Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 420 - 439)



  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.


  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.


  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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