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Mr. Walter: Does my hon. Friend agree that the French appear to be developing their replacement nuclear deterrent, and that it would be unacceptable for France to be the only nuclear power on the continent of Europe?

Mr. Howarth: I strongly agree with my hon. Friend. I could not have expressed that point better. Indeed, the only person who might have done so is my hon. Friend the Member for New Forest, East, who is the master in these matters.

The defence industrial strategy states:

"We welcome the progress made in establishing understandings on security of supply and the decision to introduce an EU Code of Conduct on Defence Procurement which aims to create an effective European Defence Equipment Market."

Indeed, the Minister referred to that. The fact is, however, that our European partners have been far less welcoming than the United Kingdom. Spain has already
 
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rejected the code of conduct outright, and France appears to be doing little more than paying lip service to opening up her markets. Perhaps the Minister could ask the French whether, instead of buying the plans, they might like to commission an aircraft carrier from a British shipyard. We could build three: one for them and two for us. Somehow, I do not think that that suggestion would go down too well on the Quai d'Orsay, but it might be worth a try.

For two decades, Britain has led the way in opening up our defence markets, but the time has come for us to let our partners catch up with us before we proceed any further. The European Defence Agency and initiatives such as the code of conduct will have the effect of opening up European defence markets, giving UK companies the kind of access to European markets that European companies have to our markets. If that will also increase European capabilities so that the Europeans can pull their weight more effectively in NATO, well and good. However, if the intention of the EDA is to act as a vehicle for the advancement of the EU defence project, doing little to open up markets or increase capabilities, we will oppose it. It is for similar reasons that we have opposed a military application for Galileo, which, despite protestations from UK Ministers, is clearly under consideration on the continent.

While we support the Government's reconfiguration of our armed forces along expeditionary lines, and realise that we have neither the funds nor the resources necessary to plan for every eventuality, some thought must be given to tomorrow's threats, at least on a conceptual level. I will not be the first to point to China's growing military and economic prowess. China is already increasing its military spending, with a double-digit increase over the past 15 years, and will undoubtedly want to increase the reach of its military forces. I understand that it is even planning to build its own indigenous aircraft carrier; it will probably not look to us to supply it.

On the principle that we prepare against capabilities, not intentions, Ministers must recognise the need to consider a conventional threat developing at some point. That is another reason why we need to maintain the industrial capability to respond to any such threat.

Mr. Wallace: Given that China is assisting the Iranian Government with missile guidance technology, is my hon. Friend concerned that the Government might at some stage allow the European Union to lift the arms embargo that prevents industries—in France, for example—from selling arms to China? If the embargo were to be lifted, there would be serious consequences for Anglo-American industry relations.

Mr. Howarth: As ever, my hon. Friend is absolutely right. Indeed, I had a meeting with John Bolton last year, and he explicitly stated that the United States would view the lifting of the EU arms embargo on China as little short of a declaration of war—[Interruption.] That was a metaphor, Minister. The fact is, the Americans have attached great importance to this issue. I would say to our American friends that I hope they stick to that policy. I hope that there will be no question of their wanting to lift the embargo on China before the EU does. I am sure that that will not be the case,
 
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however. As I have said, we need to be very wary about China, and to be cognisant of the need to preserve our capabilities. Intentions can change overnight; capabilities cannot.

While we acknowledge that some excellent new military capabilities are coming through, the fact remains that smart procurement has failed to deliver the promised improvements in the process, and the Government are failing to provide our armed forces with the quantity of equipment commensurate with the military obligations that they have entered into. Without a flourishing defence industrial base that continues to deliver state-of-the-art equipment for our armed forces, we shall surrender our own national sovereignty. As some of my hon. Friends have argued, it may be cheaper in the short term to buy off the shelf from the United States, but such a policy would soon change the relationship from one of partners to one of customer and supplier. Nor do I believe that we should simply throw in our lot with our EU partners, some of whom have proved extremely unreliable.

I believe that we have no alternative but to continue to muddle through, while accepting that there is a price to pay for sovereign command of our armed forces. Much of that is implicit in the defence industrial strategy. I hope that we will all be prepared to pay the price to enable us to prove to the people of Britain that we regard the defence of these islands and the freedom of our peoples as the first duty of Government.

Madam Deputy Speaker (Sylvia Heal): Order. I remind all right hon. and hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.

2.34 pm

Dr. Gavin Strang (Edinburgh, East) (Lab): I am grateful for the opportunity to speak in this debate.

As an Edinburgh Member of Parliament, I want to put on record the fact that it is a matter of great regret on both sides of the House that the Member of Parliament for Dunfermline and West Fife is no longer with us. I am grateful for the nodding from the Opposition Front Bench. As we know, she developed a great interest in defence matters as a result of the constituency she represented, not least because of the Rosyth dockyard. She specialised in the subject, took part in the graduate, postgraduate and later stages of the armed forces parliamentary scheme and eventually got on to the Select Committee on Defence, although I know that she would have liked to get on to it earlier. Members of that Committee on both sides of the House will confirm that she was a real specialist on defence and made a tremendous contribution on behalf of the British people.

I want to move straight on to the procurement issue, which is hugely important. I congratulate the Government on their defence industrial strategy. It was important that they published it last December, and I also congratulate the Secretary of State on his statement. The strategy was a step forward in many important respects. Perhaps it did not establish a framework—that is too strong a word—but it was a statement to use for the future. Certain issues are not addressed in the document, while others are perhaps
 
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addressed in a way that we would not like. It is important, however, that we have such a substantial document on the defence industrial strategy, which points up some of the key issues that have been discussed, not least that of the United States, on which, given the current situation, the hon. Member for Aldershot (Mr. Howarth) rightly spent some time.

It is vital that we protect and nourish our defence industrial base. We cannot produce everything, which I think is what the hon. Member for Aldershot meant when he referred to muddling through, although I do not like the word "muddle". We must recognise that we cannot develop expertise in every aspect, particularly of the forward and expensive technologies. We do, however, have something remarkable in this country. In the context of our manufacturing industry, the British aerospace industry is still tremendously successful, but it is at a potential turning-point. If we do not sustain and support that industry, an important part of which is military, we will probably look back in 10 years' time and regret that we did not make the key decisions to help to maintain it and all the jobs that depend on it.

Time is limited, and I want to move on quickly to the Eurofighter, to which Members on both sides of the House have no doubt heard me refer in the past. I have been concerned about the issue, and I accept fully that my interest is partly due to the importance of the jewel in Britain's industrial crown, as Arnold Weinstock called it—the skills that we have in relation to radar, lasers and so on, predominantly but not just in Edinburgh, in part of what is now called SELEX.

It is tremendous that the Eurofighter is performing so well. Air force people in America and the other three countries involved, Germany, Spain and Italy, speak highly of the plane. Those of our pilots who have been up in it cannot speak too highly of it. We have got tranche 1 and 2, and we are grateful to the Government for sustaining that programme. Perhaps we would have liked the tranche 2 announcement a bit earlier, but we will not make an issue of that today—it is behind us. The issue, of course is, tranche 3.

I do not want to inject a partisan note, but the hon. Member for Berwickshire, Roxburgh and Selkirk (Mr. Moore) will be aware of concern, to put it mildly, about his party's policy. I am not sure if it has changed its policy, but it emerged before the last general election that the Liberals were committing themselves to no tranche 3 for Eurofighter. If there has since been a change in that policy, I should be pleased to be informed about it. No doubt the hon. Gentleman will say something on the subject. I hope he will say that a tranche 3 may well be needed, because there may well be a need for a Eurofighter that is different from the tranche 2 version, which has ground attack capability but could be improved. We have to think about the future position of the Eurofighter, and also that of the joint strike fighter. I do not know what plan B is, but it will almost certainly have to involve a role for a Eurofighter. A Typhoon could operate from the big new aircraft carriers, but it would need to have short take-off and vertical landing capability.

If the Government can achieve what we want from the JSF, that is fine. We can make progress. A waiver in respect of the US international traffic in arms
 
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regulations will be necessary, and it is not in the gift of the United States Administration or the President. We must get Congress to recognise that we need it, and give us it. There has already been a huge setback, in that we were promised it five years ago and have not been given it so far. We must face up to the position, and I think that we should think in terms of a decision this year.

SELEX has made a huge contribution to development of the Typhoon, and with its lasers and sensors Edinburgh has won the head-to-head competition for the JSF contract in the United States. That was a tremendous achievement and we welcome it, but we need the technology transfer. We want to ensure that SELEX in Edinburgh can generate the profits that will pay for research and development. We need Government help if we are to maintain our cutting edge in technology. We cannot possibly sustain it if we have to enter into an arrangement whereby, in future, all the traffic is one way. The United States can go it alone, because its R and D expenditure is so colossal and its market is so large. We need that waiver. The position is complex, but it was promised to the United Kingdom and, I believe, to Australia five years ago.

In a sense, I have no problem with the strategy. It recognises that BAE Systems is a British champion, although most of the equity is now owned in the United States. It sold a number of its Edinburgh assets to Finmeccanica, and it called the new company SELEX. We have Finmeccanica and we have Thales: two very big players in the British defence market. We must bear in mind what we do not want to happen to Finmeccanica, or to SELEX in Edinburgh, in the long term. The Minister rightly spoke of the importance of the upgrading, servicing and maintaining of the planes, which have huge long-term prospects. We should consider how long the Tornado has been operating, and the amount of money that has been generated by its maintenance and upgrading. The same applies to the Eurofighter. The SELEX people in Edinburgh have the expertise and equipment, and if they are the best at making the avionics for such planes they will obviously be the best for maintenance, development and upgrade purposes. We do not want BAE Systems—the British champion—to think that in the long term, it can come back in or squeeze us out. The reality is that Finmeccanica, along with other companies, is there, and the British Government took a very important strategic decision in allowing it to buy those assets.

We have reached a very important stage in the future of our industry. There is no doubt that we have great strength in avionics and in aerospace generally. I hope that we will not allow the situation to drift. Crucial decisions have to be taken, and if plan B has to become plan A—as it may well have to do—we will probably need to take them within the next 12 months. Reference has been made to a memorandum of understanding being agreed between the two countries' officials. A memorandum of understanding does not sound that strong to me. We will need to examine the situation as it develops, but it is not looking good at the moment. I hope that we can make progress in our talks with the US and find a way to achieve effective and meaningful collaboration and a transfer of technology, so that my constituents can keep their jobs, continue to provide superb equipment—such technology is the best in the
 
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world—supply the US market, and help to build the JSF in this country on terms that are mutually acceptable to the US and the UK.

2.47 pm

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