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It is absolutely right that we should have this debate today. Defence procurement is always an ongoing subject, and we should not push it aside and make it an add-on to the Ministry of Defence. If we get it wrong,
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it can shape our military doctrine for the future—rightly or wrongly—and leave many of our troops with the wrong equipment in the wrong place.

Defence procurement is a misunderstood subject. It often gets a bad press, involving the use of terms such as “overspend” and “late delivery”. However, the story of the small defence contracts and procurement processes going on every day—whether through urgent operational requirements or planned projects—that are delivered on time and on budget, and greatly welcomed by our armed forces, often goes untold. Yes, the large projects get a bad press. However, I was the overseas director of QinetiQ before coming into the House, and a soldier before that, and in my experience, delays in defence procurement are often the fault of the politicians of the day interfering because they feel that something needs to change, or of a strategic defence review of the threat to our forces resulting in the doctrine changing direction. Those factors inevitably have a cost impact. We should remember that they often arise for the right reasons, but they do cost money.

The other thing is that we need to lance a few of the boils that we hear about in connection with defence procurement. One is obviously the great “off the shelf” argument that my hon. Friend the Member for Harwich (Mr. Carswell) referred to. According to that argument, it is easy to nip down to Battersea heliport and procure a few helicopters for our armed forces. However, procuring a helicopter from wherever we can get it is of course not the whole story. In fact, it is probably only about 10 per cent. of the story. First, we have to see whether the helicopter can actually take the weapons systems that we want to put on it to protect it. Then we have to ensure that the helicopter has the guidance systems suitable for the interoperability needs of our armed forces. There is no point putting on to a helicopter a compass or a radar system that is fit for the armed forces of the US, the Australians or the Germans.

There is an interesting anecdote here. The US exported a number of F-22s to be stationed and used in Japan. The problem was that the GPS system did not recognise the international dateline, so half way through flying across the Pacific to get to Japan, the planes had to turn back and have the whole system reprogrammed. We have to ensure that our equipment fits our needs and our doctrines. We have to recognise that helicopters bought off the shelf might not fit the configuration of our platoons, which might carry more or less equipment than the host nation from which we buy the helicopters. The deployment of our soldiers into more hostile areas may mean that our helicopters need more protection. That takes time.

In the case of the Apache, for example, it is totally misleading to say that if we were to buy from the US, all would be well. Let us remember that we buy from other countries and we wait in line. Why should the US say, “Oh, don’t worry, UK, you can jump the queue with the Apaches”? Just tell the US marine corps, a much larger customer, that it can wait for its 500 helicopters! We would probably be told to come back in two or three years.

Ann Winterton: This is not about helicopters; it is about the delivery of the Mastiff. I suspect that the US has ordered nearly 3,000 of them, yet we are going to
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get ours fairly quickly, as we did with the previous 100. Sometimes it is possible to reach an accommodation in order to jump the queue.

Mr. Wallace: I am grateful, but my understanding of the Mastiff project is that it has been delivered because we put some of the assembly and final production in the UK. My hon. Friend the Member for Harwich objected earlier that we should not manufacture or produce in the UK unless necessary. Mastiff has been a successful procurement, delivered on time, but that was partly because the US had the force level required at the time in Afghanistan.

Another example is the FRES programme. Production of serious and complicated large bits of equipment does not happen every day. Production lines are not running all the time all over the world, churning out armoured personnel carriers. In fact, I believe that at the moment there are only two production lines in the west where armoured vehicles are being made. One is in Switzerland—General Dynamics—and there is another plant in Canada. The Vickers plant in Newcastle is not doing that job.

This is not like buying a mini or a car from Volkswagen. There are no production lines that just carry on through the years and the decades. They come together, produce the order, and very often, if the export sales cannot be found, they stop. People should remember that when they say, “We don’t need a FRES. Let’s just buy them off the shelf.” There are only two production lines capable of producing what we want; they are not in our possession at the moment and we do not have the ability to deliver. Secondly, there are no alternatives to what we want to fit into our military doctrine, so pulling off the shelf would not solve that problem. If we do not sometimes—not necessarily always—develop and make our own weapons systems, we do not have the ability to resell them or to generate income to share the development costs and perhaps profit from them. One of the most successful artillery pieces in the world is made by BAE Systems in Barrow. The British do not buy it, but it is incredibly profitable because it spreads the cost across the world. Should we decide to buy it, the unit cost would be very cheap.

What is more, our defence no longer uses the technology of 1945; its technology is highly complex. One of the reasons why we have smaller forces is the punch that our platforms can now give. They need source codes, for example, and the ability to service and upgrade throughout their lives. That means that we need control. Those who buy off the shelf may get their equipment cheap up-front, but the equipment must last for 30 or 40 years, and when it comes to an urgent operational requirement, Boeing will be waiting with a big fat invoice, and we will not have a skills base.

It is misleading to suggest that security of supply is protectionism. I am slightly older than I look, and I remember when the Belgians did not want to give us ammunition during the 1982 Falklands conflict.

Mr. Gerald Howarth: The Belgians refused to sell us ammunition.

Mr. Wallace: I think we might have learnt our lesson: the Belgians would never really come to our rescue.

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Security of supply is not protectionism, although of course protectionism exists. It is important to national security—and yes, jobs are important. Defence procurement, and Government procurement, are not a fantasy or dream of the capitalist world, because there is not a level playing field in most countries. As overseas director at QinetiQ, I regularly came up against other European or United States defence contractors. I can tell the House that the British defence market is the most open, probably the most transparent and probably the fairest in the world—and we do not get much thanks for that from our competitors. If we let it all go, we will have very little security of supply and very little ability to develop our own way of thinking.

People say that we will all be allies together. Will we? We have already diverged from a number of our European allies, in the most recent Iraq war. We should not forget that countries such as China and Iran that could become our rivals—I think that a more civilised term than “enemies”—are procuring and spending as if there were no tomorrow. We must always anticipate whatever threats are around the corner.

The reason why we can produce the UOR—urgent operations requirement—equipment that saves British lives every day is the skill base that we have here, at home. When people say that it was possible to protect the Warrior from the RPG29 or from some other threat, it generally turns out that it was done by means of a telephone call to some of our engineers in what is often little more than a shed. In the greatest British tradition, the engineers came up with the ideas and the equipment was on the front line within days or weeks. That capability is something that we should not give away.

I want to record my appreciation of what Lord Drayson has done. I believe that, as a procurement Minister, he has done an awful lot of good in putting Ministry of Defence procurement on the right track. However, I feel that there have been a few weaknesses in today’s debate. I was disappointed by the Minister’s opening speech. There are many big questions to be answered about the joint strike fighter, the third tranche of Typhoon and the update of the air tanker: where is it? There is also the question of the Defence Export Services Organisation, which my hon. Friend the Member for Newbury (Mr. Benyon) rightly raised. I used DESO in my business. It was excellent, and if we lose that expertise, British defence industry—small or big—will be the worse for it.

If anyone wants to know the difference between DESO and the DTI, let me explain that in my sector we used to call the DTI “Deter Trade International”. Its ability to secure straight answers, quick decisions and a knowledge of the market was as far removed from that of DESO as chalk is from cheese.

I was amazed that the Minister did not mention the defence trade co-operation treaty. That treaty, between the United Kingdom and the United States, was laid before the House two weeks ago yesterday, and is incredibly important to the United Kingdom defence industry and the United Kingdom and United States armed forces. It is about our sharing with our closest ally technologies that save our soldiers’ lives every day. That treaty is sitting on the table, but it has not been mentioned.

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A week and a half ago, I was in Washington to speak to senators and ensure that American protectionism did not block the treaty. My hon. Friend the Member for Harwich has talked of public accountability for defence procurement—and if he wants to see how that can go badly wrong, I suggest that he take a trip to Congress and see how pork-barrel politics often destroys a cohesive defence doctrine in the Pentagon. It is an important lesson. We as politicians and the Ministry of Defence can take long-term defence procurement decisions in the national interest without being too hamstrung by elections every other year.

Mr. Blunt: I understand that we lost the TRACER—tactical reconnaissance armoured combat equipment requirement—programme because a congressional sub-committee put a line through the programme in Congress, against the wishes of the Pentagon. I entirely agree with my hon. Friend about the consequences of doing business with the United States.

Mr. Wallace: My hon. Friend is correct. I think that a recent United States defence budget had 9,000 tags, or attachments, when it went through the appropriations committee; members of Congress were deciding that their naval base needed a new set of front gates, and the ejector seat for the new aircraft should be cancelled. That is not the way to go about it.

We needed some clear answers from the Minister. The debate is about procurement. There were many opportunities for him to update us. The fact that he missed out the defence trade co-operation treaty is important. Inevitably, it will come before the House for a vote. This might have been an opportunity to flag it up. I want to place on record my appreciation of the work of Andrew Radford and the British embassy in Washington. He has done an amazing job in negotiating that treaty with the US State Department. It is a very good document. I hope that the House will support it when it goes through. It is good news for us and for the US.

I will watch carefully how the hon. Member for Grantham and Stamford (Mr. Davies) votes, given his remarks about the European defence market. Surely he will be against such a treaty. We will watch how his new party welcomes him through the Lobby. We will see how long that view of European defence lasts.

We could use some good examples from the future rapid effect system about how we need to push forward. I am worried about FRES. It started with a weight requirement of 17 tonnes and the No. 1 priority of being air-mobile and of being able to go back in the A400M. The weight requirement has recently changed: it is now up to 27 tonnes. In our procurement of the A400M, we seek a lift capability of only 26 tonnes. The Germans have gone for 30. Currently, therefore, we could be on course to lose that air mobility. Another thing about FRES could have been clarified. It was supposed to be manufactured in the United Kingdom. That was one of the main issues.

If the FRES project means that our vehicles can no longer be air-mobile, we may have to get into the realms of answering the question: what will the Conservatives do when it comes to finding money for defence projects?
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There was the mess of spending £190 million on the TRACER programme and the multi-role armoured vehicle project from 1998. That was just a waste. Two projects—one a United States project and one a European consortium project—have been cancelled, and it has cost the taxpayer £190 million. Perhaps we could talk about the mistakes made with the SA80 rifle, or the brand-new chairs for the MOD headquarters. There are examples within the MOD budget that show a woeful lack of accounting. That could be improved.

As an ex-guardsman, I know this is minor, but we spend money looking for replacements of bearskins to satisfy one politically correct lobby or another. Most bearskins have lasted for 100 years. We do not need to scout around for artificial replacements at the cost of hundreds of pounds, which we would no doubt have to find elsewhere.

We were looking for answers today, and I am disappointed that we have not really had them. One answer that I would like from the Minister now is whether we will commit to the blue force tracking programme in the United States, to ensure that friendly fire incidents between our allies and ourselves are minimised as soon as possible.

8.49 pm

Mr. Ian Davidson (Glasgow, South-West) (Lab/Co-op): I wish to speak about shipbuilding, the aircraft carrier order and how we proceed from the position that we are in at the moment. I used the opportunity earlier to intervene. I would like the Minister to come back and tell me what steps the MOD intends to take to ensure that the structure of the aircraft carrier ordering programme is devised in such a way that opportunities for subcontracting are maximised, so that local firms in the areas of the yards involved are able to participate. We do not want the subcontract blocks to be so large that local firms cannot tender for work and it therefore has to go abroad.

Similarly, I hope that the Ministry of Defence will work in Scotland with local colleges and Scottish Enterprise in its various manifestations to ensure that, across the country, adequate training is provided for both adults and youngsters so that we maximise the number of people taken into employment in the shipyards and the subcontracting industries, rather than simply having imported labour. We are worried about the skills shortage in the west and east of Scotland and we do not want the jobs simply to be filled by immigrants from eastern Europe or elsewhere. The Prime Minister has spoken of British jobs for British workers; I want these jobs to go to people who are currently unemployed or under-trained, and we now have an opportunity to focus on achieving that.

Robert Key: What hope is there of the hon. Gentleman achieving that aspiration if the Scottish National party is in control, none of whose Members are present for this major defence debate? It will control what happens in Scotland—and kick out the forces, as far as we can tell. That is a tragedy, and I hope very much that he will persuade his electors to re-elect him.

Mr. Davidson: I thank the hon. Gentleman; if I am looking for speakers to support me I might consider
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inviting him—although, given the Conservatives’ record in Scotland, I might hold back from doing so. However, I take his comments in the spirit in which he intended them.

We will have a robust discussion in Scotland about whether the Scottish nationalist-led Scottish Executive are prepared to put the necessary money into training to ensure that industries such as defence, which depend on the UK Government for their orders, are adequately staffed and provided for. That will be one of the most important political debates in Scotland over the next year or so, and I intend to participate in it. I have done all that I can to ensure that my constituents are aware that the placing of the orders for the aircraft carriers has come about as a result of Scotland’s membership of the United Kingdom. My constituents are under no illusions. If there were an independent Scottish navy, it would not be ordering two aircraft carriers on its own.

Let me return to the thrust of my remarks. The MOD has been working constructively and positively with the shipbuilding industry to try to provide a degree of forward planning to ensure that we avoid the peaks and troughs of demand that have caused such havoc in the lives of many of that industry’s work force, who have had to be repeatedly laid off and then rehired. When skilled staff in industries such as shipbuilding get laid off, many of them find other jobs and never return. We cannot simply turn such a labour force on and off like a tap.

Given that context, I particularly welcome the Government’s commitment in principle that the peaks and troughs in the shipbuilding orders for the frigates and aircraft carriers will be evened out by sequencing the placement of the MARS programme—the military afloat reach and sustainability fleet tanker programme—and making sure that it meshes in. I was therefore extremely concerned when representatives of the industry informed me that the MARS commercial manager recently wrote to a number of suppliers suggesting that it was the Government’s intention that the fleet tanker programme should be progressed under the EC public procurement regulations. If that were to happen, and if the competition for the fleet tankers were to be open to European companies, it would presumably go to the lowest bidder, and therefore the opportunity that we have to adjust the timing of the flow of work through the shipyards to take account of peaks and troughs would be lost. We ought at the very least to delay that until the forthcoming MARS industry day has taken place on 24 October.

In the longer term, we should delay the programme until such time as we are able to ascertain exactly what the shipyards’ flow of work under the aircraft carrier order will be. As I understand it, simply to issue an advert for the procurement process through the Official Journal of the European Union would commit us to that process at an early stage. We would not then be able to claw it back.

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