Draft Defence Science and Technology Laboratory Trading Fund Order 2001

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The Chairman: Order. The point has been well made, but we are debating the order and should concentrate on it.

Mr. Howarth: I note your remarks, but one is entitled to make the point that the order is being discussed in Committee and not on the Floor of the House, Mr. Stevenson. I was explaining that I felt the order should have been discussed in the House because this is an important issue. Once the order is agreed, the next landmark will be the vesting day on 1 July, when NewDERA will become a public limited company. The House will not have been able to vote to show whether it approves of splitting DERA into two component parts, of which one will be privatised and one will remain in the public sector. Parliament will not have expressed a view on the matter.

My hon. Friend the Member for Salisbury mentioned that the House of Commons Defence Committee—sometimes known as HCDC—has done a superb job of monitoring the issue throughout this Parliament. Its members have rendered a great service to the House and to the country at large because they are the only people who have the opportunity to question Ministers at length on their proposals. However, they were unable to vote on the matter. I therefore put it to the Minister that if he were in opposition he would find it odd that this major privatisation, which concerns the defence of the realm, was not put to a formal vote in the House. It is ironic that I am not the first person to say that.

As I examine the glum faces of the Labour Members in Committee, I am unsure how many of them are old Labour. I can identify the hon. Member for Rother Valley (Mr. Barron), with whom I used to spar over coal mining. Although we disagreed on fundamentals, we agreed on many points of detail. In the 1980s, the idea that a Labour Government would privatise the heart of British defence research would have beggared belief, and men in white coats would have surrounded anyone who suggested it. It is extraordinary that the Labour party, which spent the best part of the past century fighting private capital, has rolled over without a whimper in the face of this unique privatisation. It has fallen to Conservative—

The Chairman: Order. I am getting a little worried that the hon. Gentleman is straying from the content of the order. I want to direct him to return to it.

Mr. Howarth: I recognise old Labour when I see it because at one time, like you, I was a Staffordshire Member, Mr. Stevenson. However, I take your point.

I hope that I am entitled to contrast the treatment of the privatisation of National Air Traffic Services—which is of great concern to several Labour Members—on which there has been an opportunity to vote in the House, with this issue, which has not been subject to proper debate. I have made that point so I should pursue other matters that relate to the order. Nevertheless, you must forgive me for pressing the point because this is the only opportunity to question Ministers on the handling of the privatisation of DERA. Where can hon. Members raise the matter if they cannot raise it in Committee?

Returning to the Government's proposals, I agree with my hon. Friend the Member for Salisbury, who correctly pointed out the reservations felt by members of staff. There has been a consultation process, but staff will be inhibited in going public about their reservations when all their future employment prospects are at stake. When the Select Committee on Defence debated making the results of the consultation process available, the Minister said that it would be wrong to release into the public domain information that people had given privately. My constituents were pretty nervous about giving any view, even privately, for fear that there would be recriminations. I know Sir John Chisholm well and I believe that he has done a great job there. It would be wrong for anyone to suggest that he would take it out on anyone who expressed a contrary view. He is interested in an open debate, but these people's future is at stake.

A third of the people who make up one department in DERA are moving out. They are going to work elsewhere. It is ironic that the Opposition are expressing concern about the culture that encourages people to forsake the private sector, which we as Tories value highly, and remain in the field of pure research at the Ministry of Defence's sponsored military scientific operations in this country. I am not sure that taking them out will lead to the best results. However, that will happen.

The privatisation is friendless. Not only does it not enjoy the support of the Opposition or the Defence Committee, but I have yet to find friends for it outside the higher echelons of the Government. There is clearly no enthusiasm on the Labour Benches; if there were, Labour members of the Committee would be keen to participate in this debate. Perhaps they will after what I have said. The Government put forward a reliance model. I do not know about my hon. Friend the Member for Salisbury, but I read it and found it incredibly complicated. It is virtually impossible to understand, but that was the Government's serious proposal for the privatisation of parts of DERA. I welcome the fact that they abandoned at least that one in the face of the opposition of the Defence Committee and everyone else. Clearly the present proposal is a more understandable arrangement although, as the Minister conceded, no less complex.

The Defence Committee, in its recent deliberations published last week, drew attention to the fact that in a previous encounter it had highlighted five areas where, in its members' view, there was still significant uncertainty that the Ministry of Defence had yet to resolve. There was the issue of whether NewDERA would be permitted to undertake defence manufacturing, which my hon. Friend the Member for Salisbury mentioned earlier. At question 180 on 28 February the Minister for Defence Procurement told the Committee:

    ``We have to winnow out the definition. Industry has to comment on the definition that we will have to reach with them and that is work still in progress.''

In other words, here we are within three and a quarter months of turning this into a public limited company and there is no resolution as yet on the extent of the operation that NewDERA will be permitted to undertake. The Government stated in their response to the last Defence Committee report:

    ``we accept that clarification is required to define the parameters of defence manufacturing'',

but as yet, nothing has been resolved.

The second uncertainty to which the Defence Committee drew attention was the fact that the MOD had not made a final decision on which of NewDERA's assets would be regarded as being of strategic importance and thereby fall under the special measures afforded by the MOD's golden share in the privatised firm. That issue has not been resolved and it is the critical issue for the people of this country.

That is the critical issue for the people of this country. Which strategic assets should not fall into ownership that would imperil Britain's control of them? In answer to the right hon. Member for Walsall, South (Mr. George), the Chairman of the Defence Committee, the Minister for Defence Procurement said that her gut instinct was that she would like the organisations acquiring NewDERA to be British. I am sure that we all agree with that.

The third uncertainty concerned the extent of controls on foreign and individual share ownership of DERA that will be introduced in its compliance framework. That remains unresolved. The fourth point concerned putting the bulk of DERA's research work in NewDERA. There were doubts about how the scientific foundation of DSTL would be maintained in the long term. I put that to the Minister earlier in today's proceedings and he kindly assured me that the military believe that there will be critical mass in DSTL to enable it to fulfil the role that is currently fulfilled by DERA. As recently as last week, the Defence Committee concluded:

    ``We are disappointed that the evidence shows that four of the outstanding areas of uncertainty that we had previously identified . . . remain unresolved.''

It is unacceptable that, so close to the creation of a public limited company, major issues have not been resolved.

Other issues were set out in the Defence Committee's fifth report. We shall all be looking forward to the Government's response to it. I hope that it will be noted that, at paragraph 6 of the report, members of the Committee said that they had examined a series of other issues. It would be especially helpful if the Government, when replying to the report, dealt with those issues, some of which are major, such as

    ``The rationale for establishing DSTL as a trading fund''.

Perhaps of less significance is

    ``The appointment of New-DERA's directors and their likely remuneration packages''.

In the absence of a proper debate on the Floor of the House, the Government owe us a comprehensive response to the Select Committee's report.

Sir Dick Evans, the chairman of BAE Systems, which also has its headquarters in my constituency, has expressed his worry about the erosion of the military research and development base in the country. That is of enormous concern to us all. We must ensure that there is continuing funding of long-term military research. If that does not happen, we shall lose out not only for our own defence, but in our capacity to collaborate with other countries. That has been the pattern of military procurement for major capital items over the past three decades. We have been looking to collaborative projects.

If we do not have a comprehensive and state-of-the-art scientific base, we shall not be able to make our contribution to those collaborative projects, which means that we lose out in our share of the projects and we are then on a downward slide. As an aviator in the aerospace business, I venture to suggest that we are one of the leading three countries in the world. We are not in the top 10; we are in the top three. The United Kingdom has had a hugely successful century in aerospace, but the business depends on long-term investment in research and development.

I shall not stray too far, but I hope that you, Mr. Stevenson, will allow me to say that I welcome the fact that the Government are providing launch investment, which follows on from what the Conservatives called launch aid. It is all the same, and it has contributed to ensuring that we have been able to fund the enormously long lead times that are required to bring major projects to fruition. That especially applies in the military field. The first decision to build the Eurofighter, which is now more happily called the Typhoon—I approve of the name change—was made in about 1984, but it is still not in service 17 years later. That shows not only the problems that arise in collaboration but the enormous lead times required.

We must invest over a long time to ensure that we keep up to speed in our ability to compete in the complex fields of high technology defence equipment. I hope that the Government will give us an assurance that they will ensure that DSTL is funded in such a way as to ensure its continuing competence in all the fields that, as Ministers rightly described, DSTL will cover.

My hon. Friend the Member for Salisbury mentioned the United States. I discussed the matter with Sir John Chisholm and others in DERA. It is critical to the success of the Government's proposal that the United States accepts and approves of what we are doing. That is not to suggest that we should be beholden to the United States, but it is critical that the strength and benefit that we have derived from the relationship between DERA and the United States authorities is preserved. A programme called JOUST was introduced to evaluate the performance of combat aircraft using data derived from the United States, the United Kingdom and elsewhere and assessments made by the various parties of the ability of, in particular, Russian aircraft. To reach the place where that research was being carried out, people had to go through five separate security controlled doors, because some of the data were provided by the United States. That is how highly the United States regards its security and lack of leaking from DERA to ensure its continued confidence in the organisation.

I know that Sir John and Ministers have had discussions with the United States authorities, but ultimately it is for the United Kingdom Government to make the decision, not the United States. However, I hope that Ministers are clearly reading the signs coming from the United States so that they do not allow themselves to be given a false picture of the United States' position. I do not suggest that the United States is now hostile to the proposal. However, I hope that, in their desire for privatisation, Ministers will not allow themselves to accept an assurance from the Americans at face value without being absolutely satisfied that the Americans are content with the proposal and will continue to place their confidence in the ability of DSTL to collaborate with them on a secure basis.

I want to quote from the end of the Defence Committee report, which encapsulates my position. I have no wish that the project should not succeed. I have argued against it, but the Government have decided to proceed with it. It is in the interests of the United Kingdom that the project is successful, even if it is launched on a false basis. The last paragraph of the report states:

    ``The trading fund Order is an inevitable step on the way to the division of DERA—clearly New-DERA cannot be established as a public limited company while it remains a trading fund. If the Government is resolutely set on the misguided change of status for the Agency, a delay in approving the trading fund Order would only serve to undermine the prospects for a successful subsequent flotation and to further damage DERA's already brittle staff morale, neither of which we would wish to see. It is because the Order takes forward the partial privatisation of DERA, however, that we cannot lend our positive support to it. Though now at the eleventh hour, we would still prefer that the proposed public-private partnership for the Defence Evaluation and Research Agency—one of the MOD's successful sectors under its present status—was abandoned.''

11.6 am

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