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Mr. Gerald Howarth: I thank the Minister for his comments. In considering the diversification agency, will he acknowledge that the Defence Evaluation and Research Agency is already very conscious that it is the possessor of much valuable technology that has application in the civilian field and that it is working extremely hard and producing results? In a sense, would not the defence diversification agency replicate what the DERA is already doing?
Mr. Spellar: I do not wish to pre-empt the outcome of the Green Paper on the defence diversification agency. The hon. Gentleman will know that we have already acknowledged the considerable role played by DERA and our intention to build in best practice in our application of the defence diversification agency. This is about applying the fruits of investment and technology in the civil sector of the industry, spreading the technological processes and skills that have been developed for defence into new civil markets, which can strengthen the industrial base--and, indeed, the defence industrial base--as well as contribute to Britain's improved economic performance.
The Government are obviously alert to the problems associated with broader restructuring. We want the process of restructuring to continue. After all, as my right hon. Friend the Secretary of State has said:
As my hon. Friend the Member for Chorley is aware, collaboration between nations on major procurement projects, such as Eurofighter and the future large aircraft,
will become increasingly important. In future, and in order to facilitate such collaborative projects, OCCAR--I am delighted that the hon. Member for Salisbury (Mr. Key) pronounced it in full, which spares me from doing so--the four-nation armament structure createdby France, Germany, Italy and the UK, will offer a real opportunity to realise the long-term benefits of collaborative projects through improved management. We look forward to the excellent work that it will be undertaking.
Obviously and rightly, due to the interests in the north-west, my hon. Friend the Member for Chorley stressed the position on Eurofighter. The Government remain firmly committed to the Eurofighter programme and have made that position clear on a number of occasions in the House and elsewhere both before and since the election. I certainly recall the Adjournment debate that my hon. Friend secured in July, in which we said that Eurofighter would form the primary component of the RAF's fighting capability. We are all pleased to have heard the good news from Bonn last week that the Bundestag voted for the eurofighter programme. That positive development means that Germany is committed to future phases of the programme. We are now consulting our colleagues in Germany, Italy and Spain with the aim of signing the intergovernmental arrangements known as the memoranda of understanding for the production and in-service support phases of the programme.
My hon. Friend the Member for Chorley mentioned the future large aircraft. As he knows, the Secretary of State announced on 31 July that we would join our partners in issuing a "request for proposals" to Airbus military company for the future large aircraft. Although the Airbus military company has not yet been formally incorporated, the request for proposals was issued on a provisional basis to the potential partner companies on 4 September. I should however stress that neither the UK nor any of its partners is at this stage committed to a purchase. Indeed, our decision in July made clear the need to maintain competitive pressures in order to ensure best value for money. The companies involved--Airbus and British Aerospace, which are world class and regularly compete successfully in the civil market--have a clear opportunity with the FLA to show that they can develop a world-class contender for the military market.
The hon. Member for Ryedale (Mr. Greenway) mentioned the Bulldog replacement programme. He rightly pointed out that we are not buying new aircraft and plan instead to buy flying hours from a contractor. The contractor will provide the aircraft and be entirely responsible for maintenance and a range of other support services. As the hon. Member rightly said, the aircraft being considered are two variants of the Slingsby Aviation Firefly and the German Grob. The Firefly is a good aircraft. Slingsby Aviation has exported it to several countries, including the United States. The Ministry of Defence is strongly supporting those export efforts. The RAF is familiar with the Firefly, which is used by the joint elementary flying training squadron. The final decision has not yet been made, but I assure my hon. Friend the Member for Chorley that the points that he has raised will be taken into account. I shall have to write to hon. Members about the points that have been raised about Royal Ordnance. Those considerations are part of our deliberations.
I assure my hon. Friend and the House that the Government are committed to a strong, capable defence industry. Tomorrow's defence industry will be different from today's, but we are convinced that our world-class industries and their employees will be equal to the changes that they face. The Government will be backing them.
Mr. Alex Salmond (Banff and Buchan):
This subject covers a wide canvas. I shall concentrate on the real concerns of many people in Scotland that the Government's plans amount to the sabotage of the most effective inward investment agency in Europe. They are a betrayal of the spirit of the devolution process. I hope that that is an unwitting move by the Department of Trade and Industry. Perhaps the Minister will be able to put at rest some of our real concerns about the trend of events and the Department's plans on inward investment.
The starting point should be the existing arrangements. Some remarks on inward investment in recent months have suggested that there are no arrangements to cover competitive inward investment across the United Kingdom. That is not the case. Rules are in place to prevent the poaching of jobs from one nation or region of the UK and moving them to another. If an inward investor does not have a preferred site in the UK, the industrial development unit in the Department of Trade and Industry reviews the case and sets the level of regional selective assistance available for whatever part of the UK becomes the preferred site.
Mr. Michael Fallon (Sevenoaks)
rose--
Mr. Salmond:
I should like to develop my points before I give way. I shall be fascinated to hear the Conservative party's position on this, as it seems to be going through a phase of development. The hon. Gentleman will have a chance later.
The only flexibility available to local bodies is in the package of site preparation, training and after care. There are European Union limits on the total value of any inward investment package offered. If those rules are broken, as has been alleged, the Treasury and the National Audit Office have the power to investigate, to monitor abuses and to do something about it. My first question for the Minister is whether she believes that the present rules are not working. If she does, what evidence is there and what have the Government done about those supposed breaches?
If an inward investor has no other preferred sites, the local agency, such as Locate in Scotland, acts directly with that investor, with the approval of the Government. There are strict financial limits to ensure that excessive grant packages are not offered.
I shall quote several authorities on the issue to show the range of concern in Scotland. The first is Neil Hood, a former director of Locate in Scotland. He pointed out the current situation in The Herald on 20 November:
The Minister for Education and Industry, Scottish Office, who is present today, has denied the allegations and described them as "black propaganda" and has published transcripts of the dealings with the company to set the record straight. The second question for the Minister is whether she accepts her colleague's version of events or the version put forward by Sir George Russell.
There seemed to be a large streak of envy running through Sir George's evidence to the Trade and Industry Select Committee. Perhaps Sir George should understand that inward investment is not a lottery. It is a reward for those with the techniques and ability to seek out investors and to do the job properly. There is no licence to print money. Inward investment is a competitive environment, unlike the monopoly that Camelot enjoys. If the Scottish Office is correct in saying that Sir George's allegations are no more than "black propaganda", why has he, as a public official, not been censored by the Government? Why has he not been brought to book? Has the Minister had any conversations with Sir George, in the light of his evidence to the Select Committee, to ask him to mend his ways and not make unsubstantiated allegations against other inward investment agencies?
"Europe's defence industry must rationalise or die."
The shape of any restructured industry is a commercial decision for companies, but the role that the Government can and will play is to establish the necessary international framework and agreements to facilitate change. We can and will continue to establish a clear policy framework in which industry can make sensible decisions on how to restructure.
11 am
"In effect the distinctive competence of bodies such as Locate in Scotland is less in differential financial assistance than in customer care and attention; effective co-ordination of resources; and high levels of after care for existing investors whose expansion projects now account for some 60 per cent. of total inward investment."
There is a concern that the concordat will restrict the independence and the ability of Locate in Scotland to do its job. What is wrong with the existing arrangements? Allegations have been made against Locate in Scotland by Sir George Russell, chairman of the Northern Development Company, also known as the chairman of Camelot, who was appointed by the Tories in 1995.
Sir George has accused Locate in Scotland of attempting to poach Interconnections Systems from Tyneside, saying that it was offered large sums to move its head office and other operations to Scotland.
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