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Mr. Spellar: I thank the hon. Gentleman for his welcome for that announcement, although we have always believed that British warships would be built in British yards. I accept that one part of the programme made much greater progress than the other. That has enabled us to initial the PAAMS part of the programme. On the Horizon side--the ship side--we are still building on the workthat was undertaken. We shall do so within national programmes, but still working on the tri-national project work and reaping the benefit of the work that has been undertaken on that.

Mr. Menzies Campbell (North-East Fife): Perhaps I should begin by apologising for not being present when the Minister began his speech. I was engaged elsewhere. As has just been said, the Minister has made an announcement of considerable importance. Following the failure of the NATO frigate for the 1990s programme, two consecutive programmes designed to produce common procurement for naval vessels have not been successful. Will the Minister say a little more about what he means by national use of existing work? Are we talking about a new design or an adaptation of the Horizon design in so far as that had been progressed?

Mr. Spellar: We are waiting for industry to respond to invitations to come back with proposals to construct the ships to carry the extremely effective PAAMS equipment. We inherited the programme, with the difficulties that have become clear. The hon. Member for Mid-Norfolk (Mr. Simpson) will not know about this issue because he was not a Member in the previous Parliament, but many of us will recall the debates that took place. We believe, in agreement with our partners in France and Italy, that we have arrived at an effective and positive resolution of the difficulties, and one that we are able to take forward.

As my right hon. Friend the Secretary of State--

Mr. John Maples (Stratford-on-Avon) rose--

Mr. Crispin Blunt (Reigate) rose--

Mr. Spellar: I shall return to the point in a moment.

As my right hon. Friend has commented:

"We now have a very good result for the navies and industries of the three nations, and for European defence. The PAAMS missile system will provide a powerful air defence capability for the Royal

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Navy which will be simply the best in the world and will be effective well into the next century. The advanced technology and the employment which this multi-billion pound project will provide will help to keep Britain in the front rank of the aerospace and the electronics industry."

Mr. Maples: The Minister talks about a successful outcome, but it is not. It is not a successful outcome for future multinational projects and it is disappointing. It would be interesting if the Minister were to go into a little more of his reasoning and explain why he thinks that collaboration has been successful on the anti-air-missile project, but not on the ship. One would think that in some ways, building a ship was rather easier than building an anti-air-missile system. Why does the Minister think that collaboration has been successful on one aspect of the project and not on the other, and what lessons are there to learn for future potential multinational projects?

Mr. Spellar: The key lesson to be learned is that joint collaboration requires joint work on all sides. That ties in very much with the theme that I was developing earlier. The essence of modern procurement requires a good working relationship between the customer and the supplier. I think that the working relationship on the supplier side on the PAAMS project was possibly much better than on the shipbuilding side. There are lessons to be learned and we shall be drawing on them in the near future when considering how we can be more effective on multinational procurement.

As the hon. Gentleman knows, we estimate that about 40 per cent. of our future equipment orders will be placed on a collaborative basis. We need to draw lessons from failures and from successes in deciding how we proceed with future programmes. However, we have managed to achieve an effective result that is good news for the Royal Navy, and we shall be able to move forward with the programme.

Mr. Blunt: What is the expected in-service date of the ships and the missiles? Is there any chance of the missiles arriving before the ships?

Mr. Spellar: Conservative Members were responsible for the early stages of the programme. They resolutely refused to listen in debate after debate when questions were raised to the effect that the programme was going wrong, and took no action. We have taken over the programme and have achieved an effective resolution of it, so I find it extraordinary that they want to make such a meal of the matter. I should have thought that Conservative Members, as a matter of decency, would want to pass this by and move on to some other area--they were absolutely responsible. I anticipate that we shall try to build and equip the boats at the same time, and we are looking at an in-service date of towards 2006.

Mr. Menzies Campbell: I am sorry to press the Minister, but the announcement has considerable significance. What are the consequences for capability in the meantime? The vessel was designed to replace the type 42s. Will we have to stretch the lives of some of the type 42s; if so, with what consequences for capability?

Mr. Spellar: The right hon. and learned Gentleman is exactly right--we will have to stretch some of the

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operations of existing vessels. That is precisely the problem that we inherited and we have managed to get it sorted out. I should have thought that Conservative Members would be congratulating us on that and, as a matter of decency, they should be reticent about their role.

I want to leave the House in no doubt that we remain fully committed to the principles and practice of collaboration, which is increasingly important in our forward equipment programme. Our membership, with France, Germany and Italy, of the joint equipment organisation known as OCCAR presents a real opportunity to establish improved collaborative practices that deliver value for money.

Hon. Members will know that we and our partners have placed the counter battery radar programme, known as COBRA, under the supervision of OCCAR. We shall continue to pursue common objectives in OCCAR with our partners.

Mr. Tom King (Bridgwater): The Minister has raised the question of collaborative projects. Does smart procurement include security of supply? I declare my constituency interest in Royal Ordnance, but I also make a serious national point. If there is one lesson to draw from the present events in the Balkans, which follow the Gulf war and the Falklands war, it is how different each of those actions was, that our partners in each were totally different and that it is impossible to predict which countries could be considered to be a certain, secure and willing source of supply in any future difficulty that we might face. In respect of munitions and the point that has been made about Royal Ordnance, what consideration has been given to ensuring that we have not only security of supply, but security of resupply, if we need to reorder during an emergency?

Mr. Spellar: As the right hon. Gentleman will know from his experience, resupply in such circumstances is nearly always from stock rather than from reproduction. He will know from his own time in office that that was certainly the case within the time scales of nearly all the operations that we have experienced. He will also recognise that there has been a considerable reduction in demand for munitions--not only in the United Kingdom, but right across the world.

That reduction is due partly to the reduced size of the armed forces, but also to improved training techniques. For example, there is greater use of simulation. At peak, we were ordering £300 million of munitions; now we order £80 million-worth. Our experience has been replicated and munitions firms across Europe--and, indeed, across the world--face a similar situation. Therefore, there will be a greater degree of international rationalisation between companies and between countries.

The right hon. Gentleman is absolutely right to draw attention to questions of security and assurance of supply. Inevitably, the restructuring in the industry cannot involve only the companies, although they will play a prime and initiating role in the process. Governments must also be involved in the equation so that effective rationalisation, which is inevitable given the changing pattern of the industry, is combined with considerable security and assurance in this respect. I think that I have described the situation fairly accurately to the right hon. Gentleman and he will be aware of it from his experience.

Mr. King: When the Minister says "assurance", is he relying on assurances by Governments that, all things

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being equal, they will guarantee that their firms will supply to meet our requirements? As he knows, I had the experience in the Gulf war of a fellow NATO country that declined to supply us with the ammunition that we requested because it did not support the action being taken to liberate Kuwait. If we are talking about governmental assurances, the Minister might find that, in certain circumstances, overriding national interest in the country concerned will result in its assurance not being honoured.

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