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Mr. Brazier: The Secretary of State will be aware of the Select Committee's unanimous views on this matter. Was there one single well-recognised body outside Government that upheld the rather strong statement that he has just made--that failure to do something along the lines proposed would result in DERA going into steep decline?

Mr. Hoon: I have cited the justification. There was widespread support for and recognition of the fact that, if DERA is to survive and provide the high-technology research that it currently conducts, it is necessary to have access to private capital and, more importantly, to echo the way in which the private sector now conducts research.

Historically, much leading-edge research was done by Government or Government-sponsored agencies. That is no longer the case today. Much of the work that would have been done through the Government or their agencies is now being done by the private sector. It is necessary to adjust the way in which DERA operates to take account of that fact.

Mr. Quentin Davies (Grantham and Stamford): In light of the Secretary of State's response to my hon. Friend the Member for Canterbury (Mr. Brazier), how come the Americans are perfectly happy that their own military research institutes can continue to thrive and fulfil their role without being privatised or partially privatised?

Mr. Hoon: The hon. Gentleman gave away the answer to his question with his use of the word "institutes". The United States has a range of facilities available to it: some in the private sector; some, I accept, in the public sector; some part way between the two. The difference between the United States and any other country in the world, including the United Kingdom, is that the US has a wealth of available research material and institutional structures.

Mr. Davies: They are not privatised.

Mr. Hoon: The reality is that many are already in the private sector. I wish that we had greater facilities available, but this country has limited means and we have to spend those means in the best way possible. The reality is that we have only one research facility available to us. We judge that it is necessary to attract both private capital and private expertise to give DERA the opportunity of continuing its leading-edge research into the future. Part of DERA will go into the private sector; equally, part will be retained in the public sector. In a sense, that is precisely what is available to the United States Government; research available both from the private sector and the public sector.

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I recognise that there are those who disagree. I am not pretending that there is widespread or unanimous support for the change. I see my hon. Friend the Member for Walsall, South (Mr. George), the Chairman of the Defence Committee, in the Chamber, and I hope that those who have misgivings will at least accept that we have taken on board some of the criticisms and modified our plans accordingly.

I must make clear that the onus is on those who oppose our plans to say how they would instead provide the commitment and investment needed for the future. Given the remarkable pace with which technology is changing, it is not, in my view, credible to expect the taxpayer alone to foot the bill. It is surely right that we should involve the private sector so that we can take DERA forward into expanding markets in the international arena. I have to say that I find it slightly odd that I should have to make that point to those in the Conservative party who were never this squeamish about public-private partnerships when they were in power.

Of course, the Conservatives are perfectly entitled to say now that they will scrap the DERA public-private partnership. However, they are not then entitled to complain about defence cuts when, on this policy alone, they would effectively be taking hundreds of millions of pounds out of the defence budget at a single stroke.

Mr. Duncan Smith: The Secretary of State may be about to say what the Conservatives think about privatisations or private finance initiatives. He will know that the previous Government looked at this proposal in detail and they, of all Governments, said that it was not do-able and rejected it. That is why we are opposed to it.

Mr. Hoon: I am grateful for the clear indication--the first we have had--of the Conservatives' spending plans on defence. The reality is that they will have to explain to the electorate how they will find the extra money that DERA would otherwise provide to the defence budget. We have already identified within the Conservative party's general financial expenditure plans a gap of some £16 billion that it will have to fill by cuts in public services.

On defence, a new and deeper black hole is emerging. The Conservatives will have to say how they will fill that hole. Will they cut the equipment programme? We are having a defence procurement debate; this is an opportunity for the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) to say precisely which equipment programme he proposes to cut: type 45; Meteor; A400M; Eurofighter? Which is it? Which defence activity or operation will they cut? The hon. Gentleman's policy simply is not credible unless he can answer that question.

At the next general election, the people of Britain will face a clear choice on defence: between a Conservative party that would submit our armed forces and their equipment to death by a thousand cuts, and a Labour Government who are investing in the future of Britain's defences; between a Conservative party that just talks tough on defence, and a Labour Government prepared to match words with action; between a Conservative party that is committed to cutting the defence budget to pay for tax cuts for a privileged few, and a Labour Government who are committed to the first real-terms, year-on-year increase in the defence budget since the end of the cold war.

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After more than a decade of cuts under the Tories, we have a Labour Government who are prepared to invest in the future of our nation's defences. Ours is a record to be proud of, and I commend it to the House.

3.9 pm

Mr. Iain Duncan Smith (Chingford and Woodford Green): I will not start as I had originally planned, because the Secretary of State started with a major announcement. We expected a debate on defence procurement, but he effectively gave us a statement on a particular procurement programme, then a party political broadcast, followed by a quick trot through about 30 or 40 different programme issues, to which we shall come later.

Let me deal first with the roll on/roll off stuff. I deplore the fact that the House is the last to hear about the issue, not because of a pompous view that the House must hear first just for the sake of it, but because we should be able to question how the programme is to work. There is a nicety about giving Opposition parties notice of detailed statements so that we can ask specific questions. The press were briefed in Scotland and there was an article on the BBC website, then one of my colleagues heard something about it on the 2 o'clock news. That strikes me as an abuse not only of Parliament but of the British public, because they have a right to some answers.

There has been a deceitful process from the start in the roll on/roll off ferries programme. The Secretary of State talked about the previous Government's private finance initiative, but that Government said that they did not believe that that was ultimately the right way forward, after receiving clear indications from industry and others that the requirements for the ships were such that they could not be best met in that way.

In the strategic defence review, the Government decided to increase the requirements and to proceed with the PFI, but the tender documents show that the ships are not in essence commercial: they are military ships that can be used by some companies for some commercial activity. The PFI is a clever way of effectively giving ownership to a commercial company and thus being able to turn round and blame European competition rules for forcing us to place the orders overseas. For a Government who go on about their European credentials to use Europe as an excuse in that way is deceitful, especially as the major issues are not dealt with.

Mr. Hoon: Is the hon. Gentleman seriously telling us that the previous Conservative Government did not intend to see through the invitation that they placed in the Official Journal of the European Union in February 1997, two months or so before they lost the general election?

Mr. Duncan Smith: The reality is that the information and input from industry and others was such that those who left government in 1997 were clear in their minds that the programme would not have worked as they had advertised it. I make no bones about that. I believe that to be the case. If we had been in government now, my belief is that I and others would have recognised that the ships are essentially military. It is not credible to blame the Europeans.

The Secretary of State gave the game away when he talked earlier about best value and referred to getting the cheapest option. If we think for one moment that the

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French or Germans would place an order in Govan, for example, we are living in cloud cuckoo land. There is a serious need to rethink, not only because of jobs but because there is a strategic reason for building the ships in the United Kingdom.


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