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Mr. John Bercow (Buckingham): I am grateful to the Secretary of State for giving way. He referred to the Defence Logistics Organisation. Given that a National Audit Office report found that stocks of laser-guided bombs ran critically low during the Kosovo crisis, that morphine supplies were mismanaged and that tent accommodation was inadequate, will the right hon. Gentleman tell us what targets for improved services have been set for the Defence Logistics Organisation, and within what time scale does he expect those targets to be achieved?

Mr. Hoon: The hon. Gentleman's question mixes several issues. I stress that we have set in train a significant reform of logistics. I outlined in general terms what that involves--it will bring about a massive shake-up in the supply of logistics. We anticipate that there will be a 20 per cent. saving--that is already on track and is being achieved. My hon. Friend the Minister for the Armed Forces said that that effort has--rightly--been supported by those on the Opposition Front Bench. That practical reform will save money and deliver equipment more efficiently to our armed forces.

I should like to come now to the question of money and what the outcome of spending review 2000 means for defence. In July, my right hon. Friend the Chancellor announced the first planned, sustained, real-terms increase in the defence budget since the mid-1980s. The defence budget will rise from about £23 billion this year to almost £25 billion by 2003-04. We will see £1.25 billion of new money for defence--after inflation--in a guaranteed three-year deal.

The spending review 2000 settlement is a hugely significant development. After years of successive cuts in defence spending under the Conservatives, we have announced the first real-terms, year-on-year increase in defence spending since the end of the cold war. Such sustained growth in the defence budget represents real investment by this Government in the continued quality and effectiveness of our armed forces.

The Conservative party has so far failed to promise to match such investment. Indeed, we have had no signs of any Opposition spending plans. There has been a great deal

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of talk from the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), but no commitment to match our investment in Britain's armed forces.

Mr. Duncan Smith rose--

Mr. Hoon: If the hon. Gentleman is going to say that the Conservatives will match our investment in the armed forces, I will be delighted to give way to him.

Mr. Duncan Smith: I want to correct a couple of small points. The first is that the Secretary of State said that Labour is making the first sustained, real-terms increase. That is not true. In 1997, there was a sustained, real-terms increase. Secondly, he inherited a budget of 2.7 per cent. of gross domestic product. Under the strategic defence review, the Government reduced the budget by £1.4 billion, so it fell to about 2.3 per cent. of GDP. Therefore, the Secretary of State needed the cash injection to stabilise spending following the cut that he originally implemented.

Mr. Hoon: I did not notice the hon. Gentleman make any commitment to sustain the investment. He is playing with statistics. I am talking about real, new money after a long period during which the Government whom he supported and of whom, indeed, several current Conservative Members were part, cut defence spending. I warn the hon. Gentleman that if he is not able to commit the money, he should spend a little less time telling us what we are supposed to do to defend Britain, and more time defending his shadow Budget from his shadow Chancellor when it is made to bear the brunt of Tory spending cuts. The hon. Gentleman would be better off concentrating on the enemies behind him rather than the opponents opposite him.

I should now like to deal with issues relating to NATO, European defence and multinational defence co-operation. Although the Kosovo campaign was entirely successful in meeting all our political and military objectives, we had to rely disproportionately on the Americans for the military might that underpinned it. We cannot and should not always expect to do so for crises on Europe's doorstep. That is why we have been at the forefront of efforts to adapt and modernise Europe's defence capabilities in the same way that we have modernised our own. That was a key part of the discussion at the NATO informal ministerial meeting in Birmingham last month. I should like to report to the House on what came out of that, and on the work that we are doing to build up Europe's responsibilities in the field of security and defence. The subject is frequently misunderstood, and I suspect even occasionally deliberately misrepresented. I therefore welcome this opportunity to put the record straight.

The essential purpose of the changes that we are making to Europe's defence architecture is to strengthen the ability of European nations to act in pursuit of their foreign and security policy objectives. That means two things. First, we want to strengthen Europe's military capabilities, so that we can both make a better and more coherent contribution to NATO and give credibility to European military options in which NATO as a whole is

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not engaged. Secondly, we want to give the European Union the capacity to take military decisions and to take political control of crisis-management operations.

None of that means weakening NATO. Let me be absolutely clear that we are not building a competitor to NATO. Nor are we prepared to take any action that might damage or undermine the alliance. We are tying future European crisis management firmly to the framework of the NATO alliance. There is no disagreement among allies about that. NATO is and will remain the cornerstone of our security and defence policy. For any realistic large-scale military operation, NATO is the first and only option. NATO will remain the sole organisation for collective defence in Europe, and NATO will be the organisation to which we expect to turn for significant crisis-management operations--certainly when Europeans and north Americans intend to act together.

Dr. Julian Lewis (New Forest, East): What I am about to say will not come as a surprise to the Secretary of State because he has heard it from me before. Will he explain to the House how he can guarantee that a crisis that does not involve the Americans will not escalate out of control in a way that would not have happened if the Americans and NATO had been involved from the beginning? It is that unpredictability that is so dangerous.

Mr. Hoon: I am sorry that the hon. Gentleman does not understand how international crises are handled. If he did, he would know that they are not managed in isolation by any one country or group of countries; there is a close understanding between all allies involved regarding the appropriate response to a crisis. Even if the circumstances he describes were to start to emerge, the Americans would have been closely involved throughout the crisis in determining the appropriate nature of the international community's response.

Mr. Keetch: As one west midlands Member of Parliament to another, may I ask whether the Secretary of State remembers the informal meeting of NATO Defence Ministers in Birmingham on 10 October? When United States Defence Secretary William Cohen said that it is


did he not make it clear that the United States has no concerns about the policy that the Government are pursuing?

Mr. Hoon: I shall deal with that point soon. I was a little surprised--as, no doubt, my constituents will be--to discover that we have been removed to the west midlands. However, I realise that the Liberal Democrats are a little loose about geography, as they are about so many issues.

The headline goal agreed by EU member states at the Helsinki European Council in December 1999 is designed to deliver more effective European forces. EU leaders agreed that, by 2003, they should be able to deploy rapidly and then to sustain for at least a year military forces that are capable of undertaking the most demanding crisis management tasks up to corps level--some 60,000 strong. That level of force will be available either as a contribution to a NATO operation or for an EU-led operation.

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We have spent some months since Helsinki developing a detailed statement of requirement of the pool of forces and capabilities that it implies--the headline catalogue. Later this month, EU member states will hold a capability commitment conference at which we will publicly set out our contributions to the catalogue. Member states will also make commitments to remedy remaining qualitative and quantitative shortfalls, and to establish a review mechanism to ensure that progress in addressing those shortfalls is monitored. That will give us a programme and a timetable for meeting the headline goal.

All that does not mean a standing reaction force. It certainly does not mean a European army. It requires the identification of a pool of capability from which forces can be assembled on a case-by-case basis for specific operations, followed by the progressive modernisation of European armed forces, so that they are more deployable, more readily available and more sustainable. Everyone--both NATO and Europe--stands to benefit.

The Conservatives are always eager to tell us what the Americans are reported to think about European defence. In their hatred of all things European, they look to the Americans to bail them out, so let me tell the House--yet again--what the Americans really think. Speaking in Birmingham about the headline goal, US Defence Secretary William Cohen said:



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