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Mrs. Maria Miller (Basingstoke) (Con): I am grateful for the opportunity to speak in today's debate, which is important not just because we are discussing the future defence of our country and £6 billion of Government expenditure on procurement each year, but, as the hon. Member for Chorley (Mr. Hoyle) said earlier, because defence is at the heart of much of Britain's manufacturing industry. Much of the expertise and many of the jobs in the sector are inextricably tied to the future of defence in this country. In my constituency, Basingstoke, in north Hampshire, we have a great deal of expertise in the sector, which provides a tremendous skilled work force. Importantly, it is also a catalyst for many other businesses in the area, which rely on our defence industry for their livelihood. It is therefore vital that we hold the Government to account in this important sector.
Despite the smart procurement initiative introduced in 1998—I recall, however, that my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot) said that its roots might lie deeper in time—important defence projects are still regularly coming in over budget and late, which in any other sector of industry would be unimaginable. I reflect on the fact that the most recent National Audit Office report on major projects in 2005 found that the largest projects are almost £3 billion over budget, that financial savings are coming solely from cuts in future capability and not necessarily from efficiencies, and that delays in delivering projects have
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increased by 45 months. The MOD identified that many of those time and cost overruns were driven primarily by its actions, such as changes in specifications and budget constraints.
It is therefore little wonder that, for the Government, defence procurement is an ongoing process of attempting to reduce waste and ineffective management control. There have been no fewer than four iterations of defence procurement rules since 1997, creating a great deal of change in the sector. The Government's strategy over that time, as I try to piece it together, seems to be to achieve a better balance between best value and protecting domestic research and manufacturing capability. Of course, the Government's push for an increase in competition in the sector should be applauded, although the NAO report suggests that there is some way to go until we see the full fruits of that labour.
Unlike many other sectors of manufacturing industry, however, the defence industry does not operate in a perfect market, and there is a need to balance the protectionist drivers—sovereignty and the need for national security—with the best-value drivers, such as the need for open competition, innovation, control of costs and avoidance of the unseemly delays that we note in many of these projects. As has been pointed out, we have one of the most openly competitive defence industries in the world. For several years, however, procurement rules have recognised the need to balance the protectionist and best-value approaches so as to take into account the importance of retaining domestic capability in the market. In my constituency in particular, we want to retain skills as well to deliver value for money.
I was pleased that the 2005 defence industrial strategy identified yet again the need to retain strategic capability. I welcome the list of key strategic capabilities that we need to keep domestically. One of my local employers, Thales Missile Electronics in Basingstoke, has been identified as having an important strategic capability and an important role, particularly in fusing, in the complex weapons sector.
Let us consider what has been asked of companies that have been identified as needing to provide important strategic capability. The defence industrial strategy is somewhat contradictory. It talks of best value and the need to maintain national security, but also talks explicitly of the need to retain the ability to source from abroad, as well as the ability to design, assemble and support domestically. My right hon. Friend the Member for Fylde (Mr. Jack) said that it was almost as if the report was trying to have its cake and eat it, or the Government were.
The strategy readily acknowledges that open international competition could put the sustaining of key industrial capabilities at risk. The Minister said that it clarified priorities. That may be his objective, but he has some way to go. He must make absolutely clear what we are asking of our local defence manufacturers. There is rather more than a contradiction here. We need to know what message we are sending to our domestic defence industry. I believe that the Government are reviewing the way in which the strategy is to be implemented; perhaps they could think about that message during the process.
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We must ask ourselves whether we are retaining our key strategic capability if manufacturers are forced by cost pressures to outsource large parts of their production to lower-cost countries in order to compete in terms of price. Eventually, local production, and indeed capacity and skills, will become increasingly diluted, and our ability to be flexible and respond to the needs of the military—especially at times of pressure—will become more problematic. There must be more formal recognition of the trade-off between price and strategic capability.
As I said at the outset, we are discussing the future defence of our country. We are discussing a vast area of Government expenditure. However, we are also discussing the future of an important sector of industry and manufacturing. After four iterations of defence strategy in the Government's lifetime, we must work hard to ensure that we get it right this time.
5.22 pm
Mr. Tobias Ellwood (Bournemouth, East) (Con): It is a pleasure to follow my hon. Friend the Member for Basingstoke (Mrs. Miller), who spoke with such passion about the industries in her constituency. Thales is and, I hope, will continue to be an important component of our defence industry.
The Chairman of the Select Committee, my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), drew a distinction between our procurement needs for defence and the country's needs. They are separate but also together: separate in that we can have a defence industry that can have exports, but together in that our defence—Army, Navy and Air Force—will be one of the biggest markets for our products and equipment. We have not talked much about the former, but I want to say something about the latter.
I understand that there is an annual debate on procurement. I hoped that this debate would include an audit, or analysis, of our requirements. We have heard a good deal of talk about where pieces of equipment are in the procurement process, but what are our needs? Why do we require that equipment to meet the challenges of the future? The Minister mentioned our needs in Afghanistan and the threat posed by the growth of terrorism, but I should have liked him to spell out exactly what our mission is and how it relates to our NATO obligations. We are part of NATO; we also work closely with the United States and the Commonwealth. Why must we provide all the equipment and all the manpower all the time? As the costs are limited, we should be sharing the financial burden with our allies, in Afghanistan, in Iraq or anywhere else. In future procurement debates, it would be useful to hear how we fit into this bigger picture, given that we are constricted by the total amount that we can spend.
The Minister said that spending has in fact increased in overall terms, but the reality is that we have fewer soldiers, sailors and pilots, and fewer regiments, ships and squadrons. However, the obligations that we place on our military personnel have increased substantially. Our armed forces are therefore greatly overstretched, woefully undermanned and dangerously ill-equipped. As someone who served in the armed forces, it is quite upsetting to hear that £4.8 billion has somehow gone missing, according to the National Audit Office. That is a phenomenal sum, particularly given the basic equipment that we provide for our front-line soldiers.
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There was something of a spat earlier—swords at dawn, as it were—about the red lines and who is actually to blame. I am very new to the House and in fact, I do not care where the blame lies for past events; I want a solution for a future. So whether past Governments or today's Government are to blame, let us learn from experience and ensure that such mistakes are not made in future.
A litany of examples of the various problems has been given. My hon. Friend the Member for Harwich (Mr. Carswell) spelled out the problems associated with the SA80. The Apache was purchased—can you believe it, Mr. Deputy Speaker?—without the training manual. Chinooks, which can fly only in good weather, were also purchased. Hercules that were purchased in 1999 have still not been cleared for use by paratroopers. These are schoolboy errors and they need to be corrected. There is also the example of the Clansman radio. When I was in the Army, we dreamt of the Bowman radio system, which was to be the panacea to all our communication problems. I was well aware that, when we were in Bosnia, we were using an insecure radio system. Giorgi, the local radio ham who worked in Sanksi Most, could hear us, but so could the enemy. We were using 30-year old kit. That should never happen in a sophisticated Army such as today's. There are other examples, such as the Astute class submarine, which was £1 billion over budget.
I want to discuss the F-35, the joint strike fighter, but before doing so I want to deal with Galileo, which has yet to be mentioned today. No one has explained why we are purchasing a new global positioning system when we already have one that works and is free. Galileo, which consists of 30 satellites and mimics GPS, will cost £2.2 billion and has a running cost of £5 billion. It is backed by the EU but it is being pushed by France and Italy. Given that military equipment can run off GPS, and that we already have a free GPS system, it would be useful to hear from the Minister why we are purchasing a comparative system.
The JSF is designed as a replacement for the Sea Harrier, but if matters proceed in the way suggested today, the new aircraft carriers due in 2012—HMS Queen Elizabeth and HMS Prince of Wales—are likely to be launched with no aircraft on them. I understand that this year—perhaps the Minister can clarify this point—we are to lose all our Sea Harriers, which means that there will be no radar platform to support and protect our carriers. The T45 has been launched, which has a radar facility that could be used to assist our carriers, but its range is limited to the horizon. The great advantage of the Sea Harrier and the F-35 is that they have a radar range of some 300 miles. For six years, our carriers will lack security at sea.
Other problems have been referred to today, such as the budget cuts in America. Such cuts have come not only from Donald Rumsfeld, but from Capitol hill itself. There is also the question of technology transfer and the Americans' reluctance to hand over the technology necessary to repair and maintain the F-35.
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Another problem has to do with the date of implementation. I hope that we will have two wonderful aircraft carriers in 2012 but, even if everything goes to plan, it is likely that we will have no aircraft to put on them for another two years.
Some hon. Members have said that, because we joined the Americans in the Iraq war, they should show their gratitude by giving us back this technology. I take issue with that. I made it clear that I opposed the Iraq war, and do not think that it should have anything to do with this matter. Our very strong relationship with the Americans is based on the fact that we share technology and intelligence: in the absence of the waiver, that is a factor that must be taken into consideration.
The American House Committee on International Relations is at the core of the problem, not the Americans in general, and we should focus on the ITAR. It is important that Ministers and Tony Blair take every opportunity—
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