---

Mr. Vaizey: Will the Minister give way?

Mr. Ingram: I should like to make some progress, and I have already given way to the hon. Gentleman.

The partnering arrangement signals our long-term commitment to industry in this sector. It envisages a different way of doing business, as BAE Systems will be contracted to provide AFV capability when and where we need it. It provides for retained access to innovative subsystems and technologies in the supply chain. That will require effort on both sides, but the benefit is mutual, as it safeguards critical capability and at the same time achieves better value for money.

It is an exciting time for the aerospace industry, with the development of two highly capable aircraft—Typhoon and the joint combat aircraft. Looking further ahead, we will develop potentially transformational uninhabited combat aerial vehicle—UCAV—technology.

Mr. Brian Jenkins (Tamworth) (Lab): I am listening with great interest to my right hon. Friend, who is setting out strategy for the defence industry, but I am concerned about the restructuring of the industry. Who will undertake that restructuring—the Ministry of Defence or industry itself? Will we ask firms to fall on their sword because they are longer needed? How can we guarantee that the best remain rather than undertaking different work such as offshore platforms? Who will drive the restructuring forward over the next 10 years?

Mr. Ingram: The principle of the DIS is to find out what our needs are. Industry requires that assessment if it is to plan for the future retention and growth of skills, the recruitment of new personnel, and investment in new technology and plant. It can no longer do so with hunger and burst, which has not served it to best effect or advantage. We now have a framework on which we can build. As for the question of who will restructure industry, the answer is industry itself. If it wants the opportunity for which it has been asking—and we are delivering that opportunity—it must face up to reality and restructure. If it thinks that something is no longer coming downstream, it should ask itself why it should invest in it. If it thinks that something is a major opportunity, it should invest in it, because it is certain
 
2 Feb 2006 : Column 502
 
that it will happen. There is no guarantee of success, but if restructuring does not take place we will certainly not achieve success, and we would have to continue, as we have in the past, with hunger and burst, which would mean that industries would operate under threat of closure. Restructuring for best advantage is better than the pattern of closure that we have had in past decades, and the strategy gives us the best opportunity to achieve that.

As for the platforms themselves, Typhoon is a multi-role platform that will take over roles currently filled by the Tornado F3 and Jaguar aircraft. It will be supplemented by the arrival of the joint combat aircraft to succeed the Harrier and Sea Harrier and perform a variety of multi-role operations. We want to retain and develop engineering and design capability to ensure that Typhoon and the JCA are supported, operated and upgraded throughout their service life. That means harnessing and inserting new technologies, so that the aircraft remain leading-edge while investigating the military potential of UCAVs.

The industry must adapt to meet that change in emphasis from the design and build of new aircraft to supporting them through-life. BAE Systems, Rolls-Royce and Selex, among others, will play a critical role, and there are significant business opportunities available in the long-term support of our future aircraft. We will work with industry throughout the year on the business rationalisation and transformation needed to sustain the skills and capabilities that we require in a cost-effective manner.

As for rotary wing, the helicopter sector shares many of the characteristics of the AFV industry, and we would wish to retain the abilities to maintain and upgrade our existing helicopter fleet with a large onshore supplier. To that end, we are developing a partnering arrangement with AgustaWestland, whose Future Lynx product remains our preferred solution to meet a variety of our future helicopter capability requirements. The outcome of that work will sustain the necessary systems engineering capabilities. We need to indicate the way forward on developing efficient support solutions for our existing fleet. Most importantly, that work will provide the Armed Forces with the military capabilities that they require. We expect to finalise the partnering arrangement with AgustaWestland this spring. We will, however, continue to look to the vibrant and competitive global market to satisfy our future requirements.

Mr. Tobias Ellwood (Bournemouth, East) (Con): The Minister has glossed over one of the most important aspects of the procurement debate, which we should discuss—the F35. Has he had any discussions with Henry Hyde, the Congressman—[Laughter.] Hon. Gentlemen may laugh, but it is a serious matter—he is the chairman in charge of organising the relationship between Britain and America. We are close to losing the deal, which means we will have two aircraft carriers without any aeroplanes on them, unless we get a deal giving us the technology to repair and maintain those aircraft.

Mr. Ingram: In a sense, that view is shared across the House. The hon. Gentleman asked whether I had met Congressman Hyde. I have not. The last time I went
 
2 Feb 2006 : Column 503
 
through Washington he was not available, but I met other key players. Meetings such as the hon. Gentleman suggests are the role of the Minister for Defence Procurement and of my right hon. Friend the Secretary of State. All hon. Members who pass through Washington should be briefed on the issue and should raise it. If they do not, they are not doing this country justice. We must make clear to our American friends and allies the importance of the issue, and we continue to do so. We are making some progress, and I will comment on it later.

Mr. Lindsay Hoyle (Chorley) (Lab): My right hon. Friend rightly mentioned fast jets and heavy lift capability, but will he describe the benefit of the A400M and how many jobs that could bring to Rolls-Royce, BAE Systems and the rest of the supply chain?

Mr. Ingram: That is an important aircraft, which is taking a long time to arrive. That is the reason for the C-17s. Given that the A400M will be leading edge and will have very good technologies on board, it will be able to do a great deal of strategic airlift and strategic activity, which will make it a forerunner in its field. That is why we are excited about the project and waiting for it to be delivered. I hope to be at the Dispatch Box when that happens.

Mr. Mark Hendrick (Preston) (Lab/Co-op): How confident is my right hon. Friend that a stronger version of the JSF will be developed? If that version is not developed, is a carrier version of the Eurofighter being considered? [Interruption.]

Mr. Ingram: I hear that described as plan B. As I have said before, we do not plan for failure. We plan for success and put all our efforts into achieving it. What we are planning is the best aircraft of its type, for various technical reasons. The question of marinising Typhoon has been mooted. People are talking about it, but we are not planning that. There are technical issues concerning the stress on such an aircraft landing in the way that it would land. There are major technical issues involved, so hon. Members should not just read the headline and think there is a simple solution. [Interruption] I said earlier that I hope I am at the Dispatch Box when the A400M arrives. With the length of time I am taking, I may well be.

Dr. Gavin Strang (Edinburgh, East) (Lab): The House is grateful to my right hon. Friend for what he has said. The issue is hugely important, as he understands, and a decision will have to be taken. Is not this the year that it will have to be taken? Either we go down the road that I assume is still the Government's preferred option—my right hon. Friend might describe it as plan A—the JSF, using the big new carriers, or we recognise that it must be the Eurofighter tranche 3, navalised, as plan A.

Mr. Ingram: I thought I had answered the question, but let me try again. We are confident that we will succeed in what we have set out to achieve. That must be the main thrust of our argument and we must impress it upon our US allies. We are the main contributor to the
 
2 Feb 2006 : Column 504
 
project—a level 1 contributor, up to $2 billion. That is a significant commitment. We think we will succeed. We are determined to succeed. Beginning to debate alternatives only allows others in the US to say that we are not really interested. The project remains our preferred option and we are confident that we can achieve it.

Mr. Robert Walter (North Dorset) (Con) rose—

Mr. Ingram: I have taken a substantial number of questions on that topic, and there are others that I want to address.

Within the complex weapons sector we have invested considerably over the past decade in new programmes such as StormShadow and Brimstone. These weapons provide the armed forces with the ability to deliver precise effects, which are able to achieve military advantage at a reduced level of usage. Our analysis has consequently highlighted a series of vital capabilities for retention in this field, with particular emphasis on the design of new weapons and upgrades, integrating them into the wider military network and support through life. But we need to be realistic. Our recent investment cannot continue, and on current assumptions will decrease by 40 per cent. over the next five years, creating overcapacity and a need for rationalisation.

We will work with all elements of the onshore industry, including overseas companies that have established a UK presence in the sector, on how best to tackle that. This may require us to temper international competition in the short term and to consider whether there are solutions that we might develop with our allies to maintain critical skills. We intend to work on the necessary solutions this year and to implement them in 2007. That will not be easy, but it is essential that we do so in this critical field.

We also need to ensure that our armed forces can have continued and long-term assured access to less complex munitions, while maintaining the option to go for the best in the wider global market, where security considerations permit. Currently 80 per cent. of our existing munitions requirements are met by BAE Systems via an agreement that commits us to find ways more to effectively provide munitions across the supply base. At present we are engaged with the company to enhance this agreement through a new long-term planning agreement. This will mean changes, but we are confident that we can ensure security of supply.

I make it clear that we will continue to operate the most open defence market in the world, encouraging others to follow our example. As an example of this, we have recently developed with the European Defence Agency a code of conduct regarding the procurement of warlike goods. We expect this to lead to a more open European defence equipment market, giving UK industry a greater chance to win business abroad.

The UK industry has also been successful in developing its presence in the sizeable US market and is a major contributor of equipment to the American Department of Defense. UK defence sales to the US have increased by about £500 million to a total of nearly £1.5 billion over the past five years. Over the same period, there has been a corresponding increase in the UK's share of total US defence investment spending
 
2 Feb 2006 : Column 505
 
from about 1.5 per cent. to 2 per cent.. The UK accounts for about 50 per cent. of total US defence procurement spending overseas.

Despite our close industrial, political and military ties, however, we continue to experience difficulties in securing the necessary technology transfer from the US to guarantee our sovereign operational independence. Such technology transfer is vital if we are to continue to co-operate with the US on major equipment programmes. As the hon. Member for Bournemouth, East (Mr. Ellwood) suggested in his question, this is an important issue for us and one that we continue to raise at the very highest levels.

---