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Mr. David Jamieson (Plymouth, Devonport): I welcome the Minister's statement that an announcement will be made in the next few weeks about privatisation of the dockyards in both Rosyth and Devonport. But does he not realise that there is some cynicism among Opposition Members and a belief that this is a sort of Whitehall farce, because we have sat here so many times over the past two and a half years and heard other Ministers make exactly the same assertion?
Mr. Arbuthnot: I have said before, and I say again, that it is an extremely complicated and important development. It is essential to get it right. The negotiations are protracted and difficult, and that reflects the complexity of the issue.
I shall say something about our defence procurement policy in general and then speak more specifically about warship building.
The Government have today replied to the report of the joint Defence and Trade and Industry Committees on "Aspects of Defence Procurement and Industrial Policy". Our response will be published by the Committees in the usual way. I do not want to pre-empt it, but I should like to set out briefly the main conclusions of our separate review of defence procurement policy, which was under way before the Committees launched their inquiry.
The background is the need to deliver to our service men and women the battle-winning equipment that they need in a cost-effective way, to the benefit of the taxpayer. The rigorous pursuit of value for money has been a great success for our forces, for the taxpayer and for British industry. We must also ensure that our supplier base remains efficient and competitive and can meet our immediate and longer-term needs. We consulted industry through the National Defence Industries Council as part of our review. That continuing consultation will help us develop the best procurement policy for Britain.
We have drawn three key conclusions from our review. First, value for money, through competition, must remain the cornerstone of our policy, and it must take full account of through-life costs.
Secondly, the MOD will, with the Department of Trade and Industry, take more systematic account of defence industrial factors in our procurement decisions. We shall carefully consider the balance between off-the-shelf procurement and collaborative or national development of equipment, to ensure that we can maintain our competition policy in the short and longer term, meet our operational needs without unacceptable compromise, support the equipment that we have, and use our industrial resources to take full advantage of opportunities for collaboration.
Thirdly, we shall continue to pursue cost-effective collaboration. Much has been achieved, but we believe that collaboration, especially in Europe, will be increasingly important in future. That is why we are pursuing the concept of a European armaments agency and why we wish to participate in the Franco-German armaments structure that came into being at the start of
1996. In addition, the United Kingdom defence industry has important relationships in the United States, and there are good opportunities to build on those.
I am confident that that development of our procurement policy will be welcomed by the House and by the UK defence industry.
I shall now speak about the warship building industry. The Government recognise the benefits of preserving competition within industry wherever that is practicable, but there has been overcapacity in the warship yards, and consolidation has continued in the past 12 months. Swan Hunter's Wallsend facility has been sold by the receivers, bringing to an end Tyneside's strong tradition of supplying quality ships to the Royal Navy. This year, GEC Marine has taken over VSEL, bringing two warship builders under one management. Against that background, we have sought new ways to introduce competition.
One option has been to supplement the traditional competition between yards by encouraging established defence contractors to compete as prime contractors. That is already working in practice. VSEL teamed with Kvaerner Govan for the construction of HMS Ocean. The hull has been built under subcontract at Kvaerner's commercial yard at Govan and the fitting out of military systems will be undertaken at VSEL's Barrow-in-Furness yard. Similar arrangements may apply to the auxiliary oiler competition, in which at least one of the invitations will be issued to a team of prime contractor and commercial shipbuilder.
Competition policy has proved successful; the price that we pay for ships for the Royal Navy has reduced considerably in real terms. It has also brought the benefit of innovative designs--for example, in the batch 2 Trafalgar class competition. Where competition is not possible, it has become our practice to price non-competitive contracts at the outset. That no acceptable price no contract strategy has been adopted in the negotiations with VSEL for the replacement of HMS Fearless and Intrepid. Within that framework, we encourage our contractors to adopt modern procurement strategies, such as a competitive "make or buy" approach to subcontracting, and to use the latest techniques, such as computer-aided design.
Mr. Paul Murphy (Torfaen):
It is extremely fortunate for the House that the Minister of State for Defence Procurement is leading the debate, because it seems that he will be extremely busy for the next few weeks making decisions about the type 23 replacements and, of course, the royal dockyards.
What troubles the Opposition--it might be a matter for those responsible for the business of the House rather than for the Ministry of Defence--is that there is only one
occasion during the parliamentary year when we debate the Navy. I should have thought that it would have been better to delay the annual debate for a few weeks so that hon. Members from all parties who have deep concerns about procurement could speak in the debate.
I have read some earlier naval debates. The Minister was right when he said that the Navy has been extremely flexible over the past five to 10 years--it has had to cope with different situations around the world. Twenty years ago, of course, the Navy had to deal with problems east of Suez, and 10 years ago there was the problem of the east and of communism. All of that has gone, and I am sure that all right hon. and hon. Members will want to pay tribute to the skill and determination of the men and women of the Royal Navy over those years.
Threats still exist, of course. The Minister touched on them. There is still uncertainty in parts of eastern Europe and there are problems in the middle east. Those of us who were fortunate enough to listen to the Prime Minister of Israel yesterday realise how important the peace process is in that part of the world. There is also the staggering growth in the far east. The possible threats remain, not just to this country, but to peace and security on the planet.
The Minister was right to draw the House's attention to the activities of the Royal Navy in the West Indies, the Falklands, the Persian Gulf and, until 1997, Hong Kong.I am sure that all right hon. and hon. Members will agree with the tribute that the Minister paid to the Royal Navy for its activities in the former Yugoslavia. It has played its part in Operation Sharp Guard to enforce the United Nations embargo on arms and the trade sanctions.
I want to pay a personal tribute to the Royal Marines for their work in Northern Ireland. For six months, I was an Opposition spokesman on Northern Ireland, and I realise the great courage that our forces needed to play their role there. The same is true in respect of the Royal Navy's coastal activities. Some weeks ago, we had our debate on the Army. My hon. Friend the Member for Motherwell, North (Dr. Reid) was, I believe, unjustly criticised for his opposition to certain Government policies for the Army. It is important to put on record what we feel our role in opposition should be. It is not to attack those who serve in our armed forces, but to criticise and bring to account the Ministers responsible for the defence policies of the United Kingdom.
It will not be too long before Conservative Members have the same role as we have now, and they must realise that they will have to criticise whatever policies a Labour Government will present. I have to say, however, that, in the past few weeks, the Government have seemed more like an Opposition than a Government.
There have been dramatic changes in world politics during the past few years. Any party that forms the Government has to respond to those changes, but we have always charged that the Government's response has been badly thought out. We believe that, although the cuts that have been made might have been necessary in certain instances, they have not been defence led. Rather, they have been led by the needs of the Treasury. I fear that, occasionally, the Government's policy has been dominated by adherence to a too rigid doctrine of free market forces, which does not always go with the Navy's needs.
There has been an unstructured rundown of the Royal Navy, involving ships, submarines, people, dockyards, the staff college at Greenwich and supply depots. No one would say that defence in 1996 requires the same resources as it required in 1986, but we are saying that there is a need for a proper strategic review of how defence is handled. We need consider only the redundancies--in July 1995, an admiral, 460 officers, 2,000 ratings and 130 Royal Marines were made redundant. By the turn of the century, the Royal Navy's strength will be only 44,000.
In 1993, the Select Committee on Defence report stated:
The Select Committee later stated:
I understand that the Royal Navy has started its own internal study to see whether it can still carry out its traditional duties, following the defence cuts. Sir Jock Slater was quoted in The Daily Telegraph--not normally a friend of the Labour party--on 3 October 1995 as saying:
He went on to say that he was concerned about the effect that the reforms were having on morale and that the changes had increased work loads and eroded job security. He continued:
I have no doubt that both sides of the House agree with the Labour party's main principles. First, we believe that NATO is the cornerstone of our defence policy--it was a Labour Foreign Secretary who helped to set NATO up in the late 1940s. Secondly, we believe that the United Nations should be supported--I am sure that the Government agree--especially in its humanitarian activities. Thirdly, we believe that we should have the resources necessary for the effective defence of our country. Those are the three planks of the Labour party's defence policy and I am sure that the Government do not disagree with any of them. However, we differ fundamentally on how to achieve those aims.
Time and again, the Government have derided our ideas for a strategic defence review. The French and the Americans have had one. We had them in the 1950s, the 1960s, the 1970s and even in the early 1980s. Why cannot we have one now that the world has changed so dramatically? I am not alone in calling for a strategic review. Anthony Preston, the editor-in-chief of a magazine called "Naval Forces", has said:
The Sunday Times, another paper usually friendly to the Conservative party, said in 1993:
"There has been no period of financial calm: just the opposite. No plans seem to survive the next public expenditure round. Every activity is reviewed, and revised again and again."
"For many service personnel and civilian employees, the prospect of redundancy hardly denotes stability . . . Market testing, which has barely affected most of the major centres of MoD civilian employment, is gathering pace, importing a further element of turbulence."
"We have to make absolutely certain that if the crunch were to come then we can regenerate . . . Overall our people are pretty stretched now."
"There are no two ways about that at all . . . I am concerned about the effect it has on our people."
"The time has come, not for blindly continuing to cut the budget, but for the logical review of the Navy . . . What I am worried about is just hacking away at the foliage, without working out what the job of the Navy is."
"instead of conducting a new defence review, which common sense now demands and the armed forces want, the government has hidden its defence policy behind a cloak of secrecy so impenetrable that
1 Feb 1996 : Column 1145nobody knows what it is or what the taxpayer actually gets for£24 billion a year . . . A defence review would be an opportunity to stop this death by a thousand cuts that is destroying what is still one of the finest armed forces in the world."
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