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Mr. John Burnett (Torridge and West Devon) (LD): Will not budgetary pressures smooth out the capacity problems?

Mr. Ingram: I am not sure of the precise meaning of the hon. Gentleman's question.

Mr. Burnett: I can try to explain.

Mr. Ingram: Let me try to understand what the hon. Gentleman means, because I want to make progress. The amount invested in the procurement stream must have an impact on it—that is a given. The industry knows that, but it is beginning to realise that the cash register is no longer in place. We will not feed a future overspend in the present, so we must deal with the situation. Is the hon. Gentleman asking for the budget to be increased, and if so, by what amount? [Interruption.] I am only posing the question.

Mr. Burnett: I am asking an entirely sensible question. The shipbuilding consortium talks about a bunching of contracts because of the process of re-fleeting. I am asking whether normal budgetary constraints will smooth out the process.

Mr. Ingram: That would depend on the nature of the proposition when set against the budgets, which is what is being discussed. I accept the premise on which I thought that the hon. Gentleman's earlier question was based, but budgets must have an impact on the procurement stream. We must get the balance right because we need future capability. We need to be able to ensure that it will exist when we need it, so we need to talk with industry sensibly and openly, but equally it has to talk to us realistically. We are not involved in a one-way process. We are the main purchaser and we keep the shipyards open. As I have said before, if there were no MOD spending in British shipyards, there would be no shipbuilding industry. I am sure that that message has struck home.

We also work closely with industry on research and development in the UK. The MOD spends £2.6 billion per year on research and development, which is comparable with the largest private investor in any sector.

On our acquisitions strategy, I have highlighted the successes of our procurement system and the wide-ranging work to develop our industrial policy, but we cannot let it rest there. In May 2003, we commissioned
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a review of the Defence Procurement Agency's progress in implementing smart acquisition. The review confirmed that the principles of smart acquisition were the right ones, but it also recommended a programme to enhance its application, including new and improved processes. Those focus on project review; financial management; supplier management; and greater joint working with the Defence Logistics Organisation. The changes will be supported by other initiatives, such as the establishment of senior responsible owners for major projects, to strengthen the governance process. We are also increasing the funding provided in early years to de-risk projects where we are working with complex leading-edge technology.

One example of de-risking is FRES, which recently made considerable progress. The assessment phase is gaining momentum and Atkins has been selected as the systems house preferred bidder. The systems house will be independent of any product range or manufacturing capability. Its project management, systems engineering and risk management expertise will provide objectivity and reduce risk early in the programme. In the case of the carriers, we have extended the assessment phase of the programme as part of the process of de-risking it.

Successive National Audit Office reports have endorsed the importance of up-front technology risk reduction. We have taken that message on board. I have set out how we are driving that forward. That is, perhaps, long overdue, and perhaps lessons should have been learned earlier, but we have now taken those messages on board and are driving forward those fundamental changes.

Leadership of the acquisition process, within both the Defence Procurement Agency and the Defence Logistics Organisation, is being driven by the very top of the Department, and all the issues—military, scientific, financial and industrial—involved in acquisition are being addressed. The changes are being managed through a new acquisition policy board chaired by the Minister for Defence Procurement, Lord Bach. The process is part of our overarching structure, which is driving forward major transformation in the way in which we go about our business, from procurement, through logistic support, to a better structured, more flexible and capable front line.

The Government are investing in defence. It is worth repeating that for the third successive spending review we have announced real growth in the defence budget. That is without precedent since the mid-1980s. We are committed to ensuring that that extra funding is spent in the best way and delivers where it can make a difference—at the front line.

I have outlined the three elements of the transformation of procurement that is necessary to deliver the capabilities vital to future military operations. To do that, we must continue to take the right decisions for defence. Those decisions might be hard for some, but are none the less essential. Change and transformation is not an easy process, but the gains it will deliver are what our front-line needs.

In conclusion, do we have a perfect track record on procurement? No, but no Government ever have. Are we getting better? Yes, unquestionably. Are we
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determined to provide the best equipment for our armed forces that we can? Absolutely. The men and women of our armed forces deserve nothing less.

2.13 pm

Mr. Gerald Howarth (Aldershot) (Con): As is my custom, I start on a note of agreement. My hon. Friends and I join the Minister in paying tribute to the courage and professionalism of our armed forces. I am sure that I speak for the whole House when I say that.

I also endorse what the Minister said about some of our equipment. Storm Shadow has performed superbly in Iraq. It was brought into operation early, which speaks volumes for Britain's defence industry and the quality of our scientists and engineers who ensure that such equipment is delivered. We endorse the C-17 as important heavy-lift equipment. We have consistently supported the principle of the two new aircraft carriers. I have said before that I issued a press release welcoming the Government's decision to go for the short take-off and vertical landing variant of the joint strike fighter and to incorporate in the design of the carriers the possibility of retrofitting the catapult. There is common ground, but inevitably there are disagreements.

A recent report stated:

Those are not my words, but the conclusion of the Defence Committee. Its recent report on defence procurement exposed how the Government's procurement process is in almost complete disarray. It is hard to recall when I last read a report by a Committee dominated by Members of Parliament of the governing party that was so overtly critical of the Government, so much so that it led to the extraordinary situation of the Government virtually rejecting the report out of hand. Worse still for the Government, however, is that it was one of a succession of critical reports exposing their inability to get a grip on their procurement process.

The reports follow on from another series of reports on the Government's approach to the equipping of our armed forces for the recent Iraq war. All concluded that there was deficiency in the provision of some kit. I remind the Minister that one of our accusations was sustained by the National Audit Office, which said that there was insufficient kit in theatre. It gave three reasons for that. First, there were insufficient stocks on the shelves. It did not entirely criticise the Government for that because it accepted that it was not possible to keep a vast array of kit on the shelves that may not be required. Secondly, there was difficulty in getting some of the kit into theatre. Again, that involves logistics issues, which we all understand. However, the NAO's third point was that the Government had allowed insufficient time to make up the shortfall of the kit that was not on the shelves. The Government have not been able to defend that serious accusation, which we lay at their door, and we pray in aid the NAO in support of our position.

I must tell the Minister, who speaks on behalf of the Minister for Defence Procurement, that the argument has again surfaced in connection with the court martial that concluded yesterday. It was told that

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That is simply unacceptable. It illustrates the fault at the heart of the Government, not only in equipping our armed forces, but in training them. They did not allow sufficient time for either equipping or training because they were concerned that that would send the message to their Back Benchers that they were preparing for war at the same time as they were negotiating at the United Nations. I am afraid to say that as a result our armed forces were betrayed. Yesterday's verdict in a court martial further confirms the extent of that betrayal.

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