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Mr. James Arbuthnot (North-East Hampshire) (Con): That was a real cracker of a speech, if I may put it like that, from the Vice-Chairman of the Defence Committee, the hon. Member for Bolton, North-East (Mr. Crausby), who is extremely assiduous and effective in that role. I hope that his powerful speech will be listened to in the United States, where it deserves to be heard.

Last year, we spent £5.5 billion on defence procurement in this country, which is really quite a lot of money. The overall defence procurement programme going forward is some £75 billion, which is all to provide good and effective equipment for men and women who risk their lives on our behalf. We must do that in a way that gets best value for money, but we must give them that good and effective equipment.

The Defence Committee, of which I feel increasingly lucky to be the Chairman, has produced several reports on such matters. We produced a report in December on the carriers and the joint strike fighter, which hon. Members have mentioned. The Committee raised the risk that the two carriers would not enter into service in 2012 and 2015 as originally planned. We also discussed our concerns about the joint strike fighter, and we expect the Government's response to the report later this month.

We also produced the report "Delivering Front Line Capability to the RAF", which came out last month. It reflected our interest in whether equipment in service is supported and maintained in a through-life way, as the Ministry of Defence has suggested that it needs to be. We will produce a report on the major projects later this year that will draw on the most recent major projects report, and we may look at smaller procurement issues just to be different. We are in the middle of an inquiry into the Afghanistan deployment to discover exactly how the Government's procurement decisions work on the ground, and how the Government support the men and women who risk their lives for us on a daily basis.

Last Thursday, the Committee visited the Defence Procurement Agency. In 2004, the previous Defence Committee said in its procurement report:

I hesitate to disagree with my extremely illustrious predecessor as Chairman of the Defence Committee, but that is not quite right. Smart procurement began in the 1990s, when I was Minister for procurement. What began six years ago was clever branding. The aim of smart procurement is to procure equipment faster, cheaper and better. In 2004, the Defence Committee said:

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Why on earth, therefore, do I claim the credit for smart procurement? One reason is that it is beginning to deliver. When the new chief of defence procurement took up his post he commissioned a stock-take of smart acquisition which found that most of its principles had not been implemented fully. When we went to the DPA last week, we were pleased to see many signs that performance has improved. In 2004–05, the agency met five of its six key targets. In its major projects report last year, the National Audit Office reported

It said that that decrease was

It said that some projects

We were impressed in a number of ways when we visited the DPA last week. It has made a realistic appraisal of performance, which has tended to take precedence in a trade-off with the cost of equipment. Should equipment do 100 per cent. of the work that is needed, or is 80 per cent. satisfactory if performance can be improved later?

Turning to the structure of the defence industry, I am convinced that a thriving defence industry is vital to our economy. More importantly, it is vital to the defence of this country. On Tuesday, Lord Levene appeared before the Committee, and he said that there is genuine value in competition. He was talking about British industry's relationship with the Ministry of Defence, and he pointed out that there is a danger of countries giving work to their own indigenous industry and failing to receive good value for money. I found that very convincing. The UK is better at avoiding that danger than most countries. My hope for many years has been that, for the best way to get round this, we should have transnational companies that could be regarded as resident in the UK, and in the United States, and in France, and in Germany. If we had two such companies competing with each other inside the UK, we could avoid the skewing of procurement decisions for national political purposes. That means that we would get much better value for money.

On a critical note, the Government had the chance to consider that possibility when British Aerospace wanted to merge with GEC. The Government should have said no to that merger and told both companies to find other, overseas companies with which to merge. If they had done that, there would have been UK competition, which would have been in the interests of the Ministry of Defence and in the interests of the armed forces, who depend on us to make good decisions. It would also have been good for UK industry.

So why did the Government not do it? I believe that at the time they were frightened of the markets and of what the markets would say about the Government preventing a merger that two companies wanted. That was a serious failure of courage, from which the UK will suffer. Is there any chance of retrieving the situation? I do not know, but we now see the defence industrial strategy and some of the consequences. Competition is lower down the agenda, partnership is higher up the agenda. There is nothing wrong with partnering. The trouble is that the Government's failure to act in relation to that merger has left us with no alternative.
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The defence industrial strategy has the huge advantage that it was promised for December last year and, for the first time ever in any procurement project that I can remember, it was produced on time—in December last year. As a Committee we are still taking evidence on the DIS, so I shall not say too much. We have some concerns that have come out during questions, particularly about the treatment of small and medium enterprises. We might end up being worried that scant attention is being paid to the key area of research, as there appears to have been a long-term decline in defence research. The essential question, as    my hon. Friend the Member for Aldershot (Mr. Howarth) said, in relation to the defence industrial strategy relates to its implementation. If that is done well, we can be pretty optimistic.

In ending, I shall say a few words about Lord Drayson, the new Minister for Defence Procurement. I wish, if I may, to ruin his career by saying that he has made a favourable impression. Not only did he produce the defence industrial strategy when he said he would, but he has given a strong impression of knowing industry, being prepared to listen to industry and being prepared to buck the political wisdom that too many of his predecessors, probably including me, were not prepared to buck. He has been among industry and has listened to it in relation to drawing up the defence industrial strategy. It is important that he and it should succeed, and we wish him well in that process.

3.28 pm

Mr. Dai Havard (Merthyr Tydfil and Rhymney) (Lab): I shall keep my remarks short, as those on the Front Benches have again taken up over half the time available for the debate.

On efficiency, with the amount available for defence expenditure, the problem is how we spend it. As I told the Minister last night, I envisage him going to the Treasury and saying to the Chancellor, "Gordon, I'd like some more money", and Gordon saying, "Well, when you can spend what I give you properly, come back and ask for some more." That has been the problem right through the term not only of the present Government, but of all Governments. It is a huge problem. In that sense, a defence industrial strategy to develop and deploy the industrial policy that the Government have had for some time is a good idea, and I welcome it because it helps to address exactly that problem and has made strides in doing so. However, the role of Government agencies is important, and the Select Committee Chairman referred to the Defence Procurement Agency. That has been a dysfunctional organisation in many respects for some time; it has not had the necessary emphasis in terms of process. The strategy places pressure on that organisation to reform itself so that it becomes an appropriate vehicle within the overall strategy. That is long overdue, but if it happens it will be a good thing. I will welcome it and we will try to help the process work.

My right hon. Friend the Minister talked about support for fast jets and the Committee's recent report on the matter. He said that the reason for doing what was done was to retain design skills within BAE Systems, but that was not the only reason. That was not the argument that was made at the time for that change taking place. There was also talk of the need for skills to
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be retained within the RAF being a reason for the change. I am sceptical about that, but we will doubtless address the matter at another time and in another place.

The question of the C-17s is important. I visited 16th Air Assault Brigade last week, and it is going to Afghanistan. It will test in anger—I hope not too much in anger, but certainly test in practice—the Apache helicopters. It will also test air manoeuvre and support ground manoeuvre. To do all those things, it needs lift, and that is a constant problem. The C-17s have been supremely helpful in dealing with that over a period of time. They did not go through the classic acquisition processes of the time, but they have proved to have been very necessary and very successful, and we could do with a couple more because they are plugging gaps in the process.

In order to carry out manoeuvre capability, support is necessary. There has been a lot of talk about big toys, fast jets and carriers, but to give that manoeuvre capability to people on the ground requires a strategy. To do all this we will have to collaborate in different ways and there will be different types of collaborators, both industrial and political. The strategy looks at particular types of equipment that are needed in relation to particular sectors of industry. There is an imbalance in the provision within the UK. Wales does not really get sufficient defence expenditure. Hon. Members may disagree, but that is the truth. At the moment south Wales is experiencing difficulties with fast jets. However, we also see opportunities, such as those in the defence training review.

I want to use this opportunity, not to plead that everything should end up in south Wales—although that would probably be a good idea—but to make a point that goes to the heart of something that was said earlier, and that concerns transparency in process. When deciding where that project should go, transparency is the key, as it is to a number of other matters.

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