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Mr. Iain Duncan Smith (Chingford and Woodford Green): I thank the Secretary of State for his courtesy in allowing us early enough sight of the statement to prepare a response. I shall deal with the spending figures at the end of my questions, but let me start by welcoming the announcement of the settlement regarding war widows, which will be received with gratitude by hon. Members on both sides of the House. The right hon. Gentleman is to be commended for that.

My first question is about Maverick. I am intrigued by the fact that although the right hon. Gentleman said that he would go ahead and purchase Maverick, he added that neither the trials nor the negotiations were yet complete.

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Therefore we do not know whether he will make the purchase, because one of the latter processes might fall down. It seems strange to announce the purchase of Maverick before knowing exactly what will happen.

If the RAF wants the missile, the lessons of Kosovo leave me in no doubt that it should get it, but will the Secretary of State confirm that the decision on Maverick raises questions about Brimstone? Is he aware of any delay in Brimstone's coming into service? We have talked about the first missiles being due in March, with an in-service date in October; is there to be some delay? If not, why is Maverick being introduced slightly more than a year before Brimstone, which I understood would do the same job, is likely to be introduced? Does the order indicate concern about a shortfall in Brimstone's capability that the RAF needs to plug?

When Brimstone finally enters service, will the RAF run two missile systems, with all the problems involving spares that that will engender? Will the right hon. Gentleman explain how he intends to resolve that problem, which will tend to make life more expensive and more complicated? Is it not true that he has let it be known that there will be a 25 per cent. reduction in the Brimstone order; and is it not that reduction in Brimstone numbers, not extra money, that makes available the sum needed to purchase Maverick?

I welcome the Secretary of State's announcement of the order for the global positioning satellite system, but what impact will that have on the implementation of JTIDS--the joint tactical information and distribution system? In addition, what impact will his new proposals for DERA have on that agency's involvement in the process?

Today's announcement focused on DERA. I confess that reading and hearing the statement made me think that I had read the wrong report from the Select Committee on Defence. The report I read struck me as one of the most damning I had ever read on a so-called privatisation. The Conservatives remain in favour of privatisation, provided that a case can be made, and the case of DERA is no different. The previous Government turned down the proposals on DERA, because they did not believe that the case could be made. The Defence Committee said--and I agree with it:

It bases that opinion--again, I agree with it--on three main areas. The first is the relationship with the United States.

The Secretary of State said some warm words about the US relationship, but below the level of politicians discussing things with politicians, are not serious problems emerging at the working level? Owing to their fears about what is happening, British people working at DERA are being excluded from discussions with US defence companies. Practically, they are being locked out. The Secretary of State needs to give us an answer.

The second concern is what might happen to Boscombe Down, about which we heard no word. Will the Secretary of State confirm that the MOD still requires an in-house capability for aircraft testing and evaluation? Will he clarify that? If not, will he indicate the possible implications for serving RAF officers who will be forced to work in private companies? How will they be dealt with, and how will their future be secured?

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On intellectual property rights, again the Defence Committee was clear, and questions remain. Private companies to which I have talked--big and small--raise exactly the same point. They have put a lot of money into such developments, but are likely to see things going against them. They are deeply unhappy about the process of ownership. The Secretary of State did not give any explanation of how the Government will resolve that big issue.

Under the Secretary of State's plans, not just units, but some of the people in them, will be put into the private sector. When the units are divided up, some people will be trespassing on both sides of the line. What will happen to them? That issue is highlighted by the question of provision for employee share ownership in the new private company. For example, the people working for the public body will not be able to own shares, but those who have been transferred to the private sector may be able to do so. How do we sort out that mess?

On DERA, it seems that the Secretary of State has determined to be indeterminate. He says that the Government will try to privatise by 2001, and a shadow organisation will be set up. If the shadow organisation highlights the problems identified by the Defence Committee, will he kill the process? Or is he driven by the Treasury to return the money, regardless of what the shadow organisation says? It is no good just saying that an organisation will be world class. Having worked in the private sector, I know that companies are world class not because the managing director says so, but because of their reputation for the quality both of the people who work for them and of the stuff that they do.

I return to the issues surrounding the budget. I wish the Secretary of State would just tell the truth about the settlement, rather than presenting it with smoke and mirrors, as is so typical of this Government. He knows very well that this is not the first real-terms increase in the defence budget in the past 15 years. I checked with the Library, just out of interest, and it pointed out that in 1996-97 there was a 0.6 per cent. increase in the defence budget. So, straight off, the right hon. Gentleman's statement was incorrect. [Interruption.] Hang on; he is to respond to these points--no doubt with yet another puff of smoke.

Three simple matters arise in connection with the budget. First, it has been falling since 1997, and is still falling. The Secretary of State inherited a budget of 2.9 per cent. of GDP, and if he is lucky, he will leave it at 2.4 per cent. of GDP. Secondly, does not the strategic defence review set a spending target of 2.4 per cent. of GDP? Even with the cash settlement, as the House of Commons Library kindly tells us, by 2003-04 the budget will fall to 2.3 per cent. of GDP--below the Government's target. The third and main point is that, as the Library's extrapolated figures show, without the panicky cash increase, the budget would have fallen to 2 per cent. of GDP by 2003-04.

The reality is that the Government have slashed defence spending to a much lower level than they inherited. That is the real reason why the Secretary of State screamed in panic at the Chancellor, "Save my life"--which he has tried to do. With the defence budget now lower than that

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which he inherited, the Secretary of State will have decimated our defence forces by the next election. That is the real record.

Mr. Hoon: I am sure that the House will be intrigued by the final comments of the hon. Gentleman, who speaks for the Conservative party on defence. This is the first time that an extra £1,250 million has been described as slashing a budget. That indicates the depth of his difficulty in dealing with this matter.

The hon. Gentleman concluded with a number of comments about gross domestic product. Perhaps he has not kept up with all that his leader has been saying recently about GDP. In case he is not a regular reader of The Daily Telegraph, I will remind him. The Leader of the Opposition said:

That is a clear lesson, which the hon. Gentleman ought to have learned.

If the hon. Gentleman is planning to increase spending on defence, he had better say so. He had better tell the House what the Conservative party's plans are. If he has plans to increase the size of the defence budget--we have not seen any evidence of that--he needs to tell the other members of the shadow Cabinet whose budget will pay for it. If the Conservative party gets its way, the budget will be slashed right across public spending. That is clear from all that the Opposition have said in recent days in response to the Government's announcement of extra money.

If we cut the budget by the amount proposed by the Conservative party, there would be a reduction--[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. I understood that the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) wanted a reply from the Secretary of State.

Mr. Geoffrey Clifton-Brown (Cotswold): He is not getting one.

Mr. Deputy Speaker: Order. It is a reply, so far as I am concerned.

Mr. Hoon: To achieve the boasts of the shadow Chancellor, there would have to be a cut of 1.3 per cent., or £900 million, in the defence budget. That represents a real cut in the amount spent on defence.

We understand that the hon. Gentleman wants an increase in the amount spent on the Territorial Army. We have estimated that such an increase would cost £150 million, even without the loss to the budget if surplus equipment and property could not be sold off. That is a gap of more than £350 million in the hon. Gentleman's spending figures. If we add to that the £250 million that he wants to forgo from the proceeds of the DERA privatisation, he should tell the House how his figures add up.

In the promises made by the Conservative spokesman there is a huge hole, of the order of £1.3 billion, which is roughly the extra sum that the Government propose to spend on defence in the next three years. The hon.

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Gentleman has not done his sums properly. He is promising the country that the Conservatives will spend more on defence, but the shadow Chancellor's proposals mean that they would cut the amount spent on defence.

The Opposition must tell the country what they will cut. If they intend to cut the budget, it is no good making vague promises about improving the Territorial Army, and about equipment. We need to know what they would cut. Are they proposing to cut Meteor? Are they proposing to cut Type 45? Are they proposing to cut provision for the future large aircraft, or the new carriers? I should welcome a proper explanation of the Conservatives' intentions.

When it comes to defence, the choice between the Labour party and the Conservatives is clear: the first real-terms increase in defence spending since the end of the cold war, or massive cuts in defence under the Conservative party.

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