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9.16 pm

Mr. Kevan Jones (North Durham): I declare my membership of the GMB trade union and draw the attention of the House to my entry in the Register of Members' Interests on the support that it gives to my constituency party. Some of its members work in the defence industry.

I am proud of this country's defence industry and the number of jobs that it creates, not just in the north-east of England, but throughout the country. As my hon. Friend the Member for Alyn and Deeside (Mark Tami) said, those are high-quality jobs. The defence industry helps to ensure that technology is at the forefront of developments.

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Like my hon. Friends the Members for Alyn and Deeside and for Dunfermline, West (Rachel Squire), I welcome last week's increase in defence expenditure. It will have a major impact on procurement by the Ministry of Defence. That is important to our defence industry, which is right to be proud of its exports record. We need to defend those exports because they are key to a vibrant and important sector.

Ministry of Defence procurement is crucial because it provides the bedrock business for a range of defence manufacturers. Defence manufacturing now operates across nations, as the Minister said. There are few sole suppliers from one country. Manufacturers work together to put sophisticated programmes in place which are important to us and our European allies. However, it is important to defend UK jobs, and the Ministry of Defence should ensure that jobs are retained within the UK defence industry. It is a matter not just of the number of jobs, but of the skills that they require. Skills cannot be turned on and off like a tap they need to be nurtured over a long time. The defence industry needs a continuous supply of work so that skills can be retained and nurtured.

On the procurement of warships, the Minister said that competition is a key part of defence procurement, including naval procurement, which I accept. It is also about getting value for money.

I refer to comments that Lord Bach made to the Scottish Affairs Committee during its investigation of employment in the shipbuilding industry on the Clyde. He stated:

He continued:

Therefore it gives me no pleasure to raise the issue of the advanced landing ship logistics at Swan Hunter, where a large amount of work that could have been carried out in this country has been subcontracted to Holland. Again, in evidence to the Scottish Affairs Committee, an MSF full-time official said that he believed that up to 40 per cent. of the work on the ALSLs has been contracted abroad to Holland.

I raised the issue last November in a parliamentary question for written answer after defence contractors in the north-east told me about their difficulties in getting on tender lists for Swan Hunter. The Scottish Affairs Committee report states:

I would like to know why that was allowed to happen, given that there was a clear concern in the north-east, which I raised with the Ministry of Defence in November. Shipyard workers in the north-east who could have done that work to a high specification are very angry that they have not been given the opportunity to do so.

Mr. John Burnett (Torridge and West Devon): The hon. Gentleman makes a brave and compelling point. Does he agree that the issue is not only subcontracting to

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companies in Holland, but the fact that those companies further "sub-subcontract" to countries such as Ukraine, which have no regulations on health and safety in the workplace and which, unlike our shipyards, have significant subsidies available to them?

Mr. Jones: I am not aware of such arrangements, but I view them with great concern. It is clear that when Mr. Yap Kroese tendered for the contract in the first place, he fully intended to subcontract the work to Holland. I feel that we in the north-east have been let down. I, and many others, have argued for procurement of warships in the north-east, but I am sorry to say that people will be left with a bitter taste in their mouths if every time we successfully persuade the Government to procure contracts for Swan Hunter shipbuilders, that work is subcontracted to Holland. The MOD and the north-east shipbuilding community must make a clear commitment to ensure that work that can be carried out in the north-east is carried out there. I understand that time is limited, so I shall finish. I look forward to the Minister's response.

9.23 am

Jim Knight (South Dorset): I gather that I have only a brief period in which to speak, so I shall keep my remarks exceptionally short. I shall pass over my strong support for the increase in defence spending that was announced on Monday and go straight to key issues for my constituency.

As I mentioned in an intervention, those issues include the consolidation of the Defence Science and Technology Laboratory in Hampshire, with a move away from its current site in Windfrith, where sea-systems expertise sits alongside a great concentration of expertise in the commercial sector. Although I appreciate that DSTL wants to keep some distance between itself and the other half of what used to be the Defence Evaluation and Research Agency, the discrete nature of sea-systems expertise means that the DSTL's continued presence in Windfrith would be a gain for the country as a whole.

While I am talking about my constituency interests, I should say how enthusiastic people in Dorset are about the idea that when the next set of Type 45s are named, HMS Dorsetshire might be revived, following its excellent record over many incarnations. Last time we lost HMS Dorsetshire, the public in Dorset raised the money for its replacement, but unfortunately it was not built and the money had to be returned.

The other point that I want to make relates to international partnerships in procurement. My hon. Friend the Member for Alyn and Deeside (Mark Tami) mentioned the A400M, and I have been privileged to visit the factory in Filton to discuss its importance with the trade union and management sides. I am therefore less than impressed by the fact that our colleagues in the Bundestag are delaying the procurement of the A400M and the Meteor, and I should be interested to learn what efforts the Government are making to put pressure on the German Parliament to make that decision. I agree with my hon. Friend the Member for Dunfermline, West (Rachel Squire) that we should not rely solely on the United States as regards the future of our defence industry. It is very important that we have a successful European industry,

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so we have to make such projects work. We must also encourage our partners in Europe to give us the same access to their markets as we allow them to ours. I am sure that Ministers will do that.

I support a strong defence industry with properly regulated exports. I look forward to seeing the recommendations of the Quadripartite Committee in its report to be published tomorrow, but I am confident that a strong defence industry is getting stronger thanks to the policies of the Government.

9.26 pm

Mr. James Gray (North Wiltshire): The hon. Member for South Dorset (Jim Knight) is very understanding towards one or two hon. Members who squeezed his time. I agree that it would be nice for an HMS Dorsetshire to be reinvented—and an HMS Wiltshire come to that. Perhaps he and I will live to see it. That said, Wiltshire is one of the most inland counties, so HMS Wiltshire is less likely than HMS Dorsetshire.

We all welcome this annual opportunity to examine in detail Defence Ministers' brave efforts to demonstrate that they have won the battle with their colleagues at the Treasury and their brazen claims that they are ready to supply, in plentiful quantity, the matériel necessary to carry out their ever more grandiose military ambitions. Unfortunately, they have once again singularly failed to persuade us that they are ready and able to do so. It is true that this week the Chancellor of the Exchequer sought to correct the impression that defence is the lowest of his personal priorities. In six years of speeches—one can check it on the internet—he has rarely mentioned the word "defence", and he gave it no priority until now. He says that he has made a generous contribution towards defence, and we welcome that gesture.

As the Chancellor's neighbour, the hon. Member for Dunfermline, West (Rachel Squire), rightly and memorably said, however, figures are subject to political bias. We fear that in this case the figures may well be biased against defence, and we will examine them very carefully indeed. It has been said that only one person understands defence budgets, and he died some years ago, and it will take us some time to determine exactly what they mean. In his contribution, the hon. Member for Yeovil (Mr. Laws) amply demonstrated that he does not know what they mean at all. We will look carefully at the figures and examine the bold claims that the Chancellor made, which were echoed by many hon. Members this evening. As is so often the case with the Chancellor of the Exchequer, I am afraid that the outcome will prove to be a great deal less beneficial to defence than he would have us believe.

The Minister may like to clarify an important point that was touched on earlier—namely, that as of April 2003 he will have to include in the budgets figures of £6 billion for depreciation and of £4 billion for carrying costs. He must tell us which Ministry of Defence budget that will come from and how it was taken account of in the comprehensive spending review. I understand from several people who know about such matters that that detail has not been thought through at all carefully. I challenge the Minister to explain, in very simple terms so that even I can understand them, exactly how depreciation and carrying costs were taken account of in the CSR. Defence accounting is a murky area, but we can

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be pretty certain that the Chancellor has been less generous than he would have us believe. The reality remains that the procurement bow wave is bearing down on us even more threateningly, and the CSR has done nothing whatsoever to reassure us about that.

The hon. Member for Vale of Glamorgan (Mr. Smith) made the bold assertion that Labour is now the party of defence. I fear he may have undermined that by his absurd and ignorant attack on the Territorial Army. I suspect that the TA will not accept his assertion; we shall ensure that Territorial Army volunteer reserves throughout the nation are aware of his precise words.

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