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9.42 pm

The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): Just before the start of this debate, the hon. Member for North Wiltshire (Mr. Gray) accused my right hon. Friend the Secretary of State, presumably unintentionally, of having misled the House. I would like to set the record straight. There was no

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contradiction between the two answers that my right hon. Friend gave. The first referred to his support for company proposals to supply new warships to Thailand. The second quite rightly stated that the Government of Thailand had expressed no formal interest in the purchase of ex-Royal Navy warships. Those two answers, while difficult to understand for a bear of very small brain, are not incompatible at all.

I shall try, in the time remaining to me, to get through as many of the points that have been raised tonight, some of which are, I have to say, rather old chestnuts. Let me start with the budget. I accept that budget figures are difficult for people to understand. I find them difficult to understand myself, but I was helped by spending two and a half years running the finances of the House of Commons, when I was Chairman of the Finance and Services Committee, during which time I learned to read a budget.

The spokesmen for the Liberals and for the Conservatives both made the mistake of comparing outturn figures with budget figures; the two are quite different. They are different in defence—as opposed to virtually any other Department—for one special reason, namely the operational requirements that the Ministry of Defence has, over and above the fixed costs that we have to bear anyway in terms of paying our people their normal income.

Operational needs are paid for out of the contingency fund, so the outturn figure rightly indicates what we have spent during the year. It does not express what our budget was. For example, last year, something over £1 billion was added into our budget figure. I cannot remember the exact figure, but if any hon. Members wish to know it, I would be happy to write to them. That figure must be stripped out before comparing last year's budget with a future budget. I am not trying to make an "I'm clever and you're dumb" point; indeed, I did not understand the matter myself until it was properly explained to me. However, the fact is that the money in question is real money that will be coming into the budget over the next three years.

I should point out in passing that it is also important to recognise that, because so much of our budget is spent on capital requirement—on procurement, the subject of today's debate—the sum is a real sum that is available each year. Obviously, if something is bought in one year, it has been paid for; it is not necessary to pay for it in the second year as well.

Mr. Laws: I accept entirely the point that the Under-Secretary makes. He was correct in saying that the 2001–02 figure was inflated by a transfer from the reserve. However, he seemed also to accept the simple statistical point that I was making, and which emphasises how tight his budget is: it remains true that, in real terms, his Department's planned spending figures for the whole of the period of the spending review are lower than his Department's spending for last year. Is that correct?

Dr. Moonie: The planned total does not include unforseen items. [Interruption.] Of course it does not. If one strips out the £1 billion, a fair comparison can be made.

It is an old trick on the part of people who think that they know a wee bit about statistics to use percentage terms when it suits them, instead of real figures. Speaking

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as a statistician of some merit, I should point out that using percentage figures to argue that the Department of Trade and Industry is getting more money than us is of course incorrect, given that its relatively small budget is some 5 per cent. of ours. I have not got the figures in front of me, but from memory the DTI's real increase is about £175 million a year. Our real increase, however, is £725 million for the first year. In real terms, that is four times as much, and of course, it buys four times as much.

Mr. Laws: Will the Under-Secretary give way?

Dr. Moonie: No, sorry, there is no time; I have given the hon. Gentleman his chance. We will see how much that money can buy as we develop our spending plans over the next few years. In his statement tomorrow, my right hon. Friend the Secretary of State may well give some indication of the direction in which we will go.

I shall try to dispose of a couple of old chestnuts, the first of which concerns the SA80. Let us be clear: every rifle misfires at one time or another, and in difficult conditions all rifles misfire more often than they would otherwise. I happily admit that the SA80 took a long time to introduce. There is no doubt that it is a very high-tech, excellent rifle. Any decent marksman will say that they would as soon use the SA80 as any other rifle in service, because they know what the result will be when they fire it. Those who are not interested in achieving a specific effect can use any rifle, no matter how poor its tolerances, to spray bullets all over the place. However, that is not what we use the SA80 for.

As anybody who has served in our armed forces knows only too well, the SA80 is an extremely accurate rifle that is reliable in all conditions. The modifications were tested in Kuwait, which has very similar—if not identical—conditions of heat and dust as those in Afghanistan. The rifle performed admirably under those conditions, which is why we have such difficulty in coming to terms with the fact that it failed to work in Afghanistan. For that reason, I will not make a premature announcement about the findings; we must wait until we have them at our disposal, and until a full and proper examination has taken place. We want to get to the bottom of the matter—after all, we have spent extra money on the SA80. We have what appears to be an excellent weapon at our disposal, and we hope that that will continue to be the case. However, I cannot make any predictions as to its future. Let us wait and see.

Mr. Gerald Howarth: Will the Under-Secretary give way?

Dr. Moonie: No, I really do not have time to give way.

The question of the Sea Harrier comes up time and again, so let me deal with it briefly. We must remember that the risk involved in upgrading the Sea Harrier is high, by which I mean that the risk of not being able to upgrade it is high. We must remember the need, under the strategic defence review, to retain an offensive capability. Nowadays, carriers are used for projecting force. We must also remember that every spending decision involves an opportunity cost: if the money is spent on one thing, it cannot be spent on another. We must further consider the

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very wide range of threats to which a carrier and any other surface vessel is subjected, only one of which is air attack. As has been pointed out, the Sea Harrier is of absolutely no use against sea-skimming missiles, which are the main threat to a ship. Of course, the Phalanx system with which carriers are equipped is specifically designed to allow for that threat.

Mr. Howarth: Will the Under-Secretary give way?

Dr. Moonie: I am afraid that I have no time to do so—I am trying to cover all the points.

We are concentrating on force projections and the advice from the services has been that, on balance, we should phase out the Sea Harrier. We must remember that the choice is not between upgrading the Sea Harrier successfully or getting rid of it. The chances are that any upgrade would fail. Not only would we then have to phase out the Sea Harrier anyway, but we would also have wasted money on the upgrade. The services are right in their advice that, on balance, it was better to carry the small additional risk of operating without the Sea Harrier for whatever period that was necessary. That was their advice: they are the professionals. I am more inclined to take their advice than that of Opposition Members or, for that matter, of my hon. Friends.

Several hon. Members rose

Dr. Moonie: I really cannot give way. I do not have time. [Interruption.] That is a silly thing to say.

Let us dispose of the argument about the cannon once and for all. The minimal operational utility of the Eurofighter gun is outweighed by its support, fatigue and training cost implications, especially bearing in mind the historical pattern of operations over the last decade and the improved capability of the advanced short-range air-to-air missile with which the aircraft will be armed. There is no need for a cannon. The ASRAAM will perform adequately in close combat.

On the issue of sonar, it is true that in 2001 the PAC questioned the chief of defence procurement and the deputy Chief of the Defence Staff about the logic of sending the first Type 45 to sea without a sonar, as that would limit the deployability of ships. At that hearing, they stated that it had already been decided shortly before that the sonar would be fitted on build to all Type 45s. The prime contractor announced on 18 January this year that it had selected Ultra UK as the preferred supplier of the medium frequency sonar. Ultra will build the sonar and take full responsibility for integrating it on to Type 45s. The contract has been let and the sonar will be fitted to the ships.

The issue of Swan Hunter was raised on a couple of occasions. Our policy that warship building should be conducted in the UK remains in place. It follows that we would have preferred Swan Hunter not to subcontract the build of the bow sections abroad, but we should put that into context. The work constitutes some 4.5 per cent. by weight of the hull. We have now incorporated a clause into the ALSL contract that prohibits the company from awarding subcontracts for fabrication or assembly work on the hulls without the prior consent of the MOD. That clause will also be incorporated into all future shipbuilding contracts. We would allow fabrication or

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assembly work on hulls to be subcontracted abroad only in exceptional circumstances—for example, if no domestic supplier were physically able to carry out the work.

The Defence Science and Technology Laboratory rationalisation is an important issue, and the organisation forms part of my departmental responsibilities. It is an MOD-owned agency whose purpose is to provide world-class scientific and technical advice to us. I have accepted the arguments from management at DSTL that considerable benefits will accrue, both in the quality of research done and in cost—that is important, because if we spend money on maintaining more sites we have less to spend on research. If we concentrate on three main sites, clear benefits will be felt from bringing our scientists together, in terms of creating new synergies, and from operating efficiency. The proposals have been the subject of consultation with staff at all stages and are now under consideration by the trade unions. We believe that the proposals will ensure the long-term future of DSTL and the best value for defence.

My right hon. Friend the Member for Walsall, South (Mr. George) suggested that the Conservatives were following Frank Allaun's defence policy, and I found that amusing. To be honest, on probably every occasion that they cut the defence budget a Labour Member could be found to say that it had not been cut enough, so we should not go too far down that road. However, my hon. Friend the Member for Vale of Glamorgan (Mr. Smith) made the point that some of the Tory cuts might have been made more cleverly.

Hon. Members mentioned delays with Astute. We are deeply concerned about those. We have continually moved from one pattern of submarine design to another, and design problems have caused these delays. We will do all that we can to return the programme to schedule, but it is only fair to say at this stage that Astute's entry into service may well take place later than the time indicated. We have left the manufacturers in no doubt about our concern, and I know that they are working hard to remedy some of the damage. Presumably if there is a gap in capability, we will have to see what can be kept going. It is difficult to envisage keeping the S class of submarines going much beyond their present lifetime, but there is capacity in the T class.

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