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Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): May I associate the Scottish National party and Plaid Cymru with remarks that were made earlier and extend our sympathies to the families of the bereaved and those who have lost their lives? May I also mention the injured and the wounded, who must not be forgotten by Government of whatever shade, or by this Parliament, for the rest of their lives?
I intend to keep my remarks short. Many issues have already been mentioned, and I hope that as a result of my brevity the Minister will respond to the specific points that I raise.
There are many aspects of defence procurement, but I want to concentrate on one specific issue. I am, of course, honoured to take part in this debate as the elected representative for Na h-Eileanan an Iar. An aspect of chief concern to my constituents is Qinetiq and the possible impact of its privatisation on the future livelihoods of 240 at the Hebrides base between North Uist, South Uist and Benbecula. It has been reported that Qinetiq in general has about 5,000 patents granted and outstanding. A great deal of intellectual property is clearly being sold, the value of which would be very hard to quantify.
As some hon. Members know, the Qinetiq range in Uist is large and stretches far to the west beyond St. Kilda. There is no land beyond that except Rockall on the way to Newfoundland and Canada. It is an ideal place for missile testing.
Missiles are critical to modern military activity, as the hon. Member for Aldershot (Mr. Howarth) asserted earlier. Given that they are critical, we need to retain the capability for testing and training.
I was recently fortunate enough to visit the Qinetiq range and see some of the highly skilled and specialised work that the operatives undertake. The Hebrides base is a tremendous facility. Its size gives an almost unique controlled environment for the conduct of test and evaluation firing of land, sea and air weapons, and the firing of in-service missile systems.
The base also accommodates the operation of unmanned air vehicles—UAVs—which are used for missile training, especially for the Rapier missile. It is encouraging that use of the base is not confined to UK armed forces. Recently, the Swiss and Swedes, among others, have used the resource and expertise at the base. I have travelled with ferry-loads of American soldiers, stationed in various parts of Europe, who find it far more convenient to go to Uist to train with missiles than to return to the United States.
I would like an assurance—if possible, a cast-iron guarantee—that the privatisation of Qinetiq will not put the range at Uist at any risk. Does the Minister view the Hebrides range as a key capability in the context of the defence industrial strategy? How can the Minister guarantee that, some day, under pressure from shareholders—some as far away as America—a private company will not close such a strategic facility in some sort of rationalisation of Qinetiq?
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Indeed, the same could be said of other Qinetiq sites in Scotland such as Rosyth, Wester Ross and many others. Can the Minister guarantee the continuation of those bases when a key part of the defence industry is privatised? Viability might no longer be determined by strategic importance but by shareholder considerations and the bottom line.
It could be argued that defence procurement budget spending in Scotland is, in terms of per capita spent, approximately £500 million lower than it should be. However, tempting as it is to trade such statistics with the Minister, I should like him to concentrate on the position of Qinetiq and how it affects Scotland.
I currently question how we can be certain that a private company in a monopoly situation cannot hold a Government to ransom when we have no other provider. Could it not add to the problem of cost overruns?
To achieve my aim of brevity, I shall make only two further points. The public cannot buy shares in Qinetiq. Only those who are described in common parlance as fat cats can do that. Why will the Qinetiq working man or woman in Uist or Rosyth be allowed to purchase only £500 in shares when the top brass walk away with £40 million? Is that not a slap in the face for the hard-working employees at Qinetiq? Is it not a slap in the face for every hard-working man or woman who, like my father, once believed in Labour values and traditions?
More than a year ago, 10 RAF personnel tragically lost their lives in an air crash in Iraq when a right wing fuel tank exploded. An RAF pilot, Nigel Gilbert, has been reported as saying that the consequences might not have been so serious if the aircraft had been fitted with fire retardant protective foam, without which the Americans and Australians would apparently not fly. I am no expert but I and, I am sure, many others would be grateful if the Minister shed some light on that.
5.8 pm
Sarah McCarthy-Fry (Portsmouth, North) (Lab): The city of which my constituency forms part has been at the forefront of defending our shores for more than 800 years. Portsmouth naval base is the home port of the Royal Navy and the defence industry is inextricably linked with the city's economy. It is therefore no small wonder that the companies that operate in my constituency have eagerly awaited the defence industrial strategy.
Times have moved on. When I first started working in the defence industry it was in the days of cost plus. A contractor would submit its costs, the Ministry of Defence technology cost team would audit the submission, we would argue about the overheads, reach an agreement, add on 10 per cent. or so for profit and that was the price that the Ministry paid. It was cosy but unsustainable and it did not give the taxpayer value for money. So we moved to competitive tender and fixed price, which required not only defence contractors but the MOD's own work force to take a long, hard look at their cost structures, and some painful decisions had to be taken in the interests of value for money for the taxpayer.
Only a few months ago, the Minister of State, Ministry of Defence, my right hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow
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(Mr. Ingram), had to announce the closure of the engine maintenance business at DARA Fleetlands, as it was unable to compete with other contractors. I expressed the hope at the time that, as we had a strong and stable economy, those skilled workers could be retrained and would find new jobs. I was therefore delighted to read in the press last week that that is exactly what has happened. The helicopter repair side of the business at Fleetlands is booming so much that an additional 200 engineers are required, and the directors at the site are keen to retrain those engine support workers to fill those roles.
Nevertheless, the competitive tender and fixed price arrangement is not a panacea. It gives the MOD short-term value for money, but not necessarily best value in the long term, because it risks contractors underbidding to win the work, then being unable to sustain long-term production, or ratcheting up the price for product support, leading to higher costs over the life of the product. The defence industrial strategy seeks to remedy that by promoting a partnership and alliance approach. I welcome this approach, and I am sure that companies in my constituency will also do so, especially those operating in ship support, such as FSL.
I welcome the recognition that the lowest bidder is not paramount, and that national security, national skills and the UK manufacturing economy are also important in defence procurement. However, this requires flexibility on the part both of the MOD and of industry. Certainty is the key to long-term strategic planning in business, and true partnership means true risk sharing. It means being able to offer a degree of certainty through the life of a project. Whole-life support is probably worth more to a supplier than the initial production, but the MOD needs to be sure that suppliers can sustain that whole-life support, and there needs to be a degree of trust on both sides. The flip side of that stability and certainty must be a commitment on the part of industry to implement continuous improvement, to continue to engineer cost-downs without the incentive of re-bidding at every stage in a project's life, and to share the benefit of those cost-downs with the British taxpayer.
I welcome the statement in the defence industrial strategy that value for money is the bedrock and that competition is a major element in value for money, but also the recognition that when a better outcome can be delivered or when national sovereignty or security is under threat, long-term partnering agreements will overcome competition. I do, however, share the concerns of many hon. Members who have spoken today about small and medium enterprises. While the larger contractors in my constituency will, I hope, be major beneficiaries of these long-term partnering agreements, to what extent will SMEs benefit?
Many SMEs operate in my constituency, and I want to ensure that the skills base that we have there is maintained and that it grows. There is a concern about offshoring, not only in defence manufacturing, but in all manufacturing. I believe that the answer is to concentrate on the things that we are good at, at the high-skill, high-tech end of the market. We need to foster those skills, and ensure that we keep them in this country. As warfare changes from using brute force
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heavy equipment to faster, cleverer, flexible and electronically networked equipment, we will need those high-tech skills to manufacture and support it.
Many SMEs in my constituency are bidding for work in the defence sector, and that is why I am concerned that long-term partnering agreements, important though they are to the major defence companies, might push out the SMEs. It has already been pointed out that the success of this strategy will be in the implantation. I would like to see some contractual commitment in these partnering arrangements to pass work down to smaller companies.
We need SMEs; they are often the seedcorn for innovation. A smaller organisation often has a different attitude to risk, and encourages entrepreneurship and innovative thought. If we are moving towards longer life platforms, we will need innovative upgrades if we are going to keep at the forefront of fast-moving technology. We will need the ability to respond rapidly to new ideas. We need to ensure that our procurement processes encourage innovation and entrepreneurship as well as the basics of cost, quality and on-time delivery. And we need to keep the door open to new entrants in the market.
We need to ensure that our troops get the best possible equipment, ready for action, when and where needed, at a cost that the taxpayer can afford. I commend the defence industrial strategy, as it seems the way forward to deliver that. I hope that the Minister will take on board my concerns about SMEs, and I hope that workers in my constituency will continue to play their part in delivering high-quality defence equipment for the next 800 years, as they have contributed to this country's defence for the past 800 years.
5.15 pm
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