Examination of Witnesses (Questions 280
- 299)
WEDNESDAY 25 JUNE 2003
LORD BACH,
SIR PETER
SPENCER KCB AND
LIEUTENANT GENERAL
ROB FULTON
Q280 Chairman: We would approve even
more, Minister, if at least one member of the Committee is invited
to the great ceremony you have been referring to!
Sir Peter Spencer: Invitations
are on their way.
Lord Bach: Chairman, it is much
too early to complain about that! There is a whole five days to
go.
Q281 Chairman: Well, I hope there
will be an invitation winging its way, not to me because I shall
be in Moscow. Sir Peter?
Sir Peter Spencer: This is pretty
well trodden ground, Chairman, as you know, but we simply would
not do it like this today. If you look back, at the time we were
faced with a hugely expensive programme which no European nation
felt able to fund independently. Therefore, the compelling need
was for one or more partners to share the non-recurring costs
of investment, and we were deeply locked into the principle of
juste retour with all of the inefficiencies that that brings
with replicating, and in this case quadrupling, various industrial
supply chains. All of that makes life very complicated and very
inefficient. The decision-making is unbelievably complicated,
as I discovered from the first couple of meetings that I attended,
and there is no doubt that one of the things which we will be
trying to do at the National Armament Director level, closely
involved with the chief executives of the major companies involved,
is to identify arrangements within industry that they could cope
with which we would then put forward for a political judgment
as to what extent we might be able to adapt this process to make
it less inefficient. Nobody defends the status quo, but it is
extremely difficult to change it completely without injecting
a hugely damaging delay into the programme. I have to say that
we have identified one or two areas, which I could not go into
publicly now, where I believe that industry is being very imaginative
and sensible in what it believes it might be able to deliver,
but I cannot take for granted what the positions in the four governments
might be if this were seen to be inconsistent with the juste
retour arrangements which are in place at the moment.
Q282 Chairman: I would like to spend
a little time on Iraq. We are now deep into our inquiry on the
lessons of Iraq and it would be premature of us all or your Department
to rush to judge them, but one of the things it seemed patently
obvious to us and to anyone who listens to the radio or watches
television was that the concept of just-in-time was a little Utopian.
As a good constituency Member, I visited Rover, and as a regular
purchaser of their cars, I was told with enthusiasm some years
ago of how they had moved into just-in-time and seeing vehicles
pulling up outside Longbridge, just-in-time for the workforce
to get cracking was fine, but it was pretty obvious that the operation
of just-in-time in a war requires a number of essential component
parts, not just having someone to deliver it, but actually delivering
it. When we were in Fallingbostel yesterday, we were told that
they are still having some of their kit sent on to them in Fallingbostel,
not having arrived in time for them when they were actually fighting
the war in the Gulf. I really would like your preliminary observations
because obviously a lot more needs to be done. We are having some
people in this afternoon and we met Sir Malcolm Pledger before
the war started, so it is not that we have suddenly alighted on
this problem. In fairness, I must say, my own conclusion is that
the kit which was delivered was excellent, the Challenger 2, a
superb tank, and a lot of very positive things were used by our
Armed Forces, but clearly the system of delivering ammunition,
boots, body armour, desert clothing, food—
Mr Cran: Medical equipment.
Chairman— Medical equipment, et
cetera, et cetera, was less than adequate, putting it at its mildest.
Really what I would like to ask you at this stage is this: is
the just-in-time approach really fitting for today's conflicts
and, secondly, because you might want to roll this question into
the other, what are we going to do to improve asset tracking?
We have heard endless stories in our inquiry so far of quartermasters
running around, grabbing kit, asking, "Where are my X, Y
and Z?", though that, I am sure, was not quite the phraseology
that they used. We were told that kit arrived, but they did not
know where or where the ship was delivering the parts and the
result was an unseemly scramble for certain types of equipment
which was not only unedifying, but really unhelpful to military
personnel having a difficult job of fighting the war in very difficult
circumstances. So essentially the two parts, just-in-time, is
it okay, has it worked so far, and, secondly, what are we going
to do to improve upon asset tracking?
Lord Bach: Thank you for those
not unexpected questions. Of course the lessons-learned process
that I have talked about a lot this morning will be crucial and
much more important actually than the answers I give to you. We
are receiving as we speak of course lots of information from theatre,
from the soldiers who have returned, and you are seeing General
Brims, I think, this afternoon about these matters, all anecdotes,
but that does not mean to say of course that they are not important,
but we must not, I believe, either the Committee, if I may say
so, or us, rush to any kind of conclusive judgments before we
have seen the lessons learned, but your questions are very fair,
if I may say so. The actual deployment was a fantastically impressive
logistical achievement. This is a force of 46,000 personnel. The
ships, aircraft, armoured vehicles and supporting equipment together
with the clothing, accommodation, medical and food supplies were
moved over almost 3,500 miles in half the time. It is about the
same amount of stuff being moved in half the time taken in the
first Gulf War. The major investment that we have made in strategic
airlift has borne great fruit, the heavy use of the C-17 aircraft
and the Ro-Ros that were mentioned earlier. You are right to say
we will have to focus on the distribution of stock in theatre
and although these are preliminary thoughts, no more than that,
that is what you asked me for, I think it is clear that we will
have to look to see whether the just-in-time policy is sufficiently
robust for the situation we find ourselves in these days. The
Strategic Defence Review set that policy, holding those items
that could not be procured within preparation time for likely
contingency operations. That meant enough personal equipment to
equip both the Joint Rapid Reaction Force and the spearhead battalion,
which I believe is about 9,000 personnel, for desert operations.
We will have to review whether that policy is sufficiently robust
in light of the operation in Iraq. You know the other side of
the argument well, Chairman, but it can be uneconomic and inefficient
to try and buy and maintain sufficient equipment for every imaginable
contingency. Whether we have the balance right or not I think
is one of the most important lessons that we will have to learn.
Your second question is equally important. As I say, sufficient
stocks were ordered and sufficient stocks seem to have arrived
and I think that is very important given the time lines and all
the rest of it. What we have to look at very carefully is, first
of all, whether equipment in theatre was distributed with the
greatest possible efficiency and crucial to that is your point
about asset tracking, and there we will have to be a review of
whether asset tracking is sufficient and it may well be that we
will have to make changes as far as that is concerned. One thing
is clear, we are not going to hide away any of the things that
went wrong. We are going to analyse them and take whatever action
we need to take. We should not forget that this was actually a
brilliantly conducted military exercise by our Armed Forces and
that includes the logistics side of it as well. I am very grateful
for what you said about the equipment side of it because undoubtedly
our equipment worked extraordinarily well. I hope I can be forgiven
for saying that some of those items of equipment that we were
being blasted about for months and years before Operation TELIC,
such as Challenger 2, AS90, SA80, turned out not to be right.
It has been around 90% success availability as far as they are
concerned, which is a very high percentage indeed and we are delighted
about that and I think our Armed Forces are delighted about that.
I cannot stop without mentioning the success of TLAM generally
but Storm Shadow in particular. Chairman, you know that sometimes
ministers have to keep their mouths shut and I had to keep my
mouth shut when it was said a few weeks before Operation TELIC,
"Why is Storm Shadow not going to be used in this campaign?
It's outrageous that it's not there to be used in this campaign."
Well, it was used in this campaign and it was used incredibly
successfully and we should be very proud of it and proud of those
companies that produced a lot of UORs and produced this equipment
so that our Armed Forces could have what I actually consider to
be world beating equipment.
Chairman: Minister, thank you very much.
I did say preliminary observations. You can take it from us that
we are canvassing very wide views in our inquiry and we would
not be so foolish as to take one soldier's word for it. Soldiers
are known for their enthusiasm for complaining, this is what being
a soldier is. I represent the regiment in Staffordshire and I
know only too well how forceful my constituents and their sons
and daughters in the military are in expressing their concern.
We would not be so foolish as to take a few anecdotal stories
and create something more general, but when we produce our report
we will not be reticent about showing where things went wrong
and we will be very enthusiastic to show where they went right.
The danger in any Select Committee is taking as a given the things
have gone right and focusing on those things that have not and
our good friends in the media are then able to make light and
make fun of where the failures were. I think it is pretty obvious
from our studies so far that just-in-time and those things that
went missing or those things that did not arrive or arrived too
late need to have the attention that you are giving, I am absolutely
certain about that. It is not just a question of ourselves raising
this issue, you have enough internal information to know already
where the system was imperfect.
Q283 Mr Cran: You said, and I would
have expected you to say nothing else, that you are going to review
just-in-time and so on. I would like to know what the nature of
that review is and how long you foresee this taking?
Lord Bach: Again, I am in danger
here of prejudging what the learned lessons published report will
say, but if that is what we find, that we need to look carefully
again at just-in-time and look at asset tracking, you can be sure
that we will be looking at it very quickly.
Q284 Mr Cran: When is this report
going to be available?
Lord Bach: The lessons learned
process is in two parts: there will be a published document this
side of the recess with preliminary findings on it, which will
of course touch on the matters that the Chairman has been asking
me about; and then there will be a more longer-term report, again
published, probably to emerge in the autumn, which will give you
more detail on these matters.
Q285 Jim Knight: I would say in passing
that in some ways there is a difference between co-operation and
collaboration. I also think there is a difference between lessons
learned and lessons identified. I think it is appropriate for
the Department to identify lessons and then review in a little
while whether they have learnt from them and that is something
we may comment on when we produce our report. I have a concern
about the flexibility of just-in-time in particular. It is dependant
upon assumptions by definition and those assumptions in theory
may prove to be false. For example, the guys in the tanks that
we saw yesterday told us how they virtually ran out of HESH rounds
and if they had got bogged down in Basra they simply do not know
where they would have got the HESH rounds that they needed. The
assumption was that they would be engaged in tank battles and
would need the DU rounds rather than the HESH rounds. That was
a good example to me of a flexibility problem. Similarly, there
were security of supply problems. I would ask you whether you
are looking at some of these issues. We have heard about the hand
grenades which are procured from the Swiss and the Swiss being
reluctant to let them go if they are going to be used in a war.
That seems completely bizarre to me in that why else would you
want to have a hand grenade. Similarly, the desert clothing having
to be procured from Indonesia or Bolivia because we do not have
any capability to manufacturer that here ourselves. Does that
lack of flexibility both in terms of assumptions and in terms
of supply not create some concerns for you?
Lord Bach: The answer to Mr Knight's
question is yes, yes, yes, it does. We have to look at these issues
but on a realistic basis. There were very tight time lines. What
was essential is that we got the equipment—and it is personal
equipment as well as the larger equipment—out to theatre
as quickly as we possibly could, and whether we did as well as
we could or not is one of those crucial matters that we will have
to identify and you will decide in due course whether we have
learnt from that or not. This gives me the chance to say a word
about Urgent Operational Requirements which were absolutely crucial
in making sure that our Armed Forces were properly protected and
looked after in the Gulf. I want to pay tribute to industry, largely
British but not altogether British, who really reacted in a fantastic
way, as they always do to emergencies of this kind and provided
us with what our Armed Forces needed. They did a brilliant job.
I had some personal responsibility for this within the Department
and had weekly meetings in which we looked at the UORs as they
were developing and I think it worked pretty well.
Q286 Chairman: I would like to talk
briefly about the ITAR waiver. Open your briefing books.
Lord Bach: I almost do not have
to for the ITAR waiver.
Chairman: The range of questions within
your responsibility is such that I think it is far better if you
have the official version than adlibbing, which you would not
do as a very competent barrister anyway.
Q287 Mr Howarth: ITAR, the International
Trade in Arms Regulations, the United States requirements for
which we are seeking waivers. Can I just take you back to the
two agreements that will inform this area of reciprocity in sharing
technology. There is the Six Nation Framework Agreement between
the UK, France, Germany, Spain, Italy and Sweden which was ratified
in February 2001 and the Declaration of Principles between the
UK and United States signed in February 2000. Both of these were
designed to open up the access to technology between the signatories.
When we explored these issues with the representatives of industry
who came to see us last month, they were dismissive of the poor
level of progress on both documents and certainly agreed with
us that the UK/US Declaration of Principles had given little or
no help in opening up the United States market to the UK. A lot
of the failures to implement the initiatives that were set out
in these two documents show that such a well meaning foundation
for this policy is unrealistic.
Lord Bach: I think both documents
are important and I think there has been some progress on both,
but, if you press me, I do not think there has been enough progress
on both. The test is what actually happens in practice. Although
there have been annexes and such like signed, for example the
Declaration of Principles, what the industrialists know and what
we know as well is that the present relationship in the field
of defence industry and the transfer of technology, of data and
of equipment is still deeply unsatisfactory. It is because we
work so closely with our American allies in such an intimate way
on intelligence operations that it almost stands out starkly that
as far as defence industrial relations are concerned there is
somehow a process by which we are still treated as though we are
any other country in the world. We think that is unsatisfactory,
I believe the Administration think that is unsatisfactory and
I think they and us are determined to do something about it. Obviously
I cannot speak for them but I can speak for the British Government
and say that we are absolutely determined to ensure that there
is a more satisfactory relationship between the United States
and us in this absolutely vital field and a lot of work is going
on in this field at the present time. We all know that in the
last few weeks there have been statements from very respected
members of Congress about these matters and we have taken those
remarks very seriously indeed. We have every reason to believe,
particularly because of our negotiations on the ITAR waiver with
the Administration—and you will know that we have come to
a satisfactory conclusion as far as the two governments are concerned
about a waiver as far as the UK is concerned—that we are
going to make progress in this field. I think the Americans are
open to progress being made in this field.
Q288 Mr Howarth: Yes, but is it not
the case that the ITAR waivers relate only to unclassified material?
Lord Bach: Yes, it is.
Q289 Mr Howarth: That does not really
deal with what we know to be the principal issue at stake. I pay
tribute to you for what you have done in beating this particular
drum in Washington, but unless we get access to some of the more
classified material these ITAR waivers are not only going to be
rather meaningless but also will face the risk of freezing out
some of our smaller companies who will not sign up because the
penalty for being in breach, namely being in receipt of UK technology
and exporting it beyond the shores of the UK and elsewhere, will
be so onerous that these small companies are not going to sign
up. You will have the prime contractors signing up but the smaller
companies will be excluded, so they might be excluded from access
to a number of American projects. Is this really worth the candle?
Lord Bach: I am convinced that
it is worth the candle. We have been working on this for a long
long time and to desist from it now would be a serious mistake.
I do know of the concerns that SMEs have in this field and I hope
we will be able to cater for those in due course. It seems to
me that if an ITAR waiver is agreed and the changes that need
to be made in Congress for this to happen are carried through
it will do a huge amount to set the ball rolling to some extent
in this field, it will do a great amount for US/British relations
too in this field. Thank you for the compliment you paid me, but
I have to say, it is much broader and much more senior than I
who have been involved in this particular attempt and we are also
grateful for the way in which we have had cross-party support
for what we are trying to do in terms of this relationship. I
think the ITAR waiver, limited though it is, I accept that, is
an important start to establishing a more satisfactory relationship.
Q290 Mr Howarth: That is the question.
It is essentially just a start, is it not, because we all know
that there are difficulties on the Joint Strike Fighter that go
beyond the ITARs and have to do with the technology access agreements.
Do you share the concerns that industry has on those issues? Do
you not think that our friends in the United States need to be
told in words of one syllable that without the support of the
UK on Iraq they would have been friendless and the least they
can do is to produce some kind of dividend for the British Government
in the form of sharing some information with their number one
ally otherwise what is the point?
Lord Bach: Of course I share the
concerns of industry in this regard and I have expressed them
publicly in front of members of the American administration and
I will continue to do so, and I think they have been taken on
board. I do not see this as some kind of reward for being loyal
allies to the Americans in Iraq or anywhere else. I think the
matters we are talking about should happen anyway because of our
close relationship with the United States in other fields connected
with defence and foreign policy, not as some dividend or reward
for being good boys but because it is the right way, both the
ITAR waiver and anything else that develops from it, and it will
actually assist the United States in their long-term defence industrial
strategy.
Q291 Mr Howarth: What would you say
would be the benefit to us if we get this ITAR waiver given it
covers 80% of technology but not the most important bit?
Lord Bach: I think in itself unclassified
US origin defence products bought by the Ministry of Defence will
not be subject to the United States licensing delays, the equipment
that we buy will no longer be subject to the vagaries of the licensing
process. Companies with a significant presence in the US and the
UK will be able to transfer material and technology between these
component parts without licensing. It is absurd that we cannot
do that at the present time. US companies will be able to deal
more freely with qualified UK companies and UK companies will
be able to bid into US defence programmes more readily. Those
are five advantages from obtaining an ITAR waiver. I think there
are advantages to the United States as well if I may say so. I
think it will strengthen their export controls because we will
be carrying out new checks on their behalf for items that are
transferred to the UK. It will improve co-ordination and co-operation
on export control policy and implementation between our two countries.
I think it is, to use the jargon that I have learnt since coming
to the MoD, potentially a win-win situation for both countries.
Q292 Mr Howarth: I am glad you are
that optimistic. I wish I could share it. I hope that you will
be proved right and my doubts will be proved unfounded. You do
believe, do you, that their concerns were genuinely to prevent
the leaking out of defence technology from the UK to elsewhere
and it was not just an attempt to protect American industry that
formed the basis of their reluctance?
Lord Bach: Who am I to even begin
to try and work out what motives there were?
Q293 Mr Howarth: Privately, within
these four walls, just share with us your thoughts.
Lord Bach: Alright, just for you.
I think motives are usually mixed, some good, some not so good.
Q294 Mr Howarth: Let us leave aside
the ITAR waiver. The Declaration of Principles which itself was
an acceptance by the United States that they needed to do more
to open up their markets to us, do you think that they are doing
that? Do you think they have honoured their commitment in the
declaration? We do have some examples where it does not appear
that they have fulfilled their commitment to treat UK companies
as favourably as the UK treats US firms here. Examples are the
Shorts Missiles, High Velocity Missile and the BROACH dual warhead
used in the Storm Shadow. How does this square with the principles
that they signed up to?
Lord Bach: I do not think there
has been sufficient progress. This was signed by the last Administration,
of course, but I do not think this Administration, who I think
have been equally if not more helpful in terms of the things we
have been talking about this morning, ever thought that these
things would move forward as quickly as we thought they might,
but I think there has been some progress and there is progress
as we speak. The last thing I want to do is to stall that progress
by criticising where it would not be right to do so. What I want
to see is a lowering of the barriers and a lowering of the barriers
pretty quickly both to the British and the American advantage.[4]
Q295 Mr Howarth: Finally, Minister,
what is the rationale for setting up the Defence Export and Market
Access Forum trailed in your joint policy paper with the DTI?
Does it add anything to what DESO, the Defence Export Services
Organisation, is already doing?
Lord Bach: Yes, I think it does.
It is in its very early days and has met once or twice. I think
it is very important that in the vexed field of defence exports—as
you know, the Government supports legitimate defence exports—these
decisions are discussed and made across government, it is not
just the Ministry of Defence's responsibility or any other department's
responsibility, but there is an opportunity to consider these
matters. Also, I think industry's connection with the forum is
also important because if the whole of Government does not learn
what industry requires and wants and discusses it with us then
I think that is an unsatisfactory position. Let us give the forum
a chance to prove itself. I think it is much too early to make
a final judgment on it yet.
Q296 Mr Howarth: Will that forum
have any bearing on the ownership of British defence contractors?
Will it have any consideration of issues like the ownership of
BAE Systems?
Lord Bach: This is an export forum.
I do not think so, no.
Q297 Mr Howarth: BAE Systems has
a big export market.
Lord Bach: Of course, yes. I do
not think you are going to get me to say anything more about the
topic you are so subtly raising now.
Q298 Chairman: I think what Mr Howarth
was trying to say was we do not want to export BAE.
Lord Bach: Thank you for explaining
that.
Mr Howarth: I think the Minister would
like to answer the point.
Q299 Chairman: He obviously does
not want to answer. We are watching this pretty carefully. Minister,
on the ITAR waiver, it might be rather undignified for you to
wave the flag, but we are not subject to such pressures of political
correctness. We will be visiting the United States in September
and the subject of our visit is the lessons of Iraq. If the ITAR
waiver problem has not been resolved by then, certainly we will
take full advantage of our meetings with our congressional colleagues
to state the arguments that we find so blatantly obvious. Our
congressional colleagues on armed services, foreign affairs, intelligence,
procurement, the whole range of committees, we are writing to
them and we are arguing very strongly as parliamentarians to parliamentarians
that we expect to be treated rather differently as a nation from
those countries whose indifference to participating with the United
States in any venture has been noted. Certainly, whether you want
it or not, you are getting our support.
Lord Bach: Chairman, we want it.
I am absolutely delighted that the Committee will be going to
Washington and arguing perhaps not just for ITAR waiver but beyond
that as well. I think Congress is pretty crucial in all this and
therefore the relationship between elected members of the House
of Commons and elected members of the American Congress seems
to me to be a pretty natural sort of relationship.
Chairman: Gentlemen, thank you very much.
It has been a long session and a very rewarding one. Thank you
for coming. Watch this space! There will be further communications
between us.
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