Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 28 MARCH 2001
MR KEVIN
TEBBIT, CMG, MR
MIKE MARKIN,
OBE, AND SIR
ROBERT WALMSLEY,
KCB, FRENG
40. Can I ask you, looking back again at the
four types of potential savings in figure ten, would you say that
there is more possibility in the future of co-operating with the
USA or with Europe either in relation to any of these things or
each of them individually?
(Mr Tebbit) I do not see them either/or, we need to
look at both.
41. I was wondering where the greatest opportunities
were.
(Mr Tebbit) The specific thing is about research and
we are certainly planning to do more in the research field with
both Europe and the United States. The big thing on the research
field is co-operation through an organisation called EUROPA. I
wonder if Mike Markin might say something about the research side
there.
(Mr Markin) I certainly interpreted this table as
being four elements of contributions to research rather than a
wider equipment thing. Perhaps just before I answer directly,
you mentioned the exchange of equipment, under research we are
doing a limited amount of that on things like chemical and biological
agents and electronic warfare equipment. So if, for example, you
have a very high profile threat then at an emergency research
stage you can exchange equipment with the US, say, to try to counter
that. Answering your latter question, we have always had a very
strong relationship with the United States on research and a much
more fragmented relationship within Europe. The issues of the
different fora, and indeed the sensitivities of the various industries,
have made things rather difficult. We are poised to make a major
step for the better within Europe now with the EUROPA MOU that
has been agreed by officials and should be signed by Ministers
in May, we hope. That will enable all nations to play on a selective
basis. Closed groups can choose to work together and much wider
ones if they wish. There will be a transparency to that and an
ease of common arrangements that should make things far more efficient.
42. What you seem to have said is that things
have been easier in the past with the USA than with Europe but
Europe, in terms of co-operation with Europe, is catching up.
What I was actually asking was where the opportunities in the
future will be? Given that Europe have now caught up, do you expect
the opportunities to co-operate with Europe will be greater than
those with the United States or not?
(Sir Robert Walmsley) I think they are going to be
reasonably finely balanced. What is happening with the transnationals
is that it is undoubtedly opening up the opportunities within
Europe and it is making it much easier because big industry has
got a foot in many of the European camps. Equally we are finding
the transnationals are setting up quite strong industrial bases
in the US and enabling us in many ways, under the Declaration
of Principles, to work more readily with them too. So I see both
of these things beginning to go forward rather more easily, but
we put a little bit more emphasis on the European one, as you
say, to try to catch up.
43. Can I ask Mr Tebbit, not just looking at
research but defence co-operation in general, where you see the
greatest opportunities?
(Mr Tebbit) I think it will be with about five partners:
the United States, France, Germany, Italy and Spain. These will
be the key partners on equipment for the future. As it happens
the programme is pretty balanced. The Joint Strike Fighter, and
I am assuming it works and the US Government review comes out
in the way we want it to and it is positive, that will send a
huge message but one also which will be about collaboration with
Europe because a lot of countries might be involved. On the other
hand, we have got the A400M strategic transport aircraft and the
Meteor missile, two key European collaborative projects, so it
is pretty balanced.
44. Can you put it into cost saving terms? Are
we likely to save money that we would have had to spend ourselves?
(Mr Tebbit) With the United States we usually go in
as a junior partner but because of that we tend to benefit disproportionately
through the investment the United States has put in. CDP may correct
me but often there is a very high gearing with co-operation with
the United States. With Europe it depends how many partners one
has. Some of the research and activity has given this gearing
something like 5:1 which, again, is very helpful. It does depend
very, very much on individual projects. It depends on how many
partners one has. It is very difficult to give a generalised statement.
I do not know whether Sir Robert Walmsley would want to hazard
a guess because I do not want to evade it but I could not give
you an answer to that. We try to run both sets of collaboration
on the basis of getting the equipment we need with the best value
for money rather than for the sake of US or Europe.
(Sir Robert Walmsley) There is a very good table on
page 16 of the report which shows the fact that the development
cost, which is what one is really after saving, sharing the R&D
costs of the programme, the absolute level of development cost
goes up as does the number of countries. So in introducing more
partners, as we have done on Meteor, it is very important indeed
to keep those development costs in toto under control. In that
case if we can make it work in collaboration with Europe, because
we have three, four, five partners, it is going to yield more
savings. Sometimes it is not an option to collaborate in Europe
and the Joint Strike Fighter is just that.
45. Which countries in the EU do you tend to
find it is easiest to co-operate with? Which are most keen on
co-operation?
(Mr Tebbit) That is quite hard to say because you
can find people who are very keen who frankly cannot bring as
much to the party. As I say, Germany, France, Italy and Spain
are the four leading partners in terms of the projects we are
running and in terms of the collaboration we are pursuing.
46. Ignoring how much they bring to the party,
which are the ones that you find are wanting to co-operate?
(Mr Tebbit) There is a strong interest among Scandinavian
countries at the moment in co-operation linked to the way in which
British industry has taken over and often taken an interest in
joint ventures with Scandinavian countries. That is certainly
true. The Netherlands is always an important country because it
plans its equipment programme a long way ahead, as do we, rather
longer perhaps than France and Germany have tended to. The Dutch
are always quite important partners to collaborate with.
(Sir Robert Walmsley) France I would put at the top
of the list. The tragedy, and I think it is a tragedy, is that
Eurofighter does not involve France. That was the well known story
of the two European combat aircraft being developed contemporaneously.
Closely followed by our Eurofighter partners. Back to the Chairman's
very first question, we are absolutely determined that Italy,
Spain, Germany and the United Kingdom will stay together on this
aircraft right throughout its 40-50 year life. Then we add in
Sweden from its Letter of Intent participation. That is it.
47. If the European Union retained exactly the
same defence requirements as various countries within the European
Union now retain, would we save any money by organising our entire
defence forces on a collaborative basis?
(Mr Tebbit) Within Europe?
48. Yes.
(Mr Tebbit) It is something which has never been thought
about frankly because we have retained, as it were, control of
those projects within the context of our alliances or nationally
rather than as a European Union venture. The Union does not have
a role in defence equipment co-operation as such, the Commission
does not play a part.
49. I was asking the question because it would
be interesting to know if you had done any analysis on how much
is savable. Not that I am suggesting in any way that this is the
right way for this country to proceed or, indeed, the right way
for the European Union to proceed, but it might give a handle
on how much potential there is for defence co-operation and the
targets you could be aiming at? I was wondering if you had done
any analysis of exactly how much we could reduce our spending
perhaps across the whole of Europe? We would never get there without
having total co-operation but the interesting thing is to see
the target.
(Mr Tebbit) The answer would not be reduced spending,
the answer might be more efficient use of spending. Since Europe
as a whole only spends, what, 60 per cent of the United States'
expenditure on defence and is particularly deficient in expenditure
on the equipment programme, Britain is much higher than most as
a percentage, I do not think we would look for savings that way.
What we have done so far is to create this thing called the headline
goal within the European Union which is about capability to deliver
up to 60,000 people, different force packages that might be formed
from that, not a European army but a capability in general. That
has not gone to the stage of future equipment programmes but we
are certainly beginning, as Europeans, to look at where the holes
in collective defence are linked to the NATO Defence Capability
Initiative and starting to think more systematically about correcting
the key deficiencies. This tends to be in terms of capability
rather than new programmes but it would obviously lead to new
programmes. More partners, we hope, will join the A400M project.
Strategic lift is one of the key deficiencies identified in these
processes.
Mr Leigh
50. Mr Tebbit, the first controversial Select
Committee inquiry that I was involved in was 15 years ago, the
Westland Inquiry, which you may remember.
(Mr Tebbit) Yes.
51. According to your cv you were safely ensconced
in Turkey at the time.
(Mr Tebbit) It was Richard Mottram who had to do all
that.
52. That was a classic dispute between the needs
of European co-operation on the one hand and, I cannot remember
all the details, buying a cheaper American version and there was
enormous political fallout from the whole thing. Just thinking
on a wider basis, what progress has been made since then to ensure
(1) that we do not get this sort of fallout between Ministers
on these matters and (2) that the needs of the armed forces are
put in front of political objectives?
(Mr Tebbit) I think that was a very special set of
circumstances in that case. I would say the system we have at
present is one which ensures that in any major equipment programme
we consult all interested Government Departments initially and
subsequently at ministerial level before we proceed with a decision.
The Foreign Office, Department of Trade and Industry, the Cabinet
Office, employment considerations, these days regional considerations,
they are all pulled into the analysis and everybody has the opportunity
to have their say. Although the Defence Secretary finally goes
forward with the proposed decision, as it were, we do build in
these factors pretty thoroughly in our analysis. The EAC, the
Equipment Approvals Committee—rather a strange name since
it does not approve but recommends—is mandated to take into
account these wider factors of political co-operation or industrial
considerations or inter-operability factors in making its judgments
and recommendations about where to go and which direction to take,
not just the narrow equipment issue. That helps quite a lot. I
cannot say you could never have a situation where a Prime Minister
and a Defence Secretary might think differently but in my time
I have not found an issue where that has been the case.
53. Can I refer you to paragraph 4.8 which deals
with some of these problems. Am I right in thinking that over
half of the most recent 17 cases whether to commit to international
co-operation were taken by Ministers collectively and that they
made these decisions partly on wider industrial and political
motives? Does this open the door to make a decision to pursue
a political objective at the expense of the needs of the armed
forces?
(Mr Tebbit) No. When I said we take those factors
into account, it does not mean to say they drive the projects
or the decisions. An Accounting Officer like myself has a duty
at the end of the day to recommend on the basis of value for money
for defence. That could be a long-term view, it could take into
account considerations of industrial capacity that we might need
in ten or 15 years' time, it does not have to be absolutely short-term.
Balancing considerations one has to decide on value for money
at the end. In other words, if it was very marginal, all other
things being equal, one can indeed legitimately, and should, take
into account wider factors, but if the premium you have to pay
is enormous, 30 per cent, then one would not pay that.
54. I understand that.
(Mr Tebbit) Or at least one would not be prepared
to authorise that as an Accounting Officer.
55. Yes. In terms of value for money they have
got to be pretty near equal?
(Mr Tebbit) More or less.
56. When you say "wider factors",
are these industrial or political, or both?
(Mr Tebbit) They can be a number. It usually comes
down to judgments about risk. When one is trying to make judgments
between competing factors it usually is a question of measuring
things which are very hard to quantify and to analyse risk, it
is very rarely a simple, straight forward issue.
57. When you say "risk", I do not
really understand that. Could it be that if you had two projects
which broadly seemed to offer roughly equal value for money, you
would be happy if the Minister said "I want to pursue option
A because that will promote European co-operation, which is a
political aim of mine" rather than, say, co-operation with
the Americans? Would you accept that as an Accounting Officer
as a valid reason?
(Mr Tebbit) It is difficult to discuss these things
in the pure abstract and I suspect you are thinking about BVRAAM
because it looks rather large there on the page that you are referring
to. Promoting a European missile was a consideration in this because
it was important for Europe, we judged, to have the capacity to
develop a missile in the future and not be entirely dependent
upon a US partner. There were also other considerations like the
type of aircraft we would be using as distinct, perhaps, from
the sorts of aircraft the United States might have. There were
quite a lot of factors that came into the account but Ministers
in the end came down to a collective judgment on this and there
was not a split, as it were, of the Westland nature that you talked
about earlier.
58. All right. So you are satisfied that you
hold adequate safeguards in a personal veto as Accounting Officer
to prevent the wrong decision being made for the right political
reasons? The wrong decision in terms of the needs of our armed
forces.
(Mr Tebbit) I would not say that, but let me just
put it like this—
59. You would not say that. That is a rather
alarming answer.
(Mr Tebbit) I would not put it the way you have put
it. I did not feel the need to ask for a direction from a Minister
in order to proceed with the Meteor missile programme, I was satisfied
that that represented value for money.
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