Defence and Security Procurement

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Dr. Murrison: The Minister has already cut across his right hon. Friend Baroness Taylor in his previous replies to me about subcontracting, as the record will show and which we shall almost certainly pick up. The explanatory memorandum asserts on page 6 that there is extensive application of exemptions from public defence and security contracts from the rules of the internal market. Does the Minister know how many referrals there have been to the ECJ on the grounds of inappropriate use of article 296? He has admitted that Nordic T-shirts and south-European firemen’s hats are not part of that number, but can he cite any that have been referred using that mechanism and tell us what the outcome was?
Mr. Davies: I have already said that I am not aware of any such cases. If I become aware in the next few minutes, I will certainly let the hon. Gentleman know.
Mr. Davies: I have just explained that I do not know of any cases when any parties—that is to say ourselves or any other member states—have been referred for abuses of article 296. I may have to go back over this because it seems that my first answers were not taken on board. Although I said that I did not know of any such cases, I now understand that there have been one or two down the years, but no more than six and the UK has never been referred. That answers the hon. Gentleman’s question. My right hon. Friend the Minister for the Armed Forces was absolutely right that the UK defence equipment market is the most competitive and the most open in the EU. That is precisely why there is some benefit to bringing the directive forward. Doing so will create a more open market in defence so that member states cannot argue that it is essential to their security interests that they do not buy from outside their own country. If they were buying war-fighting equipment and they wished to give the order exclusively to their own nationals, they would have to argue that it is essential to their security interests to do so. In so far as the directive might push member states into adopting a more liberal and less protectionist attitude—and we believe that will be the case—that will be to the corresponding benefit of UK industry. We may stand to gain proportionately more from this trade liberalisation than other member states—although, of course, everybody gains from trade liberalisation.
Dr. Murrison: We will come to the attitude of indigenous industry to the measure later. However, regarding the hypothesis that existing structures have not been tried sufficiently well and we are introducing a directive unnecessarily, what assessment has the Minister made of the 2006 code of practice that was drawn up by the EDA, which the Spanish promptly announced they would ignore? That set the scene for yet another agency flop. It is important to audit the success or otherwise of what is currently in place before we go on to something else. I hope the Minister agrees and will tell me what assessment he has made of that code of practice.
Mr. Davies: The code of practice is a voluntary and non-binding inter-governmental regime and two things flow from that. It does not necessarily have an immense effect, whereas if the directive is adopted, it will be binding, and if there are any evils, they will not necessarily be overwhelming. In addition, participating member states must agree to advertise contracts. As the hon. Gentleman can see, that is already in the text of the proposed directive.
If member states subscribe to the code of conduct, contracts must be advertised on the EDA’s electronic bulletin board. We have no problem with that. Six exemptions are made to advertising such contracts in order to respect the sensitivity of certain procurements—for example, nuclear weapons, nuclear biological and chemical, cryptographic equipment and so forth. We are happy with those exemptions and agree with that.
During the past four years, several hundred contracts worth billions of dollars have been advertised on the electronic board. Those are contracts that otherwise might not have been advertised and that is a favourable development. Following on from my previous answer, if more business is done across member state borders in the European Union, our industry is well placed to get a decent share of it. That is an entirely benign development, which we support.
Dr. Murrison: May I ask the Minister about research and development? He will know that that is extremely important to the United Kingdom because we do most of the research and development in Europe. Governments and industry are unlikely to invest in R and D as heavily as they currently do if they think there will not be much in it for them, particularly if they think that jobs will not be created in their country. Given that most of the research and development in Europe is done in this country, what impact does the Minister think the directive will have on British R and D and on our technology base?
Mr. Davies: The latest presidency draft has reinstated the R and D exemption that exists in the classic directive where the new provisions on article 20 have been retained for circumstances in which the exemption will not be applicable. That satisfies the objectives of our position. We have recently had discussions with industry to consider what further changes might be sought and we have made proposals accordingly.
Dr. Murrison: May I quiz the Minister on conflicts with other pieces of work and institutions? I shall start by mentioning the defence industrial strategy. I am in a slightly difficult position because in a way I am defending a piece of Government material. We agree with parts of the strategy, particularly on appropriate sovereignty. It is perhaps up to us to say so.
On 10 March, the right hon. Member for Coventry, North-East said that further work must be done to deconflict the DIS, any partnering arrangements we might have, and the draft directive. What has been the outcome of that deconfliction exercise? What conflicts have been identified and what remedial action has been necessary, particularly in relation to version 2 of DIS, which we thought we would get this year, but for which we will have to wait a little longer?
Mr. Davies: The theoretical conflict exists and must be what my right hon. Friend was referring to earlier this year. Clearly, member states such as the UK can develop long-term partnership arrangements, such as those set out in the DIS, and can decide explicitly, as we have done, that we set store by having a sovereign capability in some areas. The hon. Gentleman will be familiar with those—naval and submarine shipbuilding, complex weapons, encryption and so forth. It is good to know that we have the support, as least for the moment, of the Opposition on those matters. Theoretically, directives of this kind would cut across that. As I said—I anticipated the hon. Gentleman’s question in my opening remarks—we are happy that the protections that we required in those areas are now in the directive. I refer the hon. Gentleman to article 9(a) on secure information, and to recital 7 and articles 14 and 15 on security of supply and national capability. If he reads those, he will see that our position is pretty satisfactorily protected in those important areas.
The Chairman: Order.
The hour allotted for questions is almost over, but several Members still wish to ask questions. Under the provisions of Standing Order No. 119(7), I am extending the time to allow the remaining questions to be asked. We shall move on to the debate after no more than half an hour. Any extra time given for questions will be deducted from the total debate time, so we should still finish no later than 7 o’clock.
Mr. Jenkin: On a point of order, Mrs. Dean. I had intended to wait until questions were finished, but I wonder if I may raise this matter now. In my view, it is unprecedented for a Committee to be asked to consider a draft directive without it having been furnished with the latest draft of that directive in advance. Were this not material, Mrs. Dean, you might not have to consider the matter so seriously. Given that the Minister confirmed that certain wording has been amended, which resulted in the Government withdrawing a matter of key concern from the negotiations—security—it is impossible for the Committee to fulfil its function under the rules of the House, as laid down by Standing Orders and as charged by the European Scrutiny Committee, without the document. The Committee should adjourn forthwith until another day when the document is available.
The Chairman: I can confirm that there has been no breach in Standing Orders. If the Minister wishes to respond, he may do so.
Mr. Davies: I have already expressed my regret that we did not have the latest text available. As I explained, I discovered that fact only about an hour and a half before the Committee was to meet and have already launched an inquiry into why it happened. I am not in a position to offer a further explanation now, unfortunately. The matter of the point of order is not for me to decide. I stand ready to follow the Committee’s wishes.
Mr. John Hayes (South Holland and The Deepings) (Con): Further to that point of order, Mrs. Dean. I came to the Committee, albeit tardily, and had the papers before me, having done my research. I now learn that we do not have the draft directive that we are considering. Frankly, is it not appropriate to adjourn so that we can have proper consideration?
The Chairman: Order. I must suspend the Committee for 15 minutes for a Division in the House.
5.29 pm
Sitting suspended for a Division in the House.
5.44 pm
On resuming—
Mr. Jenkin: On a point of order, Mrs. Dean. It might be said that we are not here to scrutinise any particular document but to scrutinise a general approach by the Government, which is what the motion refers to. However, the document before us is dated 2007, which suggests that rather a lot of water has gone under the bridge since then. That has been confirmed by the Minister, and on a crucial point about essential national security interests. I submit that the Standing Orders were not written to accommodate such tardy production of documents and such slovenly production of information on the important issues that the Committee has been constituted to scrutinise.
I ask you, Mrs. Dean, to reconsider the request that the Committee should adjourn until we have the final wording of the entire document laid before us, which we can question the Minister about and debate as part of the assessment of the Government’s overall approach. To proceed on a document that is almost a year out of date seems to fall outside the spirit of the Standing Orders as they were intended to be interpreted.
The Chairman: Are there any other points of order?
Mr. Hands: Further to that point of order, Mrs. Dean, as a member of the European Scrutiny Committee I am equally amazed that we are considering the document, which is dated 13 December 2007, not least because the European Scrutiny Committee has considered the document on six occasions since it was published, as can be seen from the front page. We kicked off on 6 February 2008 and continued to scrutinise it all the way through to 12 November 2008.
It is surprising that we cannot have an updated version of the document, considering the amount of scrutiny that I and other members of the European Scrutiny Committee have given to it since it was published. Furthermore, I believe that there have been at least two revisions to the document since its publication. I suggest, in the name of the European Scrutiny Committee, that it is essential that we reconvene to debate the document when we have a proper copy of it.
Dr. Murrison: Further to those points of order, which were well made by my hon. Friends, we have been looking through these documents all day. Indeed, some of us have been looking through them all weekend. We found, for example, in the first document in our pack references to things such as “A new recital 19(a)” and “A new article 5(a)”. There are numerous “recitals” throughout the document. The Minister referred to material on subcontracting, which can only have come from the up-to-date document. I do not see how we can proceed on the basis of material that is a year out of date.
Mr. Burns: Further to that point of order, Mrs. Dean, I seek your guidance, as it seems unsatisfactory to me that we are questioning the Minister and having a debate on a final document that we do not have in front of us. Clearly, given the time span since 2007, there have been changes and the document has moved on.
There is a precedent. During the Committee stage of the Health and Social Care Bill, when a Minister failed to produce the explanatory memorandum for some significant changes that the Government were making to the Bill, the Chairman of that Committee suspended the Committee until the documents were made available, on the grounds that it was wrong for a Committee to study something when they did not have the information before them. That Committee was suspended until the Minister could bring the information before the Committee so that a proper debate could be held.
Mr. William Cash (Stone) (Con): On a point of order, Mrs. Dean. I arrived here because I heard that there was a certain amount of difficulty arising. [Interruption.] Well, we are in a European Standing Committee, of course. I am concerned about this issue, for the very simple reason that in the report of the European Scrutiny Committee, of which I am a member, it says that there is also the risk of amendments being made and it goes on to clearly indicate that, although we would like the matter to be debated and we recommend that it should be, that debate should take place on the basis of documents that are in front of the Committee.
My concern is simply the same as that expressed by other Conservative members of this Committee. If we had had the document that we should have been considering, we might have come to a different conclusion in deciding whether or not this document was of legal or political importance. In fact, our report would therefore have been different, which raises an important question. I suggest that, in those circumstances, there is a strong case for the adjournment of this Committee.
Mr. Davies: I should be very grateful if I could come up with a point of order, too, in response to the points of order that have been made. I am glad to see that the Opposition have called in the heavy artillery as a result of the recent interval, and I look forward to debating with the hon. Member for Stone (Mr. Cash) in a few moments’ time. I was extremely sorry to discover this afternoon that the document before the Committee is not the latest one that was available to me. That is unsatisfactory, and I shall write to the Committee with an explanation when I have it.
Let me not apologise for things that we have not done. I shall not go too far in apologising, because there are some misunderstandings on the part of the Opposition. First, I am told that the latest document that they have seen is not the original draft, which is the only version of the directive; everything else is just a discussion document. It is not the Commission’s original 2007 version; it is a more recent document, which the European Scrutiny Committee discussed only two weeks ago, so let us not pretend that they have seen nothing about it since 2007. I am informed that they have seen more recent versions, but they did not apparently see the latest version.
Secondly, if the Committee wants me to return on another occasion, I shall be delighted to do so. It is entirely a matter for the Committee, but the presidency has produced a whole series of these discussion documents, which is, as hon. Members know, how decisions proceed in Brussels. I am informed that the presidency will circulate another version shortly, and I am expecting it on Friday. If the Committee decides to postpone discussion for a few weeks, I cannot undertake that there will be any finality about whatever document happens to be in front of us at that time.
Thirdly, the presidency—we cannot directly influence it on this matter—hopes to be able to conclude consideration of the directive and to approve it by the end of December, at the end of the presidency. That means that matters may move fast in December, so if the Opposition want us to take account of the Committee’s views in time to inform future discussion, there would be a considerable cost in delaying our discussion much longer.
That brings me to my final point, which the Committee must decide. The Government are at its service, and there is a balance to be struck. I hope that hon. Members appreciate that there may be some cost in delay, and that, whatever happens—and as has been conceded in a number of points of order from the Opposition—the Committee’s purpose is to provide the Government with the benefit of the Committee’s view on the general principles at stake, and not to approve a particular document, let alone one version of a large number of presidency drafts, which will inevitably be produced during the course of discussion.
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