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Mr. Davidson: The hon. Gentleman says that there are difficult decisions. Will he disown the comments of the Liberal Democrat Lord Garden, who recently said that he wanted the order for aircraft carriers to be placed in the United States and the aircraft carriers to be built in Norfolk, Virginia?

Mr. Breed: I was not aware of that and I hope that the aircraft carriers will be built here. There is every hope that that will happen. However, it would be interesting to examine the cost comparisons so that we understood the issues. Sometimes the definitions of value for money—and the definitions in general—are not sufficiently broad. When I read the report, it took me a while to understand the term "de-risking". I believed that it meant to get rid of risk, but it means risk assessment. Why use "de-risk" to mean risk assessment? I worked in an industry that considered risk and reward all the time. It is not possible to remove all risk but we can try to assess some risk and make cost comparisons.

Mr. Ingram: If the cost comparator said that it was cheaper to build abroad, would that become Liberal policy?

Mr. Breed: Decisions would not be made purely on cost comparisons. We must acknowledge that value for money contains far more elements than the actual cost of building a vessel. If, as I understand it, the life span is 50 years, that will have all sorts of implications for the economy, and so on. There is no reason why we cannot be honest and mature enough to examine how much production might cost in different places, and to consider the benefits.

Such objectives sometimes seem incompatible. I do not believe that they are, but our instinct must be to buy British where possible. Because of globalisation, however, the necessity of joint ventures and the scale of some defence programmes, the international defence industry is shrinking in terms of the number of companies involved, particularly with the capacity to undertake such programmes. With the huge US defence budget and the nationalistic calls from American politicians to buy only American, it will be more difficult to maintain an independent UK defence industry. The
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Government have indicated that they do not consider ownership of a company important provided that it remains based in the UK, with all the employment opportunities and with some safeguards for intellectual property rights. I do not take that view, as I believe that joint ventures as well as mergers and acquisitions provide Trojan horses, which could by stealth appropriate the component parts of our defence industry.

This brings me to the last of my crossroads concerns—research and development, which has been touched on in previous contributions. The Government have rightly indicated that the UK's future economic fortune lies in knowledge-based industries at the heart of which is research and development. There are three vital elements to successful research and development in any field, but they are perhaps most important in defence: a supply of highly intelligent and motivated people; considerable financial resources; and an appropriate Government policy. It is interesting to note from today's newspaper that seven of the top 10 universities in the world are American, and perhaps we ought to congratulate Oxford and Cambridge on being the only two UK universities in the top 10. As regards funding, the vast majority of venture capital funds now available for R and D are located in the USA. And the enormous programme of public expenditure by the US Government provides an attractive background to R and D projects, allied to a most attractive corporate taxation policy to encourage R and D in companies at all levels.

We are rightly concerned about the admissions policy of our universities, and hon. Members have engaged in all kinds of debates recently on that. While we are debating, however, American universities are scouring the world and Europe in particular to offer attractive packages to the very best students, with the prospect of US citizenship at the end. In no way do I present this scenario as an anti-American rant, but as a recognition of the USA's clear, co-ordinated policies to assemble a defence industry that has the capability for significant domination in the foreseeable future. It is therefore vital for us to recognise that our procurement policies will have to take into account those realities. I hope that that gives my view in terms of work that may go out of this country to the USA in particular.

I want to turn to a few current concerns. Mention has already been made of the Astute submarine programme, and especially the delays that have been experienced. I have recently been made aware of the operational vulnerability of our existing Trafalgar class submarines. I understand that HMS Torbay and HMS Tireless have been withdrawn from service and are undergoing further expert assessment at Devonport. I readily pay tribute to the highest safety standards that are adopted at Devonport when dealing with our nuclear-powered submarine fleet. Clearly, safety is of the utmost importance not only to those who sail on those ships but to those who do the work at Devonport. It places inevitable strains on the existing submarine fleet if replacements are delayed, however, and we are likely to experience technological difficulties in ships that are probably among the most complex pieces of machinery in the world today. Increasingly, lengthy delays will be   experienced, exposing some of the problems with   replacements. If the Minister cannot provide
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clarification of the current situation of those two submarines in Devonport in his wind-up, I would be grateful if he could write to me.

As we have indicated previously, we wholeheartedly support the carrier programme and would welcome the Minister's confirmation of the current situation. Reference has already been made to that. In an intervention, my hon. Friend the Member for Hereford (Mr. Keetch) mentioned the Military Afloat Reach and Sustainability project in an attempt to understand the thinking of the MOD in respect of the MARS and carrier programmes, as it appears that they are inextricably linked. If our warship yards cannot cope with the construction of eight to 10 ships for the MARS programme at the same time as the construction of aircraft carriers, we would like some understanding of the thinking on how to tackle that programme. If they can be constructed at the same time as carriers, in this country, I would be only too pleased to hear it.

Finally, I want to refer to the results of the MOD internal survey, which was published only a few months ago. I hope that the Minister agrees that it provides some alarming figures. Two thirds of those questioned are spending their own money on extra equipment because they do not have confidence in the MOD issue, and nearly half our soldiers in Iraq have no confidence in their fighting kit. Furthermore, a constituent of one of my hon. Friends who is the mother of a Royal Marine serving in Iraq at the moment has advised me that the Marines cannot operate effectively at night because there are only eight pairs of night-sight goggles for a total of 800 men. That seems extraordinary and I would therefore welcome the Minister's comments.

The same survey revealed that 39 per cent. of soldiers do not feel valued by the Army and that 35 per cent. felt that morale was very low. When asked, "Does the MOD look after its personnel?", only 3 per cent. of respondents strongly agreed, and 32 per cent. somewhat agreed, leaving 62 per cent. who either did not know or did not believe that the MOD looked after its staff. Furthermore, 35 per cent. of soldiers were critical of the frequency of the operation of tours, while 87 per cent. of the RAF said that they were overstretched, with 20 per cent. working more than 50 hours a week. I hope that the Minister at least finds those figures as worrying as I do, and will seek to address some of the underlying problems. Again, I would be appreciative of his views in his wind-up.

I think that it is agreed across the House—at least I hope so—that we need to ensure that our forces have the best and most effective equipment, and yet it is clear from the survey that that does not seem to be the case. I readily accept that no one can provide everything without reference to cost, but in the total sum game, the amount spent as a proportion of total expenditure on basic kit and basic equipment cannot be large. I would hope that some reprioritising of expenditure, bearing in mind the huge costs of some of the big-ticket items mentioned this afternoon, can be made so that we can at least ensure that no member of the armed forces would feel compelled to purchase additional kit with their own hard-earned cash in order to feel more confident in the dangerous situations to which we send them.
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3.28 pm

Mr. David Crausby (Bolton, North-East) (Lab): I shall begin by making the obvious statement that it is undeniable that our armed forces deserve—indeed, must have—the very best equipment and support services available. They are, after all, men and women who risk life and limb in our defence on an increasingly regular basis. Whenever there is a conflict between the safety of our troops and buying British, we must have no hesitation in coming down on the side of protecting our brave servicemen and women. Cost is obviously an important issue, but we would be wise to take a sensibly balanced view in the procurement process, so as to deliver a secure supply of defence-related products and services in the long and medium term.

The safety of our forces notwithstanding, the most secure and dependable supply is, of course, a local supply, manufactured and delivered by the UK in the UK. The end of the cold war has completely changed western defence priorities, and the globalisation of the industry has put enormous strain on both defence manufacturers and the trade unions. The trade unions have dealt with and accepted enormous numbers of job losses over recent years, and defence manufacturers, for their part, have continued to invest, in spite of difficult trading conditions.

Despite this revolution in the industry, the UK has been able to maintain its position as the world's second largest defence supplier; and so we ought to be, as we are, after all, the world's second largest defence importer as well. This is not just a one-way process, with UK manufacturers demanding more of the defence budget. The size of the budget is in many ways dictated by the size of our industry and its ability to produce. As the British defence supply chain declines, the temptation to cut the budget will increase.

The UK's defence industry is one of which we should be enormously proud. While I accept the Minister's comment that without the MOD there would not be a British shipbuilding industry, I must point out that without the British shipbuilding industry there would not be an MOD—or, indeed, a British nation, other than one that might well be French or Spanish-speaking. This is very much a two-way process. The UK defence industry is world-class, and it should be valued in the same way as we value our armed forces themselves. It contains irreplaceable talents and skills, and it is vital to our independent ability to protect ourselves and our nation.

The UK has the most open defence market in the world, but our openness to others is not always reciprocated. Does anyone really believe, for example, that the French would allow us to build their aircraft carriers, or the Chinese would dress their soldiers in Lancashire cotton? I doubt very much that either of those things could happen.

The defence industrial policy launched in October 2002 was an important step in the right direction, but it was long overdue. The order for Hawk trainer jets was secured only at a very late stage, after some very serious arm-twisting. Sir Richard Evans, the then chairman of BAE Systems, told the Defence Committee that the recommendation from the Defence Procurement Agency was to acquire the Italian Aermacchi aircraft rather than the British Hawk, and that in coming to that
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recommendation no account had been taken of the additional value to the UK of purchasing the Hawk. He went on to say that the Indian Government had placed an order for 66 Hawks only after the British Government's eventual decision to buy British, and that he could genuinely see us being able to sell 400 to 500 such aircraft worldwide. Well, we shall see, but one thing is absolutely certain: none of that would be possible without the MOD order. After all, who would expect the Indian Government to buy the Hawk if the British Government had not been prepared to?

The eventual decision by the Secretary of State to secure the Hawk trainer was a brave and sensible one that was obviously made in Britain's interests, and I suppose that this example demonstrates the success of the defence industrial policy in the end. Why, though, did he have to make the decision at such a late stage? One of the six overarching themes of defence industrial policy is maximising economic benefit to the UK from defence expenditure. The Americans do not appear to be so reticent in protecting their manufacturing base. They are not quite as enthusiastic as we are about being fair and open to foreign competition. That is clearly demonstrated by their reluctance to grant even an unclassified waiver of the international traffic in arms regulations to the UK, which is disgraceful. I greatly appreciated the Minister's robust comments on the waiver in his opening speech, and we strongly support his efforts to overturn the decision.

America's argument in favour of the regulations is that it should not export its technology to the industries of untrustworthy countries. That is understandable, but Canada has done so and enjoys free trade with the United States. The question is, who will George Bush turn to first when he needs a reliable military ally—Canada or the UK? There is an urgent need for the President to deliver on the ITAR waiver. The White House has no excuses now that the Republicans are clearly in control. Failure to deliver will inevitably damage our special relationship. Without full access, we are entitled to ask why we should stick our neck out in support of the United States if it does not trust us with its technology. The denial of the waiver delivers a huge and unfair advantage to American companies.

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