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Today, we want to look at what the comprehensive spending review settlement will mean in the years ahead, at the Government’s record to date, at the implications for the big procurement projects and at
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project management. As a share of total Government spending, defence expenditure has fallen from 7.8 per cent. in 1998 to 6.1 per cent. in 2006, despite the fact that we are involved in two wars—in Iraq and Afghanistan—with the inevitable reduction in the life expectancy of much of the equipment involved. Funding from the Treasury reserve for urgent operational requirements—UORs—does nothing to diminish an ever-increasing liability that must be met, in terms of equipment, at some point. In that context, we must look at Ministers’ boasts that they will achieve a 1.5 per cent. annual real-terms increase.

The last settlement that was trumpeted in similar terms to this one resulted in three infantry battalions being cut and the loss of three destroyers and three frigates. What are the likely casualties this time round? If the rumours and leaks circulating in the Ministry of Defence are anything to go by, we could lose a further five frigates and destroyers and two submarines, up to 6,000 personnel from the Army and two squadrons of Tornado GR4 attack aircraft, cutting the RAF’s front-line squadrons from eight to six. Perhaps the Ministers will take the opportunity of this debate to snuff out those rumours.

My hon. Friend the Member for New Forest, East (Dr. Lewis) made a point about the Navy earlier. This is not a question of a change in our assumptions about the Navy’s numbers. The Government presented the strategic defence review, in which they said that they required two carriers and 32 destroyers and frigates. When the Government’s security Minister was the First Sea Lord, he said that we could not get by with fewer than 30 destroyers and frigates. If the Minister thinks today that we can get by with a lower number, let him justify that to the House. We want to know what has changed in the strategic assumptions that would allow that to happen. The argument that we are normally given is that we do not require platform numbers because we have increased capabilities, but that argument cannot be deployed indefinitely. We cannot keep cutting platform numbers while saying, “Because they can do more, we require fewer of them.” Ships cannot be in two places at once. If the Government intend to make further cuts to the Navy, they must explain to the House, to the Navy and to the country what strategic changes have taken place that will allow them to move from the plans that they brought to the House of Commons in recent years.

All these elements occur against the Government’s poor record of managing the defence budget. In September this year, the Public Accounts Committee outlined the Government’s performance. In 2005-06, 19 of the major equipment projects, excluding the Typhoon aircraft, were forecast to cost £27 billion, some 11 per cent. over the approved budget, and had been delayed by a further 33 months. Indeed, the Department’s performance against its key user requirements is worsening, with only 17 projects being expected to achieve all requirements—one fewer than in 2004-05.

As usual with anything run by the current Prime Minister, we have to read the small print to understand the true picture. Some of the procurement reforms of recent years might have helped to stop procurement costs spiralling entirely out of control, but substantial capabilities have been sacrificed to achieve that. The number of Type 45 destroyers being procured has
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fallen from 12 to eight, and possibly as few as six. There have been reductions in the number of guided multiple rocket launch systems, Brimstone missiles and recovery vehicles being procured.

The Public Accounts Committee reported that the MOD had previously said that it had carried out a departmental review that came up with 44 ways to reduce the forecast cost of these projects by £781 million, or 3 per cent. of the total. Yet, on closer examination, it was discovered that £91 million represented a rebate and exemption from Her Majesty’s Revenue and Customs, and a further £448 million did not represent real savings at all, as the Department transferred the expenditure to other budgets.

The real effect of this mismanagement has been on the operational efficiency and safety of our armed forces. The most appalling indictment in the life of this entire Government has been that relating to the death of Sergeant Roberts in Iraq as a direct result of a Government decision not to procure sufficient quantities of enhanced body armour, purely for political reasons. The assistant coroner said that

No more damning words have been said about any Government.

Then there was the utterly inexcusable and, in my view, inexplicable decision in 2004 to cut the FRC helicopter budget by some £1.4 billion. At a time when our troops are facing a shortage of lift capacity in both Iraq and Afghanistan, that decision was astonishingly complacent, if not downright incompetent. The consequence has been a chronic shortage of helicopters in both theatres and, although we welcome the procurement of the Merlins and the eventual conversion of the Chinooks, that has all happened far too late in the day, as my colleagues who have had experience in Iraq and Afghanistan will attest.

Ann Winterton: My hon. Friend is describing the procurement of helicopters, and the implied costs involved. Is it worth considering the fact that one can often rent helicopters at a far lower price and therefore get far more of them to use in theatre? That would allow us to provide them much more quickly than the very expensive procurement process does.

Dr. Fox: The aim must always be to give our troops the equipment that they require, when they need it. However, we must also take into account the fact that many of the helicopters that are available commercially might not carry the defensive aids and equipment that we take for granted in some of the helicopters that we procure. If the necessary protection could be guaranteed, it would make perfect sense to get them as quickly and cheaply as possible. It is not only right for the Government to do that; it is their duty to do so wherever possible.

Mr. Hoyle: The other point that the hon. Gentleman ought to make is that some members of the coalition in Afghanistan have not been playing their part. They should have been supporting our troops much better, and the use of their equipment should have been
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offered, rather than our having to scrounge around. That is the reality: we have been let down by our partners. Does the hon. Gentleman not agree that they should take up some of the weight that has been placed on our shoulders?

Dr. Fox: It is not often that I am happy to have words put into my mouth, especially by Members on the other side of the House, but the hon. Gentleman is absolutely correct. Some of our NATO partners have to understand that being in an alliance means having to do the things that they do not want to do, as well as doing the things that they do want to do. In Afghanistan in particular, the heroic efforts of the Canadians and the Danes, and to a certain extent the Dutch, alongside ourselves and the United States, are an example to the other members of NATO. Security is not optional. If they want to enjoy global security, there is a price to be paid.

I have criticised the MOD’s management of the defence budget , but it should not shoulder the entire blame. The just-in-time approach to procurement is entirely Treasury led. The Minister and I have served on opposite sides on a Finance Bill and we both know exactly how the Treasury operates in the United Kingdom. The Treasury approach has resulted in an increasingly difficult procurement environment. Given the strategic uncertainty and constantly evolving operational environment, it is extremely important that we give personnel the flexibility of equipment choices to enable them to perform their tasks successfully. Despite Treasury resistance, UORs have proved vital, which is why I believe that Members on both sides of the House will find it extremely disappointing that Defence News last month stated that

Indeed, sources say that Treasury officials might suspect that not everything ordered via UOR was really urgent. I would be grateful if the Minister, in winding up the debate, dealt with this question; it is a fundamental issue, not simply a theoretical one.

The hon. Member for Norwich, North (Dr. Gibson), who is no longer in his place, made an important point about the need for better parliamentary scrutiny of major procurement programmes. That need not impede the MOD; in fact, it could eventually help to reduce cost and time overruns. We in the House of Commons simply do not have sufficient access to the details of equipment programmes and do not know how projects will fit into the defence budget in the years ahead. It is difficult not only for MPs but for the military to judge the Government’s plans sufficiently.

The Prime Minister says that he wants new politics, so perhaps the Minister will assure Parliament that Members will have a chance to look at the 10-year funding forecast for major procurement projects. For example, in the years of the comprehensive spending review and beyond, we would like to see how much is allocated in each year for spending on aircraft carriers, the future rapid effect system, the replacement of the nuclear deterrent or the defence training review. Unless we know that, we can make no sense of whether the
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Government’s proposed allocations are realistic or simply a wish list. The House operates in the dark, which other elected assemblies simply would not accept.

Although we have welcomed the carrier announcement, a number of concerns and unresolved issues remain. The in-service dates are now 2014 and 2016 and the cost will be £3.9 billion, but in which years will the costs be borne? Will the Minister update us on contract negotiations?

Some progress has been made with FRES, but medium-weight armoured vehicle procurement has been badly handled, and we should be much further ahead than we are. Nine years after the Government announced their intention to procure new vehicles, we have not completely reached main gate, which is unacceptable. As the Defence Committee said:

Despite that, we still get procrastination. Similarly, with the replacement of our nuclear deterrent and the defence training review, we need to know where the potential costs will manifest themselves in the actual budget; otherwise we can make no sense of any of the Minister’s promises today.

The fact that our procurement process too often produces long delays and budgetary overruns is hardly a bone of contention. The consequences are that we often pay too much for things that are almost out of date by the time we get them. That makes no sense. It provides neither value for money for the taxpayer, nor a predictable equipment flow for the armed forces. However, it would be churlish not to acknowledge the efforts made to improve the situation, not least by the noble Lord Drayson. Whatever its merits, the defence industrial strategy needs to be refined further. We need a more rigorous assessment of what constitutes sovereign capability and whether we are willing fully to support it through our economic and procurement policies. At the same time, we need to be frank about where we are beginning projects that are either duplicating work undertaken elsewhere or are unlikely ever to come to fruition. Better project management is essential to achieving better value for money.

We must also recognise that if we want British defence jobs to be protected—and they are a vital part of our economy, as well as an essential part of our defence infrastructures—we need to expand British defence exports. We intend to begin a consultation with our defence industries to see how a future Conservative Government might best achieve that. Stronger exports are, in the longer term, the best way to create entrepreneurship in the defence sector and secure defence jobs. That will be taken up by my Front-Bench colleague in his wind-up speech. The Minister and I have already exchanged views on it.

All these issues may sound technical, which probably explains the lack of attendance in the House today, but what might sound technical in the comfort of the House of Commons is of vital importance to the safety and well-being of our armed forces personnel and the adequate protection of our country. The difference between success and failure in any project often lies in
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the detail. There is no inherent reason why there should be a difference between the parties on that issue, but the House of Commons must be given a greater role because too many of the Government’s failures are having a negative impact on our armed forces and our ability properly to defend our country’s interests, which is simply unacceptable.

6.6 pm

Mr. Quentin Davies (Grantham and Stamford) (Lab): It is a pleasure to follow the hon. Member for Woodspring (Dr. Fox), who made a good speech. He often makes good speeches on this subject, and I have no doubt about the knowledge and commitment that he and his colleagues on the Opposition Front Bench bring to defence matters. When I sat on the Conservative Benches, I often found myself agreeing with them on defence matters. However, it was always difficult to get them to live up to their rhetoric. They were continually saying, as they have said today, that the Government were not procuring enough helicopters, frigates or submarines. There is always a good case to be made for procuring things that are not procured at the moment. There is always a good case to be made for going back to some previous target for procurement of a particular type of equipment. Whenever I asked what the Conservative Front Benchers proposed to do about the problem, however, I always got the same answer that we have heard this afternoon. No, they were not committed to spending any more money. They would either reduce their commitments, or if not, they might think a bit more about it— [Interruption.] Does the hon. Member for Congleton (Ann Winterton) want me to give way?

Ann Winterton: Any simple housewife will tell the hon. Gentleman that the important thing is not what one spends, but how one spends it. The money wasted on the defence budget could have provided much more equipment. Questions have been raised about those matters, and I suggest that the hon. Gentleman do his homework before speaking on this subject.

Mr. Davies: I am coming on to that. As a matter of fact, Defence Equipment and Support—the new version of the Defence Procurement Agency, merged with the Defence Logistics Organisation—has an extremely good and improving record of dealing with these issues. I am afraid to say that the Conservative party, in simply saying that it can identify and reverse a lot of waste, will have no credibility unless it is prepared to be specific about how it is going to save the money. It is no good the Conservatives saying that if the commitments are too great they will cut them back, unless they are prepared to answer the question that they have never answered, as they have not answered this afternoon: what specific commitments are they going to cut in the present context? They can see the challenges that the country faces as well as Labour Members can, so which particular commitments are they going to cut? There is always a silence on that.

There is a fundamental hollowness in this matter, as in other matters at the heart of the Conservative party. I am not making a personal attack on the hon. Member for Woodspring, as this is a generalised phenomenon. It is all about the way the Conservative party has been managed and been directed. It is
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focused entirely on pretence and the creation of image. When it comes to the difficult and responsible task of costing tax promises or defence promises and looking at the hard questions and difficult dilemmas that real Governments face, the Conservative party shies away from it.

As I said, the Government have a fine record on defence procurement and I want to pay tribute to my Front-Bench colleagues this afternoon. I base my judgment on the findings of the Select Committee on Defence, an entirely objective body, which found that the Defence Procurement Agency achieved 100 per cent. of its targets in its last year before the merger. Those targets are rigorous; I will not go through them as I do not have time, but anyone with any background in the subject knows how extremely difficult it is to achieve those targets. Yet 100 per cent. achievement was reached, against the background of appalling cost and time overruns in the past. Some of us thought that we would never get the operation to succeed as it has.

I would also like to congratulate the Minister on the introduction of the urgent operational requirements system, which has proved splendid in practice and has resulted in Mastiffs being delivered in fewer than six months from contract to operation. Those are fine achievements and I am sorry that the Opposition were too churlish to recognise them.

Bob Russell rose—

Mr. Davies: I will give way once again, but I will not have time for any more interventions.

Bob Russell: The hon. Gentleman is clearly well informed on these matters. The Minister refused to let me intervene earlier, so perhaps the hon. Gentleman can answer my questions. Does he agree that all the engines that power Her Majesty’s Royal Navy should be manufactured in this country? And will the new vessels that we have heard about all be powered by British-made engines?

Mr. Davies: My concern is simply to ensure that we have the equipment that our forces need in order to do the job. That is the No. 1, overriding priority. The No. 2 priority is to secure the equipment in the required form, to the required specification and at the required time, and at the lowest possible price for the taxpayer. All other considerations are tertiary at best—including, I have to say, the creation of employment in the defence industries.

We must be tough and rigorous about these matters. There are choices to be made. I have tried to give an honest answer to the hon. Gentleman’s question.

Mr. Hoyle rose—

Mr. Davies: I will give way very briefly to my hon. Friend.

Mr. Hoyle: Does my hon. Friend agree that when we have the best of British jobs and are producing the best of British engines, we ought to support that?

Mr. Davies: It goes without saying that if that is the case, the best deal will be procured from that source.

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