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Written Ministerial Statements Monday 8 September 2003

DEFENCE

Trident Programme

The Secretary of State for Defence (Mr. Geoffrey Hoon): The current estimate of the total acquisition cost of the Trident programme, with payments already made expressed at the prices and exchange rates actually incurred and future spend at the current financial year exchange rate (the hybrid) estimate, is now £9,803 million. Leaving aside the effects of price inflation and exchange rate variation (+£1 million), there has been a real cost increase of £2 million. Expenditure on the Trident acquisition programme to 30 September 2002 represented over 99 per cent. of the total estimate. If all expenditure, past and projected, is brought up to this current year's economic conditions (the non-hybrid estimate) the estimate is £14,913 million.

The programme continues to show an overall reduction in real terms on its original 1982 estimate. This reduction, including the savings resulting from the decision to process missiles at the United States facility at Kings Bay, Georgia, now stands at over £3.6 billion at current prices.

The proportion of the estimate for work undertaken in the United Kingdom continues to be around 70 per cent.

Our four in-service Vanguard Class submarines are successfully maintaining continuous at-sea deterrence, with HMS Vanguard now undergoing a planned major overhaul.

Estimate Table    £million

US UKTOTAL
Hybrid
Previous estimate (2002) at 2001–02 economic conditions (£1:$1.46)2,884 6,9169,800
Real changes0+2+2
Price inflation on unspent balance000
Exchange rate variation on unspent balance+1+1
Revised estimate at 2002–03 economic conditions (£1:$1.39)2,885 6,9189,803
Non-hybrid,
Previous estimate (2002) at 2001–02 economic conditions4,05910,318 14,377
Real changes0+2+2
Price inflation+69+258+327
Exchange rate variation+208+208
Revised estimate at 2000–01 economic conditions (£1:$1.39) 4,33610,57814,913

Note:Figures rounded to nearest £ million hence any apparent imbalances.


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Iraq

The Secretary of State for Defence (Mr. Geoffrey Hoon): Real progress has been made in Iraq over the last few months. Coalition forces continue to support Iraqi leaders both nationally and at the local level. Political progress has been made, with the increasing effectiveness of the Iraqi Governing Council and the recent appointment of Iraqi departmental Ministers. We now seek to accelerate progress in other areas, including enhanced security across the country, and the reliable provision of basic utilities.

In the light of the evolving security situation in Iraq and the increasing military tasks arising out of the reconstruction efforts in the south of the country, the UK Divisional Commander in theatre has been conducting a formal review of UK forces and resources in Iraq. While the full scale of the requirement, which will be largely driven by initiatives of the Coalition Provisional Authority and the Department for International Development (DFID) to accelerate reconstruction activities in Iraq, has yet to be fully developed, there is an immediate requirement for two battalions and some additional specialist personnel, vehicles and equipment to allow him to fulfil the expanding range of tasks for UK forces in Multinational Division (South East) (MND(SE)).

Accordingly, we are deploying to Iraq the balance of 2nd Battalion The Light Infantry a company of which is already in theatre. This battalion will be involved in supporting current operations, and in offering additional protection to the Coalition Provisional Authority. They are currently based in Cyprus and were already identified as an "Over the Horizon Reserve" for Iraq. Their role in Cyprus will be filled by two batteries from 16 Regiment Royal Artillery.

In addition, 1st Battalion The Royal Green Jackets (1 RGJ) will deploy to Iraq immediately supported by some specialist personnel and equipment. This deployment will enable MND(SE) to increase force protection, accelerate training of the Iraqi Civil Defence Corps and to improve our information gathering capability in MND(SE). 1 RGJ are currently designated the Spearhead Land Element, are already at high readiness, and are therefore the most appropriate unit to call upon. They will be replaced as Spearhead Land Element by 42 Commando Royal Marines.

We plan to maintain the deployment of these units until around November, providing an interim additional capability to our commanders in theatre. Additional units would deploy to replace them in theatre if the requirement remained. We plan for some of the roles progressively to be conducted by Iraqi personnel.

In addition to the requirements that we have already fully identified, we anticipate additional tasks in the near future which will require military resources, in particular the provision of military support to critical infrastructure work planned by CPA(S) and DFID. This work will deliver a more stable power supply, improve fuel availability and significantly improve the delivery of water services to all sectors of the population in the MND(SE) area. The military capabilities needed will be identified as the detail of the plan's

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implementation takes shape. We will immediately take steps to identify and reduce notice to move for some additional headquarters and units, to allow further deployments as rapidly as possible in response to this accelerating programme of work.

These measures will give extra capabilities to our commanders in theatre, allowing them to increase their proactive efforts to improve wider security across the region, and allowing them to support the essential reconstruction and regeneration efforts in their area of operations. The commitment of the United Kingdom and its Armed Forces to Iraq remains undeterred by recent events. We are determined to help the Iraqi people to forge a new, peaceful and secure future for themselves and we will meet this commitment with appropriate forces in Iraq for as long as required, and no longer.

TREASURY

Double Taxation Convention (Australia)

The Paymaster General (Dawn Primarolo): A new comprehensive Double Taxation Convention with Australia (which will replace the existing Agreement) was signed on 21 August 2003. After signature, the text of the Convention was deposited in the Libraries of both Houses and made available on the Inland Revenue's website. The text of the Convention has been scheduled to a draft Order in Council and is today being laid before the House of Commons.

2001 Census: Key Statistics for Health Areas

The Economic Secretary to the Treasury (John Healey): : The report "Key Statistics for health areas in England and Wales", containing results from the 2001 Census, was laid before Parliament and published on 31 July 2003.

This report contains results from the 2001 Census for the areas covered by the 26 Strategic Health Authorities, over 300 Primary Care Trusts in England and the 22 Local Health Boards in Wales. The tables present similar information to that previously published for local authorities on 13 February 2003 and for wards on 30 June 2003. The data are also available on the Neighbourhood Statistics section of the National Statistics website.

Central Government Fees and Charges Recovery Policy

The Chief Secretary to the Treasury (Mr. Paul Boateng): : The Treasury has reviewed the normal recovery policy for services where fees and charges are set by central government. The Treasury has concluded that the cost of capital rate in fees and charges where the norm is full cost recovery (and in appropriate exceptions from the norm) should be reduced from 6 to 3.5 per cent. in real terms (keeping parity with the reduction in the discount rate for appraisal and evaluation of projects in central government and with the cost of capital in government resource accounts and budgets). For commercial services where there is or may be private sector competition, and a profit may be appropriate in the interests of fair competition, the required rate of return of at least 8 per cent. in real terms has been

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replaced with an illustrative range starting with 5.5 per cent. Departments will need to make their own assessment of the appropriate rate of return for commercial services, but the rate is expected to fall in a range 5.5 per cent. to 15 per cent. in real terms (pre-tax), depending on factors such as the level of risk. In practice, the upper end of the range will rarely be used, as it is unusual for public sector bodies to engage in such high-risk activities.

The revised policy applies to central government departments, including agencies and Trading Funds, NHS Trusts and other NHS bodies and appropriate non-departmental public bodies. It will be used in determining fees and charges in the next Fees Order to be presented, or the equivalent point for commercial or other charges. Where a consequent change in fees and charges is required, it should be effective no later than 1 April 2004. This timetable should allow for consultation about the new fee levels where the legislation or customary procedure provides for consultation. However, the words "used in determining fees and charges" have been used advisedly. Capital is often a relatively small factor in total costs and the effect may be rather to moderate the increase to statutory fees arising from changes to other costs rather than to reduce fees. There may also be services which are intended to recover full costs, but have not been achieving this objective and may therefore continue to experience increased fees and charges; or commercial services where the price charged in a competitive market may already be consistent with the revised policy and therefore require no reduction. The purpose of the revised policy is to put the cost of, and return on, capital on to a more current basis, not to make reductions in fees and charges unless they flow naturally from the revised policy (or unless there are other good reasons for a reduction such as a fall in other costs).

As a consequence-of the revised policy on fees and charges, the financial objectives of Government Trading Funds (the required rates of return) will also be reviewed. They will be adjusted where necessary by laying a Treasury Minute under the Government Trading Funds Act 1973 before the House during the financial year 2003–04. Trading Funds undertake a wide range of charging activities—statutory, commercial, inter- departmental or a mix of those. The further financial objective will therefore need to be determined individually for each Fund.


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