Nick
Harvey: I will not detain the Committee. Suffice it to say
that this proposal is a welcome development in the European single
market. For the greater part of the EU’s history, defence
contracts have largely operated outwith the remit of the single market,
and it is welcome and long overdue that we remedy that and bring them
within the single market’s scope. The UK has far more to gain
than it has to lose, and we should approach the new era with
confidence. The
UK, as is widely recognised, has one of the most open defence
procurement policies in Europe and competes strongly in world markets,
in considerable contrast to some of the other member states. Our record
in putting our defence contracts up for open competition stands
favourable comparison with that of other member states, so the
opportunity to get into the provision of items for other member states
would considerably benefit our
industry. The
European Scrutiny Committee has done a useful job over the past year or
so in picking up some of the inherent weaknesses in the measures as
originally drafted, and the Government have made considerable progress
in addressing many of those. For example, new exemptions for
intelligence activities and for sensitive information that could
threaten national security are encouraging developments. There is no
particular cause for alarm regarding the package that seems to be
evolving.
Mr.
Jenkin: I am grateful for the hon. Gentleman’s
confidence. Has he seen the draft document with the new wording, which
the rest of the Committee has not? He shakes his head. How can he
therefore give such an
assurance?
Nick
Harvey: I cannot give an assurance; that is not my role.
However, from the documents I have seen, what I have heard and what the
Minister has reported, as well as what the Minister in the other place
has said, it appears that progress is being made. We will not, as the
hon. Gentleman rightly says, know that for certain until we see a final
text, but it strikes me that the debate is evolving sensibly and is a
satisfactory outcome to the issues raised. We should be grateful to the
European Scrutiny Committee, and I believe that the document has now
had copious scrutiny.
I am not sure
whether I share the Government’s view on subcontracting; I am
not convinced that our defence industrial strategy has been a great
boon to our SMEs. The overweening power of the prime contractors on
some of the contracts has disadvantaged SMEs, and the Government may
have been too ready to take the word of the primary contractors in that
we should not be making provision in European measures for SMEs to get
a guaranteed share of the work. In the United States, it seems that
SMEs get a far greater share of the work than they do here under our
defence industrial strategy. If I were to take issue with the
Government, it might be about that. As a general principle, however,
this is a welcome development. It is overdue, and subject to our
getting satisfaction on the remaining points of dispute, it should be
welcomed. 6.20
pm
Mr.
Jenkin: My thanks to you, Mrs. Dean, for how
you have conducted the Committee’s proceedings and listened
sympathetically to our points of order, albeit you made a ruling that
was not entirely to our
liking. I
wish first to articulate the sentiment
that “we
do not believe that the benefits that might result from introducing a
specific defence procurement directive are sufficient to offset the
drawbacks. In particular, an additional regulatory burden on top of
those already in place is unlikely to support our aim of making defence
markets more effective and efficient. We do not, therefore, support the
development of a new directive at this
time.”—[Official Report, European Standing Committee
B, 8 February 2005; c.
5.] I urge the
Minister to listen to those words, because they are not mine. They are
the words of a former Defence Minister, the right hon. Member for East
Kilbride, Strathaven and Lesmahagow (Mr. Ingram), who spoke
in this Committee on 8 February 2005 and set out the
Government’s opposition in principle to this
directive.
It is worth
reminding ourselves that, once again, the Government have been dragged
from a position of total reluctance to one of support, for a whole lot
of obscure reasons that we will never know about. We all know that the
legislative process in the EU is one of logrolling, as they call it in
the American system. We push one end of the log, somebody else pushes
the other, and the only way that the log moves forward is if we back
something that we do not want and they back something that they do not
want, so that we can get something
else. The
proposal might be on the price of fish, agricultural policy or some
foreign policy position, but it all gets mixed up in the vast
multilateral process that is led by the United Kingdom Permanent
Representation to the European Union. We all know that, even if the
Ministry of Defence still did not want this directive, as was expressed
on 8 February 2005, it would be told by the Foreign Office, on the
advice of UKRep, to withdraw its opposition and concerns about the
directive and let it through. The Foreign Office probably has
negotiating priorities that it regards as more
important. Let
us be clear about the likely effect of the directive. I am perfectly
happy for the Minister to turn on a sixpence and insist that there is
only a one in 10 billion chance of a case involving sensitive
information that we wanted to keep from the European tendering process
going before the European Court of Justice. I simply put it to him that
he has not excluded the possibility. His attempt to reassure us might
reflect a little hyperbole
in the number of noughts he added to the probability
of that eventuality, perhaps to try to give us more assurance than may
be justified. Once again, we
are in the familiar position of Ministers assuring us that certain
things will not happen, to encourage people to support things that they
would not otherwise support. In the fullness of time, they often do
happen. I remember the debates in this very room on the Transport Act
2000. We were told that the provisions on the free movement of capital
would not apply to golden shares in National Air Traffic Services. They
do, as that was overturned in the European Court. The Minister involved
has since privately apologised to me for failing to take my legal
advice on the
matter. It
is worth setting out the truth of what the directive does. It states
that
it “shall
apply to public contracts awarded in the fields of defence and security
for: (a)
the supply of arms, munitions and/or war material, referred to in the
Council Decision of 15 April
1958”. Let
us remind ourselves what those are. First, “Maintenance and
repair services”. It seems to me that every
contract—every partnership arrangement we have on any long-term
big defence programme—will be brought within the scope of the
directive. Secondly, “Armoured car services” and
“Computer and related services”. Is there a single piece
of sophisticated military equipment that does not have service
contracts related to computers and software? Thirdly, “Research
and development services” have already been referred to by my
hon. Friend the Member for
Westbury. Fourthly,
“Accounting, auditing and book-keeping services” may seem
innocuous, but they provide a lot of information to those carrying out
those services. Fifthly, there is “Management consulting
services and related services”. I do not how this Government
move in the Ministry of Defence without taking advice from management
consultants. For management consultants to do an effective job in the
Ministry of Defence, they have to see all the nooks and crannies, warts
and all, so there is sensitive information related to
that. Next
is “Engineering services”. Is there one major equipment
programme going through the Ministry of Defence that does not involve
engineering services? Then come “Integrated engineering
services”, “Related scientific and technical consulting
services” and “Technical testing and analysis
services”. These are the sinews of our defence being required to
be put into a public tendering process.
Let us also be
clear that the decision to exempt any of these contracts on the basis
of article 296 is, as the Minister said, to be taken case by case. Let
us also be clear what the directive says about how those case-by-case
bases shall be arrived at. It says
that “non-application
of the Directive should be proportionate to the aims pursued and cause
as little disturbance as possible to the free movement of goods and/or
the provision of
services.” So
it is clear in the drafting—unless this is something the
Minister has managed to get changed—that the bias is to be in
favour of letting contracts through this European system, with all the
lack of advantage for the British Government and for the UK that the
Minister advertised in debate in 2005.
We need a
reality check. As was pointed out by the hon. Member for North Devon,
we already have the most open and transparent defence procurement
market
in the European Union. It is also true that we do a
very large proportion of the research and development in this country.
Would that our European partners spent even half the proportion of GDP
on research and development that we spend. We have—excepting
perhaps France—the crown jewels of defence
technology. I
submit that the approach of this directive is wrong. We should be
exploiting our bilateral relationships rather than diluting our
potential for those by getting into a long-term commitment to
multilateral relationships.
We know that
this directive is part of a longer-term trend and that the European
Defence Agency has set itself up as a procurer of military
capabilities. That is what is set out in the charter of the European
Defence Agency. Incidentally, those capabilities could eventually refer
to more obvious military capabilities, rather than just technical or
equipment capabilities. It sees itself as—and is—an
embryo Ministry of Defence. Thankfully, our Government, like every
other Government in Europe, are starving this new body of much in the
way of funds so that it is pretty ineffective. We should be
concentrating on not handing over decision-making power on defence
procurement to the European Union, which I always used to support as
something to do with free trade and co-operation rather than a single
European defence policy, but our bilateral relationships and exploiting
our technological advantages, which are massively reinforced by the
superb professionalism and dedication of our armed services. We should
concentrate on interoperability, particularly NATO
interoperability.
The most
depressing aspect of the European defence procurement agenda is
duplication, which the former Prime Minister, Mr. Tony
Blair, set himself against when the St. Malo declaration was first
announced on the Floor of the House, even though
the—
The
Chairman: Order. I remind the hon. Gentleman that we are
taking about
procurement.
Mr.
Jenkin: Indeed, Mrs. Dean. I am talking about
the duplication of weapons standardisation. The function of weapons
standardisation is being duplicated from NATO to the
EU—wastefully, bureaucratically and ultimately, through
directives such as this, restrictively. It has the potential to limit
our procurement options. It is clearly designed to create a European
defence identity at the expense of the national identities, which it
would be in our national interest to develop. It also duplicates one of
the very functions that NATO was set up to
pursue.
Dr.
Murrison: My hon. Friend may be aware that NATO spent many
years trying to agree a common code for stock numbers and part
inter-compatibility. That was a very painful process. I served in the
armed forces during that time; it was extremely difficult to get that
going and I saw the huge problems that it caused. Does he agree that if
the EU is to embark on that self-same trail, it will be massively
wasteful and consume a huge amount of resources to no particularly good
outcome?
Mr.
Jenkin: My hon. Friend has trumped me. It would be to no
particularly good outcome, because generally, when we try to force
ourselves into these multilateral arrangements, the sum total of the
parts is worth rather less than the individual components.
Finally, I wish
to return to article 296, which provides limited protection that has
been generously interpreted by a consensus of member states since 1958.
Article 296 (1)(a) states
that “no
Member State shall be obliged to supply information the disclosure of
which it considers contrary to the essential interests of its
security”. This
directive is clearly intended to subvert the protection that article
296 has hitherto provided to us on the basis that somehow it provides a
pretext for anti-competitiveness and allows other countries perhaps to
behave in a protective way, which may not be in their own interests. It
may damage export opportunities of our own.
We have been
told that we already have the most competitive and open market in other
fields such as health and safety at work, and financial and insurance
services, and that this directive will open up the European market so
that British insurance companies, British financial services, British
agriculture and British food will be sold into other European markets.
But it never works like that, does it? We should have learnt from
experience that opening markets is a long and painful business. In the
field of defence procurement, there are too many risks and too few
advantages for us to be pursuing
that. I
agree with what was said by the Minister in 2005. How is it justified
for this Minister to stand there insulting Opposition Members by saying
that they are somehow unbalanced in their judgment when, by voting
against the draft directive, we are doing no more than articulating the
sentiments that a Minister in this Government articulated a short time
ago? 6.35
pm
Mr.
Davies: We have certainly had a lively debate. The
Government always listen carefully to debates in this Committee and
consider whether we can take on board some of the wisdom expressed in
the proceedings to further the national interest during negotiations in
Brussels. I am sorry that the occasion has been dominated by
some extraordinary Opposition statements. They expressed some quite
fanciful fears about the purport of the directive. I fear that until
now, the Opposition—well, the Front Benchers anyway—have
not understood what the directive is about. I hope to make
clear what it is
about. The
hon. Member for Westbury reverted to asking why NATO is not involved
with the matter and why the directive does not deal with NATO. The
measure is nothing to do with NATO; it is to do with the single market.
Does the hon. Gentleman seriously think that we should bring the United
States and Canada into a directive that has as its sole purpose the
creation of a special regime, or derogation, from another
directive—the public procurement directive—that is part
of the single market procedure? The United States and Canada do not
have the faintest intention of joining the single market. Such a
suggestion is mind-bogglingly inappropriate and shows that the hon.
Gentleman has not understood what the directive is about. I am sorry
about that. I hope that he thinks about the matter carefully
because he will find that I am right. It concerns only the single
market.
Despite
the apparent intention of the Leader of the Opposition to give his
party a slightly more reasonable appearance, it is clear that my
judgment of the modern Conservative party is right. Some of the
atavistic, anti-European obsessions and conspiracy theories are just as
alive today as they have ever been. The directive has nothing to do
with giving the EU a political role. There might be other discussions
about the European security and defence policy, but they have nothing
to do with the directive, which is designed to clarify a regime that
has existed since 1957 or 1958 under article
296.
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