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Mr. Howarth: I understand the point made by the hon. Gentleman, who has repeatedly raised his constituents' concerns about explosives in this House.

Mark Pritchard : Is my hon. Friend aware that those explosives relate directly to the UK's nuclear deterrent? We will no longer have the necessary explosives for that nuclear deterrent in the UK, and we will have to rely on foreign suppliers, which undermines national security.

Mr. Howarth: My hon. Friend is right to raise the matter. The Government owe it to the House to be frank
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and honest. I recognise that they are having to make hard decisions across a wide range of procurement issues, but the only way in which we can address the matter on behalf of the nation is by being honest and frank. If we allow the supply of critical materials to come from overseas, the inevitable consequence will be that our national sovereignty is impaired.

John Smith : Will the hon. Gentleman give way?

Mr. Howarth: If the hon. Gentleman will forgive me, I want to press on with a few other important issues, one of which is defence research.

The report says that there is

That means that the battle-winning capabilities that we have seen in Iraq and Afghanistan in recent years are the    result of investment in defence research in previous      decades—principally under Conservative Governments, I should like to remind the Minister. It is quite simple. If we want to be able to continue to play a global role and to give our armed forces the best equipment available into the future, we have to invest in research today. At the last election we called for an increase in the proportion of the MOD budget available for R and D. In the DIS, the Ministry appears to share our fears about the danger arising from a failure to make that investment, for it states that

That strikes at the heart of the defence industrial strategy. By their own admission the Government are failing our armed forces. Government spending on defence research has fallen from £840 million in 1997 to about £450 million today. If the Government are to deliver on the DIS they need to commit proper funding for defence research.

I asked the Secretary of State what proportion of the sales receipts from the Qinetiq flotation will be made available for defence research. The answer that I received from him earlier this week said that a substantial proportion of the receipts would be retained by the MOD, but just what does "substantial" mean? Does it mean that the MOD will retain a majority of the funds? If the Minister cannot put a figure on it until after the sale, perhaps he can give us details of what percentage of the funds he estimates will go to the Treasury and what percentage will be retained by the MOD. Even more importantly, how much of this windfall will be reinvested in R and D, not just swallowed up in the overall defence budget? I hope that the Minister will be able to answer those questions when he winds up.

That brings me to the questions surrounding the sale of Qinetiq. The Government stand accused of selling off a major British national asset far too cheaply. That has been confirmed by the admission of the Minister's former colleague, who used to sit next to him—Lord Moonie, the Minister responsible for the sale of one third of Qinetiq to Carlyle—that he opposed the timing of the sale. We made our concerns clear at the time of the
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sale that Qinetiq had been sold off too cheaply and that the sale could have been delayed until market conditions had improved. In January 2003, in the Defence Committee, I asked, "Can you explain to us laymen why Carlyle is paying £42 million for a one third stake in a company with a value capital net of debt of £312 million?" The value of the physical assets alone suggests that it was seriously undervalued at the time. It is now clear that the sale was not motivated by a desire on the part of the MOD to enhance defence research but by the Treasury in a crude move to screw more money out of the MOD to help to plug the Chancellor's black hole.

There remain unanswered questions over the future of Qinetiq. We need to know precisely how the relationship between the company and the MOD will operate following the flotation, not least in respect of urgent operational requirements for military operations. We also need assurances that intellectual property generated in the UK will remain in the UK and not be siphoned off to the United States or elsewhere. As Qinetiq moves much of its focus to the United States, what consideration has the Ministry given to the possibility of intellectual property transfer to the US then becoming subject to the stringent US export controls mentioned by my hon. Friend the Member for Bournemouth, East (Mr. Ellwood)? What safeguards has the MOD put in place to prevent asset-stripping?

Are Ministers comfortable that they have engineered an incentive scheme correctly given that a few employees of the company stand to make small fortunes that make lottery winners look like village paupers? I have to confess that some of them are very good friends of mine—[Interruption.] Well, I am looking forward to a very large dinner from Sir John Chisholm, and I have already told him so. [Interruption.] I hope that it will be so good that it is required to be entered in the Register of Members' Interests, and I have made that clear to him as well. However, there is public unease. That points to Ministers' failure to have undertaken a proper assessment of the value of the state asset that they were selling.

Bob Russell (Colchester) (LD): I am interested by the hon. Gentleman's dismay that a public asset is being flogged off at a knock-down price, as I thought that that was the whole object of all the privatisations that we have had.

On a specific point, does the hon. Gentleman's criticism of the Government about the lack of research and development include military clothing and textile?

Mr. Howarth: I know of the hon. Gentleman's interest in textile issues, which is shared by other hon. Members. Those of us who are a bit more familiar with the armed forces than others understand the importance of good-quality kit, in clothing terms, to our armed forces, particularly those out in the field. When I went up to Arbroath with the armed forces parliamentary scheme, we visited 45 Commando. I was told by one of my more subtle hon. Friends, who shall remain nameless, that if I banged on about the kit, I would get my head banged. When I arrived, 45 Commando, who are some of the toughest guys in the business, had the kit laid out on the floor. They showed us the trousers that were split and the boots that did not work. Clothing is important.
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Returning to Qinetiq, it is now clear that that privatisation has been carried out on a timetable designed to suit the Treasury rather than to enhance Britain's defence research base. The DIS is clearly good news for the prime contractors, not least BAE Systems, which has its headquarters in my constituency, but unfortunately it gives little consideration to small and medium-sized enterprises, whose concerns will need to be addressed. The key is implementation; we will need to see how it is going to work in practice. The strategic defence review was an impressive document, but its implementation has been hindered through lack of proper funding. We will therefore wait to see whether the DIS is to be funded properly.

Let me turn briefly to some individual projects. On carriers, Lord Drayson's admission to the Defence Committee last year that the MOD was no longer able to commit to bringing the first new carrier into service in 2012 has come as a bitter blow to the Royal Navy. In November 2004, when he appeared before the Defence Committee, the First Sea Lord stated in no uncertain terms:

That was just 15 months ago. This project has been needlessly delayed. We need assurances that the new assessment phase, which was announced just before Christmas, will be completed within the year. HMS Invincible, already in mothballs, will be withdrawn from the fleet in 2010; HMS Illustrious is to be decommissioned in 2012; and HMS Ark Royal is to be decommissioned in 2015. We need to know what progress is being made on the extension of service of the ships referred to in the statement that the Secretary of State made before Christmas. Have any costings yet emerged from that process?

The House and the Royal Navy need to be kept closely informed regarding the exact nature of French involvement in this programme. We know that they are going to buy into the design. It is imperative that their involvement should not be allowed to delay construction of the UK's two carriers. Has agreement been reached with France over the charge for the design plans—we understand that it has now been confirmed at £100 million—and is their involvement in the direction of the project more extensive than simply buying the plans?

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