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Mr. Phil Gallie (Ayr): Does my hon. Friend agree that commercial interests are best served by demonstrations by our armed services of safe and competent usage of equipment? On that basis, does he agree that there must be an element of RAF low-level flying in Scotland, where we probably take more than our fair share? Does he also agree that RAF air traffic control services must be kept at a high level? Will he join me in commending the safe operation of the Scottish airways by the RAF air traffic controllers at Prestwick?
Mr. Arbuthnot: I entirely agree with my hon. Friend about the importance of preserving low flying, a capability that can be preserved only with actual practice. I also agree with him about the professionalism of both the military and civilian air traffic controllers. I take my hat off to them for the way in which they perform their stressful job. The safety of our airways must be--and will remain--paramount.
UK industry is now well placed to make a full contribution to the rationalisation--
Mr. John Spellar (Warley, West):
Before the Minister leaves the subject of air traffic control, will he answer the question posed yesterday on the subject by my hon. Friend the Member for Wentworth (Mr. Hardy), who unfortunately cannot be here because he is at a Western European Union meeting? My hon. Friend asked about the privatisation of the national air traffic control service and the attitude of the Ministry of Defence towards it. Will the Minister also answer the question that I hoped was going to be asked by the hon. Member for Ayr (Mr. Gallie), about the maintenance of the facility at Prestwick?
Mr. Arbuthnot:
My right hon. Friend the Secretary of State answered that question yesterday, and I have nothing to add to what he said then.
UK industry is now well placed to make a full contribution to the rationalisation within Europe--and indeed elsewhere--that will undoubtedly occur in the coming years. There will be scope for some transatlantic rationalisation and the development of strategic partnerships. The Rolls-Royce acquisition of Allison engines and the British Aerospace collaboration with McDonnell-Douglas are cases in point. In the short term, however, major opportunities lie across European
boundaries. The relative scale of US and European companies does not lend itself easily to a partnership of equals.
There is no escaping the fact that United States expenditure on new equipment, spares and ammunition is more than double that of all the European NATO countries, and seven out of the top 10 defence companies in the world are American. If Europe is to meet this challenge, rationalisation of the industrial base across the continent is essential. My right hon. Friend the Member for Northavon (Sir J. Cope) yesterday referred to this, and I hope to answer some of his questions in what I am about to say.
The House will have heard that the Government believe that it is for industry to make commercial decisions about future markets and industrial partnerships. We do not want the Government to decide industry's future on its behalf. What we can, and should, do is provide the climate and the opportunities in which such linkages can succeed. As I have mentioned, we must recognise and take account of the industrial consequences of the procurement decisions that we make.
Mr. Barry Jones (Alyn and Deeside):
Have the Minister today--and the Secretary of State yesterday--in effect announced a new policy?
All this means that we must accept an increased level of mutual dependency in meeting procurement needs by agreeing joint requirements. Defence co-operation is no longer just a political option, but an economic necessity. We have many good examples of previous and current co-operative programmes, but we now need to build on these to create structures and processes that offer value for money, while helping rationalisation of the industrial base.
We have made it clear that the adoption of a more commercial approach to future co-operative programmes and their supporting structures is essential. We need to avoid wasteful practices that only serve to distort the market and reduce the economic benefits to be derived. In the past, the obvious benefits of collaboration--increased standardisation, inter-operability, shared development costs, longer production runs and reduced unit costs--have been diluted by working practices contrary to the needs of efficiency and effectiveness.
In future, we should procure from the most efficient supplier--not the one who happens to make up that element of any particular country's work share based on an anticipated level of investment in the project. We cannot subsidise unnecessary duplication of facilities to satisfy purely national, rather than economic, needs. We want taut commercial management, with responsibility for the co-ordination and delivery of the programme to time and cost vested in a single prime contractor. We do not want--we cannot afford--the overhead expenses of large multinational project offices. We need lean organisations, with no international duplication of staffing.
It is against that background that the UK has been contributing positively and constructively to the creation of a European armaments agency that offers the potential for achieving the sort of efficiency improvements and
administrative savings that we should all desire. However, we are still some way from its realisation. In answer to the hon. Member for Alyn and Deeside (Mr. Jones), my remarks today are drawing together some points that have not been drawn together in the same place. It is important that I do that.
We believe that, where nations can agree to common requirements and procurement policies and practices on individual projects--or, indeed, classes of equipment--they should do so. The plans of France and Germany to create a joint armaments framework offer a new channel for a worthwhile and meaningful co-operation in policy and practice. We are working with them--and the Italians--to bring this to fruition.
Some hon. Members may be concerned that, in the creation of a European defence armaments agency, or the quadrilateral armaments structure, there is a move towards protectionism and the establishment of a Fortress Europe mentality. That would be a total misunderstanding of the Government's vision for the new structure. It is not in our interests--political or military--to do that.
This Administration believe passionately in the benefits of open and competitive markets, and strongly value the transatlantic link that has served the security of us all so well during the past decades. The simple fact is that a strong and vibrant European defence industry with expertise in many leading edge technologies is in all our interests.
Our industries must develop quality products that are both affordable and exportable, and which compare favourably with the best in the world. We will not achieve that in an introverted, isolationist European context. We need to take the measure of what the world has to offer, and match or better it. That will generate the domestic and overseas sales essential to the continued well-being of our industries. Our market share of the world's defence markets highlights the need for trading nations to develop openly and competitively.
Dr. Godman:
In relation to the safety of crews, has the Ministry any plans to order replacement vessels for the aging ships that service Trident submarines as they enter and leave the Firth of Clyde?
Mr. Arbuthnot:
No, I have no plans to announce that during this speech.
Dr. David Clark (South Shields):
The Minister has made some interesting points about the European armaments agency, and I did not disagree with much of what he said. I understand, however, that that body is to hold a critical meeting this Friday, and that the French and the Germans are arguing that any country that signs up to the agency must then place its orders with European countries. Can the Government elucidate the stance that they will adopt at that meeting?
Mr. Arbuthnot:
It is difficult to conduct international negotiations across the Floor of this Chamber or in public, as the hon. Gentleman will understand. I would rather not be tempted, if he will forgive me.
Mr. John Wilkinson (Ruislip-Northwood):
The Minister knows that I have taken a considerable interest in this matter with him for a long time. How will the
Mr. Arbuthnot:
I was just coming to bureaucracy. The agency about which we are negotiating may well be the catalyst for the sort of rationalisation of industry that I discussed earlier. We in the United Kingdom face defence industries in the United States, and increasingly in south-east Asia, which are getting ever larger. There must therefore be further rationalisation across the borders of Europe and the borders of the rest of the world to gain the benefits of large scale which United States industries already enjoy.
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