continue to build within the UK shipbuilding capacity. It is for the market to determine who owns which company. I do not think that my hon. Friends are arguing that we should take over the shipbuilding industry again. Therefore, things are conditioned by where the new ownership rests and what then applies. However, we have strategic interests in all this, and we must have proper oversight at what is happening.

That goes back to my earlier points about the capabilities that we require. We would not want those to be threatened at all. As for a need to put preconditions on any purchase of those yards, or any sale by BAES, discussions are not on the surface; indeed, I do not think that they are even below the surface yet. However, we will have to keep a close eye on that.

My hon. Friend the Member for Glasgow, Anniesland asked whether £500 million was borrowed from the procurement budget to cover the cost of operations in Iraq. That is simply untrue; it is another of those newspaper stories that gains credence because everyone quotes it. We try to rebut it, but no one recognises the rebuttal and newspapers, keep running the story. The additional costs of operations in the Gulf were met from the reserve, which is the normal process for meeting the cost of such operations. My hon. Friend also asked about the outcome of the ongoing spending review, and the hon. Member for Aldershot said that he would give me every help in that respect, but I am not even going to discuss it today. Hon. Members will have to wait for a lacer debate on those important issues. I would love to be able to say what is in my mind in that respect, but time precludes my doing so.

We have discussed the maritime environment at length, but the rapid delivery of military effect far from the UK requires investment across all three environments —sea, land and air—and our equipment programme recognises that. There are significant aerospace projects in various stages of planning or entering service, the JSF—joint strike fighter—and Typhoon being two obvious examples. The hon. Member for South-East Cornwall (Mr. Breed) referred to the possibility of Typhoon being sold abroad as something that was not to be welcomed. I take a different point of view: this is about quality European technology, and if we can market it internationally—Austria and Singapore have expressed interest in the aircraft—it can only help our industries.

I realise that the Liberal party's policy is that we should not have a Defence Export Services Organisation, and that we should not actively seek to promote abroad what this country produces, as that is what the hon. Member for Twickenham (Dr. Cable) said when he was the Liberal Democrat spokesperson on trade and industry. If the policy has changed, it would be nice to know that, because it would be nice to know that we had a joint approach in this country, to maximise the best effects of the quality of what we produce.

Mr. Breed

The Minister should not draw the inference that we are not in favour of exports. Our concern about the aircraft was that it was our tranche that we were getting and then selling on, because we could not afford to buy them.

Mr. Ingram

The hon. Gentleman should not obscure a clear announcement—or rather, restatement—of policy: that his party does not want our expertise to work alongside industry to export to other countries the quality equipment that we produce in this country. If we believe in exports, there must be a mechanism by which we can do that. In terms of Typhoon, we are committed to the 232 aircraft, and we are involved in negotiations on the tranche 2 element. The hon. Gentleman would not expect anything other than tough negotiations between supplier and customer. This is not a case of writing industry a blank cheque; we must continue to ensure that we get the best deal, which applies no matter what we are procuring or from whom we are procuring it. Our commitment to that aircraft remains as strong as ever.

My hon. Friend the Member for Glasgow, Anniesland asked about communications systems, which I take to mean the network-enabled capability, and I will write to him about that. The hon. Member for Aldershot also raised the matter in the context of what is likely to be coming downstream. We are making great progress in developing our processes, and we will make announcements on the matter in due course.

Finally, I compliment my hon. Friend the Member for West Renfrewshire who has done a tremendous amount of behalf of the shipbuilding industry, especially Ferguson's yard in his constituency. The ship he referred to in connection with recent procurement was, of course, not part of defence procurement, so I cannot add much to the points that he made. However, I take issue with the view of "fortress Britain". We cannot stand isolated; we are an exporting nation. We import and export and we must try to buy the best for our armed forces at all times, in shipbuilding, in the air and on the land. They deserve nothing less.