Examination of Witnesses (Questions 740
- 759)
WEDNESDAY 19 JANUARY 2000 [Afternoon]
THE RT
HON GEOFFREY
HOON MP, MR
KEVIN TEBBITT,
MR RICHARD
HATFIELD, AIR
MARSHAL SIR
JOHN DAY,
AIR MARSHAL
MALCOLM PLEDGER
AND MR
JOHN HOWE
740. Have you, in fact, gathered any evidence
yet as to whether joint as opposed to single service organisations—this
is a force issue but also in the logistic and supporting areas—are
you finding concrete evidence that there are savings and greater
efficiencies coming from this? It must be quite hard to tell in
the logistic area, without the software, of having found concrete
evidence.
(Mr Tebbit) It is more complicated to find it without
the software. The logistics targets are being identified as we
go along at the moment. The £2 billion savings in our spare
holdings has been identified, the targets for the logistics savings
are there. They were realised last year and they are on track
for next year. We have, of course, experience elsewhere of joint
success and on the front line—I am thinking of Joint Force
2000, the Joint Helicopter Unit, the Joint Rapid Reaction Force
formation that we are moving to, the Joint Operations Organisation—these
are all areas where the Secretary of State has seen them and they
are real successes. I suspect very few people believe that the
three services would actually find it so easy to co-operate as
effectively as they are. It is one of the reasons why we have
very good Armed Forces. John Howe will talk a little about procurement.
(Mr Howe) I will just mention our experience in procurement.
As you know in recent years, we have been bringing together the
different single service elements of our previous and separate
procurement organisations into a unified organisation which, as
you know, went down to Abbey Wood three years ago, and since has
been again radically reorganised as a result of the defence review.
Certainly our experience is that when you put different single
service functions together in a co-ordinated integrated organisation
you do achieve significant efficiency savings. We, in procurement,
cut something like 35 per cent of our staff costs when we relocated
to one site in Abbey Wood. We are on course to achieve a further
20 per cent saving over a four-year period as a result of recent
procurement reforms. So these things can be done as a result of
putting separate things together in a common organisation.
741. Thank you for that, Mr Howe. The Committee,
of course, talked to your previous incarnation there. Just one
last point arising from this morning's session. We have briefly
touched on efficiency savings. I raised then the fact that there
was a widespread story within the Armed Forces that there was
a tri-service initiative to get waiting lists down on a very large
number of service personnel who were not available because they
have orthopaedic problems of one sort or another. We had a written
answer earlier this week to say that there is no truth in the
fact that £1.5 million had been allocated for this programme
but it had since been withdrawn as an efficiency measure. Your
deputy agreed to look into this again[1].
One of the reasons why we have such problems as a Committee with
the whole concept of efficiency savings—and this is not
a problem which is new to this Government—one reason why
it seems to have become particularly acute is that we are very
uneasy about the fact that Ministers do not seem to be aware of
what are really quite large sums of money. Many of those 1,200
projects must be more than one million. As to what they actually
are, if you are not certain, then we cannot be certain either
whether they are efficiency savings.
(Mr Hoon) If John offered to deal with
that in more detail I will not second-guess the advice that he
will provide to you. Just in terms of your general point, in conclusion,
Ministers are responsible ultimately clearly for the way in which
Departments operate. As the Secretary of State, I accept the ultimate
responsibility. But equally we work very closely with a team of
people—Ministry of Defence civil servants, and people from
the Armed Forces—and it is vitally important that this system
operates as a team. One of the reasons why I personally so much
enjoy ministerial life is that I am working and am dependent on
large numbers of other people for delivering their responsibilities.
We do work very, very closely together. The idea that Ministers
are constantly checking on each and every detail of, admittedly,
very large of amounts of money, is unrealistic. It is not the
way that Government works. It is not the way large corporations
work either. It is necessary for people to work effectively together.
That often means depending on people without necessarily knowing
the precise detail of what it is that they are recommending to
you. That is important in any large organisation. The Ministry
of Defence is one of the very largest organisations in Government.
Chairman
742. Thank you. On the question of DERA, the
Committee from left to right, with me in the middle, has been
resolutely opposed to the fundamental changes that were recommended
to us by the Ministry of Defence on the future of DERA. We had
this morning the Government's response to our ninth report on
scientific research within the Ministry of Defence and our recommendations
on DERA. Can you tell us, Secretary of State, what is going to
happen over the next few months. There are rumours circulating
that the model presented to us is being, to an extent, abandoned,
although the PPP is still in place. What can we expect? Can you
tell us at this stage what is likely to happen? Will we have one
recommendation like last time or will there be a range of recommendations
for the consultative processes to be scrutinised by groups like
ourselves?
(Mr Hoon) Could I emphasise that there was a consultative
process. One of the first documents that I read on my appointment
was the report of this Committee in terms of its clear response
to the proposals that had been made. I read the Committee's report
very carefully, together with a number of other responses that
were received. In the light of those responses I judged that I
was not, at that stage, ready to make a decision on the options
that were then before me. The Committee will be aware that, in
the meantime, I asked that further consideration should be given
to developing further options. That process is under way. I cannot
tell the Committee today what the conclusions will be because
we are still examining carefully the alternatives but there will
be a PPP. It will not necessarily be in the precise form that
was alluded to in our earlier submission but I cannot go any further,
at this stage, to say what the precise outcome will be.
743. One the irritating factors last time was
that although there was a consultation period we were wrongly,
in my view, presented with one option. We were not even privileged
to have access to what the other options were. I suspect that
if the same is done this time, then there is the likelihood of
the same response, which was really quite across the board, not
just the Defence Committee but from the defence manufacturers
themselves to most people largely working inside DERA. So I hope
you will give some consideration to being a little more open this
time than happened previously and have a more open debate; not
just give us the option of commenting on one model that you have
put together.
(Mr Hoon) I will certainly bear that in mind, if only
to avoid the kind of situation arising that I faced not too long
after my appointment, reading very carefully the considered comments
that you provided. Could I say, the only point about this is that
I do not accept that there was an absolute consistency of view
in relation to that particular proposal. That was not the case.
There were a number who made submissions in the light of the consultation,
indicating that in order to provide the kind of modern research
facility that the country like the United Kingdom requires, it
is necessary to change the ownership basis to provide a degree
of flexibility which will allow for the kinds of developments
that occur in the future. One of the practical illustrations given
to me—and I know the Committee listened very carefully to
the views from the United States—in the United States there
are a number of private sector organisations, a number of companies,
which have research facilities that frankly are astonishing compared
to what might have existed 15 or 20 years ago. So the idea that
it is only Government who undertake this kind of sophisticated
research is simply no longer the case. We have to find the right
vehicle that allows not only for the concerns that were well set
out in the Committee's report but equally allows us to develop
our research ability into the future. This is something that I
am conscious of as we look carefully at the options for DERA.
744. We try to keep our ears fairly close to
the ground without indulging in any forms of industrial espionage.
We have a fairly good system of finding out. Rumours were circulating,
fairly strongly, that a model which was dismissed before the last
consultation document was presented, is now being touted as the
new model—namely, core competence—of hiving off some
of DERA into a PPP but retaining 3,000 people close to or under
the direct control of the Ministry of Defence. If that is the
option, the best arguments against it were presented by the DERA
Partnership Team in a memorandum, I understand, in February of
last year. So the second model appears to have been rejected.
Therefore, if we are going to get the second model presented to
us, we do not have to do very much more than look at what the
DERA Partnership people said was wrong with that model. That is
why it is an area which will continue to exercise your attention,
Secretary of State. I am very glad that a new set of hands has
come in to look at what might evolve. Certainly, I might say,
we have not made a decision on this and we will be as thorough
in our evaluation of model 2 or 3, whatever it is, as we were
in evaluating model 1.
(Mr Hoon) I am grateful for that observation. All
I would ask is, because I have already indicated to the Committee
that I asked for further work to be done, further options to be
considered, in a sense from the start; so in looking at this problem
all I would invite the Committee to do is not only to consider
the particular options—because it is always possible to
find flaws in any particular policy approach—but also to
look at the needs of a country like the United Kingdom in attracting
and retaining the best research resources into the future. That
is really one area which we need to address very carefully, to
make sure that we did not simply retain what we have on the basis—
I accept DERA has done extremely good work in the past but we
need to be sure that this kind of model is the appropriate model
for the future as well.
Mr Cohen
745. When we were in the United States we were
told that they were happy to provide assistance, to work with
DERA on projects, really on a state to state basis, but if it
came to a situation where there is a potential industrial competitor,
really almost in ownership or certainly linked to ownership with
DERA, that it would look askance in those circumstances. Why cannot
DERA stay in the public sector?
(Mr Hoon) Let me just distinguish the kinds of concerns
that the Committee rightly had about sensitive material information
from the range of work that is conducted at DERA. I have a considerable
interest in listening to music and one of the developments DERA
was responsible for were flat speakers. Now there is not any possibility
at all—
Chairman
746. There are no flat speakers in this Committee,
I can assure you!
(Mr Hoon) Again, that is a matter for you, Chairman,
and not for me. But there is no state security interest in the
way in which very talented people have ideas that lead to that
kind of development. Indeed, one of the problems—and this
is what I was alluding to in terms of recruiting and retaining
the best people to do this sort of research—is that inherent
in the kind of restrictions we presently operate, as far as DERA
is concerned, is a very considerable difficulty in their developing
and marketing ideas which clearly, as far as I am aware, only
have a civil application. Indeed, if there is a military application
it is a spin-off from the kind of developments that they are engaged
upon. I think we just have to be a little more flexible. There
are clearly, I accept, security considerations about some aspects
of the work that is done there, but that is by no means the general
case and we need to look carefully at preserving the best whilst,
at the same time, recognising that some of the work they do could
be developed and exploited in a private sector very effectively.
Mr Blunt
747. Come on, Secretary of State, this is an
elegant smokescreen for the fact that you have actually got to
find some money from the sale of DERA, or parts of DERA, for your
budget.
(Mr Hoon) I do not accept that at all. One of the
real problems—a problem that large corporations face just
as much as the Government—is that in these kinds of high-tech
areas you want the very best people. You want them to be motivated
and incentivised by the kinds of opportunities that frankly the
private sector affords.
748. That is why it is an agency. It has the
power to make these decisions anyway if you choose to give it
to them.
(Mr Hoon) That is not strictly right because, quite
properly, we have various restrictions on the way in which public
money can be spent. There are various supervisory responsibilities
which particularly the Treasury carries out, quite properly, and
I am not in any sense arguing against the need for proper scrutiny
of the way public money is spent. However, it does inherently
mean that in trying to develop what are high-tech private sector
applications, that the kind of restrictions that Government places
inevitably on the public sector are not necessarily appropriate
in terms of recruiting or retaining the right people. There is
something wrong about this conversation, as far as I can see,
in that here I am arguing with a Conservative about the merits
of the private sector!
749. Conservatives happen to believe in their
nation; that is one of the tenets of Conservatism. This Committee
is united, not just the Conservatives on the Committee, in thinking
it is a threat to our nation and particularly our relationship
with the United States and with our European partners if this
Agency goes into the private sector. Are you assuring this Committee
that one of the drivers behind this is not the fact that the Treasury
has made an assumption about the resources which are going to
be realised from the sale of DERA and the rest of your budget
is dependent upon those resources being found, otherwise you are
going to lose the money? That is the case, is it not?
(Mr Hoon) What I am assuring the Committee is that
we will look carefully at a range of options and reach the right
decision in the national interest. What is in the national interest
is that we have available to us the best kind of research facilities
to deliver the kind of equipment for the future that the country
requires.
750. Yes, but I wonder if you would answer my
question about the driver behind this proposal?
(Mr Hoon) The single most important driver is what
I have just stated, the need to ensure the country has available
to it the best research facility.
751. But it is also true that one of the drivers
behind it is the need to find a receipt for the Ministry of Defence
in order to sustain your budget, and the Treasury has made certain
assumptions about the resources which are going to be made available
from the sale of DERA.
(Mr Hoon) We can go on batting that backwards and
forwards.
752. Is that true?
(Mr Hoon) You asked me what was the driver and, with
the greatest respect, I have answered your question.
753. I am asking you, is a driver—and
there are obviously differing views about what the most important
driver is—I am asking a straight question, is a driver behind
this sale the need to get a receipt for the Ministry of Defence
which is assumed for it in your budget by the Treasury? Yes or
no?
(Mr Hoon) If the conclusion of my consideration of
the various options was that there was no practical benefit to
the country in having DERA, either in whole or in part, in the
private sector, then that would not be a consideration.
754. So your budget would not be affected by
a lack of a receipt from no sale of any part of DERA?
(Mr Hoon) I said it would not be a consideration.
Mr Blunt: So you would get the £250
million which has been scored.
Mr Brazier
755. Just to take you back to your earlier point,
very briefly, Secretary of State, you talked about attracting
and retaining the right people, you would presumably acknowledge
that neutrality is every bit as important as quality when it comes
to the core competences involved in advising you on crucial weapon
procurement programmes. Much of the work is, of course, done at
the moment outside DERA and outside the MoD—some in my constituency
in the University of Kent—and it is done very well, but
my question is, what kind of scientist do you really think is
going to work in an organisation which is only there to provide
a core competence for those projects without having within that
organisation also the possibility to work on exciting pioneering
work on major projects, because if you make that split that is
what is going to happen?
(Mr Hoon) You are inviting me to comment on the conclusions
of a process which have not yet been reached, so if I answer your
question then you will assume that you have hit upon the right
conclusion but I could not possibly confirm that.
Mr Brazier: I should declare an interest,
or sort of interest, having worked for an MoD research establishment
as a consultant before I was elected.
Mr Cohen
756. Briefly, on Kosovo, and I am sure that
will come up in a future session, in fact we have one next month,
but can you answer succinctly whether there were any explicit
or implicit security guarantees offered to the front line states
or other states in the region during the Kosovo crisis which might
have affected this White Paper?
(Mr Hoon) I think you will probably have to develop
that a little for me. I am struggling as to what precisely it
is you are driving at.
757. We got a lot of support from states in
the region, did NATO give them some sort of security guarantee
for the future for themselves, or did we give them some sort of
security guarantee that they could enter NATO for example sometime
in the future, or something which would be beneficial to them
such as we would come to their aid if they were attacked?
(Mr Hoon) Let me make it quite clear, we were dealing
with a number of sovereign states and none of those sovereign
states was coerced or induced into assisting. The phrase which
is often used is "a coalition of the willing" and this
was a coalition of the willing. Different countries provided resources
and assistance, equipment and forces as best they could, and for
some countries that was more difficult than for others, but there
were certainly no trade-offs in the process.
758. So there was no commitment as a result?
(Mr Hoon) No.
Chairman
759. Further enlargement of NATO, any comments
on that please?
(Mr Hoon) It is fair to say that 1999 was a good year
for NATO enlargement and that is a process which the British Government
has welcomed and will continue to support; we want to see more
countries join in. Indeed, we are committed to the Membership
Action Plan, which gives aspiring NATO members assistance in achieving
membership, but I think it is right to say that there is great
emphasis in that process of ensuring candidates and new members
are in a position to be able to fulfil their obligations as members
of NATO. That is really why the Membership Action Plan has been
developed, in order to encourage new members but also to ensure
they are carrying out their responsibilities.
1 See p. 203. Back
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