Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 28 MARCH 2001
MR KEVIN
TEBBIT, CMG, MR
MIKE MARKIN,
OBE, AND SIR
ROBERT WALMSLEY,
KCB, FRENG
20. If you go it alone and stand alone—
(Mr Tebbit) But we do not.
21. If you did you would know where you stood,
would you not? You would know what the cost was going to be, you
would know what the delivery date was going to be, you would know
what the capability was going to be and you would not be dependent
upon another country.
(Mr Tebbit) There is a narrow answer and a broad answer.
The narrow answer is, as you see, the cost of research and development
for modern defence projects is usually so great that it is very
difficult for any one nation to fund it entirely by itself without
collaborative partners. Even the United States looks for collaborative
partners when it is developing a modern, major equipment system.
There is a straight cost argument right at the beginning. The
general argument is in many ways much more significant. We do
not envisage in the future many activities that we will be doing
by ourselves, we expect to operate in coalition with partners
when we are doing defence activity. Gone are the days when we
would stand alone, as it were, and face a threat separately. We
are a member of an Alliance and we operate, as I say, within that
Alliance. We are in the Balkans as part of KFOR, not as the UK
standing alone. Sierra Leone is a bit of an exception, I agree
to grant you that, but even there we are building an international
group around us to do training. So since we operate together,
and expect to operate together with partners in the future in
almost every scenario we can think of, it is not unreasonable,
in fact it is very sensible, to say that we should also try to
harmonise on our equipment requirements so that we are inter-operable,
that we can fight with each other, that we have common systems
that can communicate with each other and so on. The idea of Britain
standing alone with its own, as it were, insulated defence is,
if I may say so, a mistaken concept.
22. That is fair enough, I do not take what
you say lightly. If this meeting had been taking place in, say,
the 1970s, or even the 1980s for that matter, you would have possibly
never envisaged the Cold War not taking place, would you?
(Mr Tebbit) No, we were still at the height of it
then.
23. Exactly. You have just said to me that there
is no way that you could envisage that we would not be in partnership
at the present time with the people we are involved with at the
moment.
(Mr Tebbit) On major defence activity, yes.
24. If you look at the scenario of, say, the
1980s and the Cold War, you did not envisage that, so what is
to say that you are not wrong now?
(Mr Tebbit) Even during the Cold War the last major
aircraft project that we tried to do entirely by ourselves was
the TSR2, that was back in the 1960s when we had to scrap that.
We have been co-operating on aircraft because of the cost for
a very long time now.
25. Okay. Let us move on. Figure 14, "Factors
causing delays on co-operative acquisition programmes", clearly
shows that partnerships do actually delay projects, does it not?
Very much so.
(Sir Robert Walmsley) I did not catch the point.
26. This particular figure shows that by going
into partnerships it actually does clearly hold up projects, projects
take a lot longer.
(Sir Robert Walmsley) The report, if I may, makes
it absolutely clear, and you were right in your opening remarks,
that defence procurement is a complex and perhaps costly business.
27. I do not doubt that.
(Sir Robert Walmsley) And international co-operation
adds a layer of complexity to that. Of course, international programmes
are not immune to all the difficulties that national programmes
suffer. What I would just reinforce is what Kevin Tebbit said,
that if you cannot afford the project on your own you have to
find a partner. Part of the skill in assembling these international
programmes is to find a partner who has got essentially the same
capability need in the same timetable with a real budget, not
just somebody who wants to talk about it and suck you in, and
then get together and produce some industrial arrangements across
the countries that will produce benefit to both countries, otherwise
we would not have the equipment at all.
28. I am being a little bit of a devil's advocate
here because I agree with what you are saying basically. I was
just interested to hear your views on the disadvantages. If you
turn to paragraphs 2.14 to 2.16, when I read this I got a mixed
perception of what was actually happening. On the one hand there
appear to be great advantages to co-operation after a scheme has
been produced nationally, and if you look at 2.15 and read the
paragraph it says that there were savings of 30 per cent in the
costs and 20 per cent through the pooling of spares, so there
were great savings there. On a programme that has been produced
nationally the economic benefits are quite considerable and yet
if you read 2.16 we are told that on joint programmes, such as
the Tornado and helicopters, the Puma, Lynx and Gazelle, there
seems to be little co-operation on support requirements at a later
date on joint projects. Is that not again starting to prove my
point that it is best to go alone?
(Mr Tebbit) It does not prove the point that it is
best to go alone, it proves that we got that wrong. We did not
do enough work to sort out the collaborative support arrangements
in the early phases of the Tornado project and we have suffered
as a result and have lacked commonality of aircraft types across
the countries which were originally in the collaborative programme.
That is a mistake we are not going to make on Eurofighter and
we are even less likely to make it on—
29. I was going to come on to that.
(Mr Tebbit) Since you are being so kind as to try
to think through the various pros and cons and the factors involved
in national or international co-operation, the other factor is
the way industry has changed over the years.
30. I was coming to that.
(Mr Tebbit) Please, do not let me pre-empt your question.
31. I can remember in a previous PAC meeting
that we had when I first came on here we discussed the Tornado
and there was a fault on the Tornado, if I remember rightly. Had
the Italians not fixed that fault and not told us, or they told
us and we had done nothing about it? I can remember that there
was a lack of co-operation. Can you remember?
(Sir Robert Walmsley) I certainly remember the problem,
which I think was fires associated with a clutch in the rear fuselage
of the Tornado aircraft. You have identified quite correctly that
we had not communicated enough between the nations on this problem,
that was absolutely true. Eurofighter is not like that, I have
to make that quite clear. On Eurofighter we are buying simulators
together, we have now agreed a common support philosophy, we have
got a tranched support contract. As the report says, it is not
finished because we have a number of tranches to let. We have
placed the first four or five tranches of the support contract,
we are working together. It is back to the point I made to the
Chairman about exercising an iron grip on a common configuration
of the aircraft and we did not do that with Tornado.
32. I will not go on to talk about Eurofighter
now because you have covered that. Do you make sure that there
is total co-operation where a programme has been produced nationally
and there is total co-operation with the partners there so that
when you produce something nationally there is co-operation at
a later stage?
(Mr Tebbit) On in-service support?
33. Yes.
(Mr Tebbit) Yes, we do. Increasingly one does try
to do that and there are various initiatives in train, for example,
to make sure that ordnance, the stuff that is fired out of them,
is common. Also there are other things like, for example, helicopters
where the Italians produced half of the Merlin helicopter and
we produced the other half. We still try to ensure that there
is commonality as far as possible. Just because you do a national
project does not mean to say that you do not try to do inter-operability
and common support arrangements. Indeed, in NATO at the Conference
of National Armaments Directors—CNAD—one of the successes
of this otherwise non-August body over the last 20 years frankly
has been to standardise and promote commonality so that different
weapon systems can still fire the same sort of round.
Mr Steinberg: I have a number of questions I
was going to ask but I will miss them out because I only have
two minutes.
Chairman: You are on to your last ten seconds.
Mr Steinberg: The answers were very long.
Chairman: I will make that decision. Last question,
please.
Mr Steinberg: How level is the playing field
when prospective partners make their decisions on whether to proceed
with a project or not? In paragraph 4.8, if I can find it—
Chairman: Page 41.
Mr Steinberg
34. In paragraph 4.8 it tells us that in "17
recent major procurement decisions involving a co-operative option
.... some consideration of industrial and wider factors were included
but only seven cases were supported by quantified analysis."
Yet in paragraph 4.10 we are told that our major European partners
tend to place a much greater emphasis on the importance of protecting
national industrial interests, for example the Germans and the
Italians on the Tornado and the French on the Franco-German helicopter.
How can we actually be sure that the British taxpayer, and when
I say the British taxpayer I mean in terms of jobs and everything
that comes from that, are being protected as well as our European
partners are being protected by their host nations, if you like?
Are we much more committed to it than they are in terms of the
national good? Do they consider their national issues more than
we do in terms of jobs and everything else?
(Mr Tebbit) I think it is fair to say that France,
Germany and Italy have tended to put a weight on the industrial
participation which has been so heavy that it has tended to erode
the economic advantages of co-operation. It depends where you
start this from. If you start it from the importance of getting
defence equipment, value for money, cost effectiveness, you tend
to want to promote competition and be prepared to see the best
results through that process. In the long run that is the way
you get the best equipment and the most healthy defence industry.
British defence industry has done so well because it has been
much more focused on competition and winning contracts through
its performance than on being allocated work shares in a rather
traditional manner. The reason, for example, British industry
has had such a huge export market is not because they produce
things solely for export but because they have been competitive
and have won in terms of price and quality overseas. So in the
long run it does not help simply to protect industries by giving
undue weight to industrial factors. It does not mean to say they
are not relevant, it does not mean to say we do not take them
into account, we do, but we do not drive the project from that
angle as much as perhaps some of our partners have done in the
past. I happen to believe they are doing that much less so now
and are more or less coming around to our own Smart Acquisition
approach.
Chairman: Can I ask the witnesses to be a little
briefer in their answers, I had to give Mr Steinberg four minutes
extra. David Rendel.
Mr Rendel: I hope I will get the same, Chairman.
Chairman: No, you will not.
Mr Rendel
35. In answer to the first question from the
Chairman, which was a two part question, I am not quite sure that
you answered the second part, if I may say so. You were being
asked about the Letter of Intent and the Declaration of Principles
and I am not clear in my own mind that you really answered the
question how you measure the success of those two.
(Mr Tebbit) You are absolutely right, I did not answer
that, and I hoped you would not have remembered. Measuring the
success of something which is not yet fully in place is obviously
quite tricky. Measuring something which is dependent on facilitating
industrial participation, co-operation, security of supply, is
rather harder than something which is purely controlled by Government.
If I may, I am going to do my usual thing and ask Sir Robert Walmsley,
who was responsible for trying to put these in place, to give
you a better answer on that.
(Sir Robert Walmsley) I will do my best. The background
is following the Prime Ministerial statement with the Chancellor
of Germany and the President of France in December 1997 that Europe
needed to form transnational industries, the Ministry of Defence
set out to see how it could best support the efficient functioning
of such transnational industries and that is what the LOI is about.
Since December 1997 I think we have seen an unprecedented degree
of transnational defence industrial consolidation in Europe. That,
to me, is a measure of the confidence industry has that it can
supply across its borders. That is what we have to do otherwise
we end up with all these separate defence industries in Europe
replicating each other's capabilities. The LOI is what allows
the United Kingdom to reach across the North Sea into Germany
and obtain equipment from there and vice versa with confidence
that security of supply will be there. If there was not an LOI
I would suggest that the degree of industrial rationalisation
would be much less. That is the first success. The second point—
36. Can I stop you there. You seem to be saying
what you think the successes are going to be but not how you are
going to measure them.
(Sir Robert Walmsley) I would measure it by observing
the number of international joint ventures that have been set
up since December 1997. That is what I was trying to say. That
was the aim, we wanted industrial consolidation and this was how
we could help. We have set it in place and industrial consolidation
has happened way beyond what I think most people believed was
possible, international confidence. At the lower level I am looking
to see by how many weeks we can reduce the clearance time to obtain
a visit by a foreign national to a UK company and vice versa.
This is the oil in the gearbox of international collaboration
and the LOI is designed to facilitate just that. When this framework
document is ratified, instead of waiting four or five weeks to
get a security clearance so an expert can come and look at something,
we should be able to get them in and out very much more quickly.
This is the hidden sand in the gearbox of international co-operation
and it will help with that. We will measure that.
37. Good. The second question is on figure ten
which is on page 15 of the report where it shows four different
types of international co-operation offering different benefits
and drawbacks. What it does not mention there is any form of equipment
sharing. It mentions shared facilities but not actual armaments
or equipment sharing. Is there any scope for that sort of co-operation
which could lead to cost saving?
(Mr Tebbit) That is a very interesting proposition.
It is something that in the UK we have tended to think about less,
I suspect, than some smaller countries who have got more of an
impetus towards that. There is a proposal to do more pooling,
for example, in air transport. We have not actually gone as far
as saying our aircraft could be shared but we are thinking of
ways where, as it were, one could almost have credits in relation
to each other where we might do something for somebody else and
then they would have an obligation to reciprocate. There is that
sort of thing. I suspect the AWACS force is probably the strongest
example of a multinational force that was created sharing, as
it were, the air frames through NATO. That probably is the most
significant thing. We are going into joint force activity, for
example, in amphibious forces where we already have agreements
with the Netherlands and are looking to extend that more widely
through the European littoral. It is a very interesting area and
one which I know Geoff Hoon is very keen to promote in terms of
the efficient use of assets. One does want to make sure that if
we offer to share that that will be reciprocated in full by the
partner and that has been something of a problem.
38. Presumably with spare parts and so on there
must be some scope for that where you do not know how much you
will use a particular piece of equipment?
(Mr Tebbit) Yes. It is hard to share a tank or something.
Easiest are the very big things like satellites that are shared
to some extent. We have put up collaborative joint satellites
which obviously are shared and facilities are shared from those.
There have been a series of satellites that have been done in
that way, I think.
39. We are allied with different countries and
some of those may be involved in different wars or whatever, some
may lose bits of equipment faster than others. Is there scope
for having—
(Mr Tebbit) Mutual support arrangements, yes, indeed.
There are agreements for mutual support arrangements of various
kinds. We have some with the Americans, for example, where this
does indeed happen.
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