§ Mr. Wallasked the Secretary of State for Defence when, in view of the damage that it is causing to defence industries, he he expects to end the present moratorium.
§ Mr. Pym[pursuant to his reply, 28 October 1980, c. 256]: The three-month moratorium on new defence contracts will end on 8 November.
The moratorium was imposed in order to hold down the rate at which the Ministry of Defence entered into new commitments at a time when payments by the Ministry to industry have been running at an unexpectedly high rate.
A number of factors have contributed to the high rate of cash flow on defence contracts so far this year: the sharp change in the economic environment and a shortage of commercial orders have led to faster than expected progress with some defence contracts; some firms are billing faster than normally to improve their cash flow; and the costs of defence equipment have risen faster than expected. The need for urgent action to keep control of expenditure meant that the moratorium had to be imposed across the board, and the scope for taking account of the circumstances surrounding individual contracts has inevitably been limited, although certain exemptions have been allowed during the period of the moratorium. Essential operational activities have not been affected.
The financial pressures will continue during the remainder of this financial year. The need for strict restraint in defence expenditure including stringent discipline on new commitments therefore remains. But the extension of the moratorium, which I recognise has caused accute difficulties for industry, would not be an appropriate method for the longer 476W term. I have therefore instructed my officials, in maintaining the necessary restraint, to pay particular attention to the industrial, as well as the operational and other, implications.
My Ministerial colleagues in the Ministry of Defence and I will be keeping the working of these arrangements under the closest supervision as part of the measures to contain expenditure within the enhanced cash limit and the Ministry will discuss their detailed application with industry. Our aim is to ensure that the decisions of the Ministry of Defence remain in step with the changing nature of the economic circumstances facing both the Department and our suppliers.