Examination of Witnesses (Questions 420
- 439)
WEDNESDAY 8 MAY 2002
LORD BACH,
SIR ROBERT
WALMSLEY KCB, AIR
MARSHAL SIR
JOCK STIRRUP,
KCB, AFC AND MR
JOHN COLES
420. What would the alternative be if the Germans
do not sign?
(Sir Robert Walmsley) I think I have to make it absolutely
clear—and I hope that somebody from Germany reads this—this
project will not succeed without Germany. This project is really
important to the air-to-air combat capability of Eurofighter.
We look to Germany for this just as we looked to them for the
plane itself to co-operate with us as they have done on the aircraft.
Chairman: Why I have concern about this is that
I and other Members of Parliament went out to the Bundestag two
or three ago to plead with the German Bundestag Defence Committee
to sign up for a Eurofighter which was causing enormous problems.
When we finally got into the Defence Committee they had made the
decision, yes, we will sign but we are very concerned about BVRAAM
and the whole of the argument was not talking about Eurofighter
but BVRAAM. They said to us very strenuously it was a European
aircraft and a European missile, and that it was a political decision
that was in some ways a risky decision, and therefore if you find
it difficult to legislate you should contact us so maybe we can
go out and argue to our Defence Committee colleagues why every
effort must be made to get this signed up. Certainly I would be
prepared to do that. Maybe we can enter into correspondence over
this.
Mr Crausby
421. How much will the delay that has already
occurred push back the missile's in-service date?
(Lord Bach) It is not just the delays that have pushed
back the current ISD, there has also been some slower than expected
progress on contract negotiations generally. I have to say that.
I do not think it would be fair just to put all the blame, if
that is the appropriate word, on one of the partners in this particular
enterprise.
(Sir Robert Walmsley) That is absolutely fair. Let
me make quite clear that part of the reason the draft contract
was not available until 29 April was we were trying to strike
a very tough bargain with the company. They put the prices up
at the back end of last year. We have negotiated that increase
away. All that takes time and while that is going on work share
is beginning to escape from one country into another and all that
needs to be put back. All these things take time. There is nothing
unusual about the Meteor story but when we set the in-service
date at the time the Government took the decision just about two
years ago we made an allowance for some of these very protracted
negotiations. I am very happy to say that when we set the in-service
date we did not set some stupidly aggressive date which was really
setting us up for a fall before we had started the programme.
I still think there is a good chance we will meet the in-service
date we set ourselves two years ago because we set that at a 90
per cent confidence of achieving it which added several years
to the schedule provided by the contractor.
422. On the question of taking the programme
forward, what lessons have you learned from the problems that
were associated last year in accepting ASRAAM?
(Lord Bach) As I understand it, we have used in our
negotiations with the company on Meteor much that we picked up
from the difficulties that this Committee has discussed concerning
ASRAAM, which I am very happy to say are now something of the
past and ASRAAM has moved on very well during the course of the
last few months, so we have learned from that. In particular,
Sir Robert?
(Sir Robert Walmsley) Two particular points, first
of all we need to set very clear acceptance criteria. The ASRAAM
arguments went on and on because we said to the company you are
not complying with the contract and they said to us yes we are.
There was an ambiguity buried in the contract which sounds trivial
about the way we modelled various aspects of missile performance.
The first thing to say is be very clear about the acceptance criteria
before we go on to the programme. The second thing which is a
much softer issue (but I think almost more important) is that
we need to involve the operational evaluation unit of the Royal
Air Force and their pilots very early to give us real feedback
as to what it feels like to the pilot to be armed with this missile.
There are a number of issues that came out of that.
Chairman
423. We have one question on Nimrod MRA4. We
will have to write to you, Minister, there are so many questions
we have to ask you and we need to spend the next 15 minutes talking
about ammunition, and then we will have to move on to make sure
Mr Coles' presence here was worthwhile.
(Mr Coles) I am quite happy to defer!
Chairman: I am sure he would like to be silent
but we are going to get him before he leaves.
Mr Howarth
424. Gentlemen, why have you reduced the number
of Nimrod MRA4 fleet needed from 21 to 18 aircraft? Do you believe
that will make it easier for BAE Systems to bring the programme
back on track? What will you do with the £360 million that
apparently you are going to save on running costs as a result
of this cut-back? Perhaps you will let us know what procurement
costs you are going to save as well.
(Lord Bach) Procurement costs are roughly a £50
million saving.
425. Why are you reducing from 21 to 18?
(Lord Bach) We are reducing because we think that
is the capability that is necessary now, for two particular reasons.
Firstly, there are fewer submarines in the Atlantic ocean than
there used to be in the days of the Cold War and we think because
of that the task that Nimrod will perform is not as difficult
as the task that Nimrod would have performed if the Cold War were
still on and the Atlantic was teaming with submarines. Secondly,
because of the capabilities of Nimrod itself, we think that it
can do the tasks that we feel it is necessary for it to do with
fewer aircraft than the 21 that were originally proposed. Jock
might want to add to that.
(Air Marshal Sir Jock Stirrup) Our experience as the
programme has gone on is that the availability of the aircraft
is likely to be higher than we had first anticipated so we will
be able to generate more operational capability from a given fleet
so a slightly smaller fleet should enable us to generate the required
capability in terms of aircraft in the air.
426. In other words, you are impressed that
its performance looks like exceeding that which you originally
expected?
(Air Marshal Sir Jock Stirrup) We have always been
enthusiastic about the capability that the aircraft would deliver.
We have just been very anxious to see it delivered.
Chairman: More to follow but through Consignia
or whatever it is called. Some questions now on ammunition.
Mr Jones
427. The previous Committee did a report on
the closure of Royal Ordinance Bishopton and the effect on United
Kingdom capacity for the manufacturing of ammunition. Can I ask
three questions and I will ask them altogether. First of all,
what role does the MoD have in monitoring or approving the rationalisations
that are taking place and have taken place since then? What would
the effects be of the potential closure of RAF Bridgewater on
the supply of high explosives and where would we actually procure
them from? The final question is related to the partnership agreement
between the MoD and Royal Ordinance which was to indicate to Royal
Ordinance the needs of the MoD. Has it not, in fact, just led
to the Royal Ordinance (or BAE Systems, their owners) being able
to decide which plants they wish to close over a period of time?
(Lord Bach) Let me try and answer those parts of the
question I can. As you know, Mr Jones, I have taken quite a personal
interest in Royal Ordinance since arriving at the Department and
since these matters came into the public arena again a few months
ago. Of course, we are kept informed about Royal Ordinance's decisions
in relation to plants, but we are not involved in any direct sense
in the review nor do we play any part in the commercial decisions
that they take and that was what was written into the partnership
agreement in 1999. That is the answer to your first question.
428. I will come back with one supplementary.
(Lord Bach) Secondly, of course, it is very reassuring,
and must be to you in particular, the recent decision that has
been taken as a result of an agreement between the trade unions
and Royal Ordinance as far as the Berkeley plant is concerned.
I think that does show that Royal Ordinance is not just in the
business, as I think may have been suggested by part of your question,
of closing down plant after plant after plant.
429. Can I come back on that. Yes, that is obviously
good news but I would not hold my breath to wait to see whether
the investment promised by BA Systems materialises. I understand
that the unions were told last week that they have got to get
on to their MPs to lobby the MoD to ensure that they get the orders
and supply they need. What is going on here? If we have got this
agreement in which you have quite clearly laid out what your needs
are, why should BAE Systems be thinking they are not clear on
what your needs are, or is it just a bit of spin from BAE Systems
to cover the fact they are going to close places like Berkeley?
(Lord Bach) I have done my best not to duck questions
but I really think that is a question for BAE Systems and perhaps
for the trade unions. I have tried to explain what our relationship
is.
430. In your mind is it quite clear that BAE
Systems know what the future requirements are of the MoD?
(Lord Bach) Yes I think so.
(Sir Robert Walmsley) It is some years since we drew
up the partnership agreement. It involved a range of requirements.
We did not specify 200,321 shells, but we said there would be
a requirement within a certain range. The importance of that,
of course, was to set the price for pieces of ammunition and having
set that price and given a long term agreement they were then
able to invest. The first thing I would say to your third question,
which I know is jumping the gun a little, is what this partnership
has done is given the RO the possibility of a real future. They
have never had a long term contract before and they said to us,
"If we can have a long term contract with you, we can invest
in our facilities and if we can invest then we can export and
that way we have a business." It was the first big partnership
deal put together. I think it is very good for both parties. Of
course they want to know whether they are going to come in within
the range and of course they want to pressurise us to order at
the top of the range not the bottom, but we will do what is right
for the MoD within the terms of the partnership agreement.
431. For once I will have to agree with you,
Sir Robert. From the MoD's point of view you think the partnership
agreement in place as it is should be able to give a long-term
future for the ammunitions manufacturers in Royal Ordinance in
the United Kingdom?
(Lord Bach) If I may just follow on, before Sir Robert
comes back on that. We do not think there would have been any
future for the Royal Ordinance in the United Kingdom if we had
not entered into such an agreement or something like it towards
the end of 1999. We think the position was that bad.
(Sir Robert Walmsley) They told us that.
432. They were crying wolf a little bit?
(Sir Robert Walmsley) I do not think it was crying
wolf.
433. If they are crying wolf now, they are crying
wolf too often?
(Sir Robert Walmsley) That is just life. The over
capacity in the ammunitions industry around the world is a problem
for every country that takes defence seriously. The way you manage
past that, including national partnership agreements, and in some
cases government-funded factories or government-owned factories,
can lead to them paying far too much to maintain employment which
is effectively a tax on defence if you do not get this right.
We think we have got this right.
434. Can I have an answer to the question about
the high explosives and Bridgewater.
(Lord Bach) Can I try and give an answer to that.
As we understand it, the company's factory at Bridgewater which,
as you say, manufactures high explosives, has been running at
a loss for several years. As you know, we are committed to the
introduction of insensitive munitions. In response to the fact
that is MoD policy, the company are proposing to introduce the
appropriate technology based at their Glascoed plant. With a name
like mine I ought to be able to pronounce a word like that! So
it has argued the case for the retention of Bridgewater. As I
understand it, the trade unions proposed to the company Bridgewater
as a site of this investment in insensitive munitions policy and
as a consequence of that proposal discussions are still continuing
with a result not due until June. That is really as we understand
the position at the present time, but I emphasise that these decisions
are not for us.
435. I appreciate the point you are making there.
If Bridgewater does close I understand BAE Systems have acquired
quite a large outfit in the United States in Tennessee. Would
you have any problems in this type of equipment supplied from
Tennessee?
(Lord Bach) I do not know the actual answer to that
but I would imagine the answer would be probably not.
(Sir Robert Walmsley) With the sole qualification
that it would have to be offered at a good price because this
issue of security of supply very much depends on a diversity of
sources. I would feel very uncomfortable if we were uniquely dependent
on any offshore source of supply. I am not at all uncomfortable
if I can depend on 11 sources of supply, which was the case the
last time I looked at missile propellant. Keeping an overview
of the world's supplier situation is a very important part of
the MoD's approach to this problem. Striking agreements with the
governments in which these supply capabilities are resident is
another part of it and we are doing that. We have got agreement
with the United States on security of supply which we are beginning
to mature. We are maturing an agreement with five other nations
in Europe. That is all part of the equation but I like diversity.
That is why I like to know there are lots of places in the world
that can provide us with this stuff.
Mr Crausby
436. Three years ago when our predecessor Committee
examined ammunition supply they were told that the MoD were "validating
the assumptions" underlying your calculations of war stock
levels. Have you brought that to a conclusion? What was the result?
Most importantly, does the MoD now hold sufficient ammunitions
stocks against its war stock requirements?
(Lord Bach) The answer to the last question is yes
we do, we do hold sufficient stocks. As far as your first question
is concerned, as far as that review is concerned, frankly, I am
ignorant, I do not know the answer to that question. I do not
know whether any of my colleagues know but we will certainly write
to the Committee with the answer. I am sorry we do not have the
answer to that.
Chairman
437. Because we had some difficulties when we
did the inquiry on the Bishopton closure—
(Lord Bach)—Which I read.
438. We have five minutes. You are obviously
having lunch with somebody, Minister.
(Lord Bach) No, is that an offer?
Chairman: We just have a few minutes.
Rachel Squire
439. Can I say I think myself and some of my
colleagues would certainly be happy to offer the Minister lunch
if he gave us the Warship Support Modernisation Initiative.
(Lord Bach) Sorry, I am doing something else!
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