HL Deb 17 March 2005 vol 670 c10WS
Lord Bach

My right honourable friend the Secretary of State for Defence (Mr Geoffrey Hoon) has made the following Written Ministerial Statement:

I am pleased to report to the House the latest developments in our plans to provide the Royal Air Force with a modern replacement air refuelling capability. Last year I reported our decision to take forward single bidder negotiations with AirTanker Ltd for the provision of the Future Strategic Tanker Aircraft programme which is planned to replace the RAF's fleet of VCIO and TriStar aircraft. Today I can report that significant progress has been made in those negotiations and that AirTanker has been selected as the preferred bidder.

We continue to believe that the provision of the capability through a service-based contract with industry under the private finance initiative (PFI) offers the best prospect of a value for money solution that fully meets the needs of our Armed Forces. Through a PFI contract, industry would own and maintain the aircraft and provide training services, infrastructure and some personnel, while the RAF would undertake military operations.

The negotiations over the last 12 months have resulted in agreement on key commercial terms such as pricing structure, measurement of service performance, commercial use of the aircraft and the compensation that would be paid in the very unlikely event that the contract is terminated.

This programme will present UK industry with important opportunities. I expect that several hundreds of jobs will be created to support this programme throughout the United Kingdom. Several thousand skilled UK individuals will undertake work in support of the service.

We will now continue to take forward negotiations with AirTanker Ltd, aimed at agreeing the detail of the complete PFI contract as soon as possible. I should stress that this remains a complex and challenging F'FI programme and that issues remain to be resolved before a value for money arrangement can be concluded. At £13 billion, it is the largest to be considered by the MOD to date. A final decision on whether or not to proceed with a PFI contract will not be taken until all negotiations, including an assessment of the finance ability of the deal, have been satisfactorily concluded. I will of course ensure that the House is kept fully in touch with significant developments.