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17 Oct 2007 : Column 267WH—continued

10.40 am

Mr. Gerald Howarth (Aldershot) (Con): I am delighted to respond in this debate on behalf of the Opposition. I congratulate my hon. Friend the Member for Newbury (Mr. Benyon) on securing this very important debate, which will be widely read across the land and where the defence industry is represented. I am proud to be the Member of Parliament representing the headquarters of BAE Systems and QinetiQ—two of Britain’s greatest defence companies. I make no apologies.

I am replying to this debate because I am a shadow Defence Minister, and I think that it is a mark of the contempt with which the Prime Minister and the
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Government hold the defence industry in our country that they have put up today a Minister representing postal services. I have never met him—it is not his fault, and I dare say it is mine—but I have read through his experience, and he seems to have none of the defence industry. It is contemptible that he has been put forward to respond to this debate. The truth is that Defence Ministers are consumed with embarrassment about a decision on which the Secretary of State for Defence was not consulted, let alone his junior Ministers. They have managed to shuffle off the responsibility on to the poor, hapless Minister here today.

As my hon. Friends have explained so graphically, the truth is that this was not planned. In July of this year, an advertisement in The Sunday Times invited people to apply for the job of head of the Defence Export Services Organisation. This is how the Government described the appointment:

It was so significant that 10 days later the Prime Minister scrapped the whole organisation, so obviously no one new was appointed to run it.

When I asked whether anyone in the industry had been consulted, eventually I received a reply from the Secretary of State for Defence, who said:

which I assume means chairmen—

What contempt! Those captains of British industry, who are working their guts out for their employees and their country and for the defence of the realm, were informed by telephone that morning. Indeed, they were informed only after Alan Garwood had been, at half-past 9 in the morning—and he is only the bloke running the system! It is perfectly clear that there was no consultation.

My hon. Friends have asked for some answers from the Minister, and I have some questions of my own. It is his duty to answer those questions, although I doubt that he will be able to do so. The good news that I can tell my hon. Friends is that, according to the Campaign Against Arms Trade, whose brief was most ably read out by the hon. Member for North-West Leicestershire (David Taylor):

We will look forward to receiving information on how that decision came about, probably not from the Minister, but from the Campaign Against Arms Trade. That is highly appropriate, because my hon. Friend the Member for New Forest, East (Dr. Lewis) made it clear that this was a sop to the old left of the Labour party and those who were upset by the calling off of the Serious Fraud Office investigation.

It is clear that some Labour Members have it in for the defence industry, and the hon. Member for North-West Leicestershire demonstrated his complete,
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abject lack of understanding of Britain’s defence industry and its importance to constituencies across the land. He ought to understand the anger of his party colleague, the right hon. Member for Warley (Mr. Spellar) at his display of such ignorance in front of a man who, of course, was a Defence Minister, was probably instrumental in shaping the strategic defence review in 1998, and continues to make an important contribution to defence matters in our country.

The hon. Member for North-West Leicestershire was inveighing against the cost of DESO. In one year, it costs about £15 million net, but produces returns of £5 billion in sales for our country.

David Taylor: Will the hon. Gentleman give way?

Mr. Howarth: I am sorry, but I do not want to hear any more from the Campaign Against Arms Trade.

My hon. Friend the Member for Reigate ( Mr. Blunt) pointed out that DESO contains specialist services and expert knowledge, and of course people in uniform, because overseas Administrations are not organised in the same way as the United Kingdom. Many of them want to come to the United Kingdom and speak to military personnel, in a military environment, and talk to military Ministers in the Ministry of Defence. By this break-up, the Government are proposing to remove that special experience. As my hon. Friend the Member for Newbury said, all the able people will be making tracks to the front door, if they have not done so already.

As the right hon. Member for Warley pointed out, Government-to-Government deals will remain the responsibility of the MOD. My hon. Friend said that information had been circulated to some of us from people who are desperately concerned. The Minister does not understand. I assure him that this is no synthetic anger. We are deeply angry about what the Government have done, and so is British industry.

In case the Minister does not know, the answer to the frequently asked question:


Everybody else will be subject to arrangements yet to be decided.

Interestingly enough, the Campaign Against Arms Trade is also saying that by shifting this into the Department of the Minister here today, the defence industry will be removed from the Ministry of Defence, which will leave it much more subject to policy decisions from the Foreign and Commonwealth Office and the Department for Business, Enterprise and Regulatory Reform. This decision will have a huge adverse impact. It is already having an adverse impact on the way in which defence business is done between the United Kingdom and potential overseas customers. Has the Minister attended the defence systems and equipment international exhibition at docklands? He should do so.

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Clearly this is an act of political spite. It is a pay-off to Baroness Vadera, who got a peerage as well. We need to know which officials in the Ministry of Defence and the Treasury are either involved themselves in the Campaign Against Arms Trade or have family members who are involved. We also need to know what resources are going to be put into the new arrangement with UK Trade and Investment. What is the MOD’s commitment going to be? I understand that the Minister’s Department intends to set up an organisation within the DTI with military officers seconded to it. Is that the case? Have those military officers agreed? Where will they be located? Will they have access back into the MOD? What about small and medium-sized enterprises, which some of my hon. Friends have mentioned? I received an e-mail from a company that I know called Christy Military Flying Training Ltd, which is a DESO charter member. It had to qualify to become a charter member, which gives it instant credibility in the overseas market. It said:

It also said that

SMEs will be wiped out of the picture. We know from a written answer published today that DESO branches—project offices—throughout the world number about 15. What will happen to them? We need an answer from the Minister.

This is a contemptible, personal decision by the Prime Minister, whose interest in defence does not venture beyond his own constituency, where Rosyth is located.

Hon. Members: Or a photo shoot in Iraq.

Mr. Howarth: Indeed, my hon. Friends are right.

This decision is a sop to the left and a kick in the teeth for the United Kingdom’s most successful manufacturing industry. Some 21 per cent. of defence employment is linked to defence exports, I can tell the hon. Member for North-West Leicestershire. Ultimately, however, the real crime is that the decision is a gift to our competitors. Unless seriously satisfactory alternative arrangements are put in hand, we shall reverse this decision when we return to office, and we shall re-establish DESO.

10.51 am

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I congratulate the hon. Member for Newbury (Mr. Benyon) on securing the debate. I appreciate his strong interest in defence issues and his background as a member of the armed forces. We also heard from a former shadow Secretary of State for Defence, the hon. Member for Mid-Sussex (Mr. Soames), and from others with a background in the issue. I assure them that I have full respect, as they would expect, for that experience. If that respect is not returned, that is a judgment not for me, but for Opposition Members.

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The question was asked why a Minister from the Department for Business, Enterprise and Regulatory Reform is speaking in this debate. The answer is that the Prime Minister’s decision, which was announced on 25 July, was to transfer some of the Defence Export Service Organisation’s responsibilities to UK Trade and Investment, which has two parent Departments, one of which is DBERR, so in the future my Department will have a strong interest in this area.

I shall begin by endorsing the sentiments that have been expressed about the strength of DESO’s record, the quality of the people who work there and its success in securing many orders for the defence industry throughout the UK. Hon. Members asked several questions about the transfer, but at root there is one more fundamental question about whether in the transfer we will lose the record, expertise and quality that DESO has stood for over the years, or whether there will be an opportunity to add to it. The Government are of the view that the change does not mean losing that quality or that record but gives us an opportunity to add to it.

One point was made in the debate that I cannot endorse: that somehow UKTI is not a successful body for the UK, that it is not respected throughout the world and that it does not have expertise and value to add to the promotion of exports in general and of defence exports in the future. The question was asked about the announcement itself, and I am afraid that I must agree with the answer that the Opposition spokesperson, the hon. Member for Aldershot (Mr. Howarth), read out a moment ago. As the machinery of government changes, it is not unusual for such changes to be announced in that way, or for the implementation details to be worked out afterwards. It has happened in the past, and it may happen in the future.

Mr. Benyon: It is now three months since the decision was taken, and customers want to know whether the Ministry of Defence will retain as part of its remit a responsibility for defence exports.

Mr. McFadden: That responsibility passes to UKTI under the proposals. I can confirm to the hon. Gentleman that my colleagues, Lord Jones of Birmingham, Lord Drayson and others are engaged in intense discussions with industry representatives to make a success of the change. There is a shared desire to do so.

Mr. Wallace: I understand the Minister’s reasoning, but what was wrong with DESO?

Mr. McFadden: We do not make the change because we believe DESO is in any sense a failing or a bad organisation but because, despite its record of success and the quality of its people, we believe that value can be added by integrating defence exports efforts with the efforts of UKTI to promote exports throughout the world.

Dr. Julian Lewis: The Minister is being very gracious in giving way. He said that it was a machinery of government decision and that such decisions are routinely taken in that way, but are they routinely taken
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in that way without consulting the principals that the decision affects, as has clearly happened on this occasion?

Mr. McFadden: I have given my answer to the machinery of government question. The Prime Minister is responsible for machinery of government decisions, and it is not without precedent for such decisions to be announced and for the implementation details to be worked through afterwards. That is what has happened in this case.

Dr. Lewis: Consultation.

Mr. McFadden: If hon. Members will bear with me, I should like to make some progress and perhaps provide them with some of the detail that they have asked for during the debate.

The new organisation will be integrated with UKTI. It will deliver services that are responsive to the needs of our overseas customer Governments in a way that coheres with UKTI’s strategy. The transfer will establish the new organisation as a UKTI business unit with expertise in defence services and products, but it will be managed and run like other UKTI business units.

The question was asked about what staff will work in the unit. I am happy to tell Members that it will contain a mix of civilian and military staff, and we recognise the point that was made about the importance of serving officers being part of the organisation. I hope that that answer clarifies the situation. We are trying to keep DESO’s value and record, and to increase the synergies between the defence industry and the wider manufacturing and service sectors within the UK. Many defence manufacturing companies manufacture more than solely defence goods, and at present they must draw on expertise that is spread widely across Government. That divide need no longer apply, and the same can be said of investment advice.

We recognise that there are specific features that are unique to the defence sector that must be accommodated in the new arrangements. The defence industrial strategy describes the part that defence exports play in ensuring that those sovereign operational capabilities, vital to our defence needs, are maintained within the UK. Defence exports can also play an important role in building bilateral relations with friends and allies throughout the world.

Several questions were asked, and people have read from briefing documents, about decisions that have yet to be taken. I shall be honest with Members: there are decisions that have yet to be taken. The plan is to develop an implementation plan, led by the Cabinet Office, by the end of the year, which will answer many of the questions that have been put today. Work has already begun on the transfer in order to ensure that it is done as seamlessly as possible. In managing its implementation, there is of course an important dialogue to be had with industry, to ensure that we understand the specific requirements and achieve the best possible result from the transfer. We will of course retain strong links with the MOD afterwards. We recognise that that is essential in order to ensure that
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the advice and assistance of the armed forces can continue to be used in support of defence products.

Sir Nicholas, I should like to continue, but perhaps time demands that I end there.

Mr. Gerald Howarth: On a point of order, Sir Nicholas, given that the Minister has been unable to answer many of the questions put by me and my hon. Friends, will he give us an undertaking that he will write to us?

Sir Nicholas Winterton (in the Chair): Time is up, but I am sure that the Minister will give that assurance.

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Export Credits Guarantee Department

11 am

Mr. Nick Hurd (Ruislip-Northwood) (Con): It is a pleasure to serve under your chairmanship for the second time in two days, Sir Nicholas. It is becoming a welcome habit.

I am delighted to have the opportunity to spend some time throwing a spotlight on an important institution that has a long track record of supporting British exports and facilitating British trade, but which has been dogged by controversy for most of its history, not least because of its involvement in projects such as the Baku-Tbilisi-Ceyhan pipeline and, most recently, Sakhalin. That institution is the Export Credits Guarantee Department.

The organisation needs to be modernised, and I speak as a member of the Environmental Audit Committee, although I was not a member in 2003, when it published its groundbreaking report calling for changes to the ECGD’s remit. I am also a board member of the Conservatives’ quality of life policy commission—recently, it, too, called for changes to that remit. My thesis is simple: Britain is a recognised thought leader on climate change. Indeed, the Government take pride in their reputation for leadership on the agenda, and some of that pride is well placed. They have taken a lead in setting targets, pushing climate change up the agenda of international politics and, most recently, submitting to the House a draft Climate Change Bill. However, at this critical time we should seek to demonstrate best practice in our institutions. The ECGD is a particularly important institution, because export credit agencies are an important source of capital and therefore an important driver of change in the business community. Those agencies and the ECGD engage with other countries, so they should therefore reflect the British Government’s priorities and values.

The ECGD’s importance is made apparent by its own sustainable development action plan, in which it states:

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