Select Committee on Business and Enterprise Written Evidence


Supplementary memoranda from the Ministry of Defence

  I am writing in reply to your e-mail of 25 January in which you asked for information following the Defence Secretary's evidence on 17 January. The follow-ups concerned the criteria for inviting foreign government delegations to defence exhibitions in the UK; a 1976 directive from the MOD's Permanent Under Secretary to the Head of Defence Sales; and disclosure of the Government's discussions with industry on the transfer of defence export promotion responsibilities from MOD to UK Trade and Investment.

Q14:  a note on the criteria for sponsorship of visits to arms fairs

  As the Defence Secretary said in his evidence, John Reid's letter to Dr Berry of 17 February 2006 sets out the process we follow and how we went about considering the case of China in relation to the Defence Systems and Equipment International (DSEi) exhibition in 2005. This example illustrates how the Government takes account of all relevant considerations. The starting point is potential export market opportunities, based on each country's known requirements and the UK's ability to meet them. The latter is a function of what our industry can offer and the Government's likely stance on licensing of such equipment to that country. The licensing criteria thus inform our deliberations, but we do not rule out inviting representatives from a country to an exhibition purely because only a limited range of items are likely to be licensable for export to it. Wider factors may also be taken into account and may cover, as John Reid indicated, aspects of bilateral military dialogue, including involvement of the country in peacekeeping operations or our wish to encourage a contribution to international efforts to enhance global security. However, a country would not be considered where that would be contrary to the UK's international obligations and our wider defence and security interests.

  The Foreign and Commonwealth Office (FCO) conducts its own assessment of the value or risk of inviting countries on the list. This will involve considering the approach and behaviour of a country on human rights and whether a company might reasonably expect to obtain a licence to export defence goods to the country, even if for a limited range of goods, in accordance with any current measure. Our Embassy staff in the country will be contacted if that is thought to be necessary. FCO agreement to invite certain countries on the list, such as China, is given at Ministerial level.

  We do continue to have serious concerns about the human rights situation in China, and our engagement on these issues is a long-standing priority for the Government. There is a strategic policy on human rights in China which identifies a number of key priorities for Government action. A multi-layered approach is taken to working with China to achieve substantive improvements in human rights protection, including high-level messaging to encourage progress at the top, detailed discussions on sensitive issues through the UK-China Human Rights Dialogue and project work to deliver longer-lasting results on the ground. We cover human rights issues in depth with the Chinese during our regular biannual UK-China Human Rights Dialogue, the last round of which has recently taken place in Beijing. Ministers regularly raise human rights issues during meetings with their Chinese counterparts. During his visit to China last month, the Prime Minister raised our concerns with Chinese Premier Wen and President Hu Jintao.

  After 1 April 2008, responsibility for defence export promotion will transfer to UK Trade and Investment (UKTI). In future, the UKTI Defence and Security Group will draw up the list of delegations for UK defence exhibitions. These will continue to conform to our international obligations and invitations will be issued with the agreement of the MOD and FCO.

Q23:  a copy of the 1976 directive

  The 1976 Directive from Sir Frank Cooper, the then Permanent Secretary, to the Head of Defence Sales, gave guidance on the standards of conduct in commercial or business deals that were expected of Defence Sales staff and of others who may have been acting on behalf of the UK Government in defence sales, including Government-to-Government arrangements. It explains that this special guidance for Defence Sales staff recognises the importance of maintaining strict standards in this area. It was released in August 2006 under Freedom of Information.

Q41:  details responses to consultation on moving DESO to UKTI

  The Committee asked about the possibility of publishing in some form the discussions with industry on the implementation of the transfer of responsibility for defence export promotion from MOD to UKTI. The following summary of these discussions has been prepared with the help of BERR, which was the lead Department for the Government's dialogue with industry.

  The Prime Minister's statement of 25 July 2007 (HC Deb, 25 July 2007, col 83WS) announced a machinery of government change moving responsibility for defence trade promotion from the Defence Export Services Organisation (DESO) to UK Trade and Investment (UKTI). The statement made clear that the new arrangements would need to take account of the specific features of defence exports, including the continuing role of the Ministry of Defence.

  Accordingly, in order to implement the change and to gain a better understanding of the requirement for support, a number of meetings were held with representatives of the defence industry and relevant Government departments (BERR, MOD, UKTI and Cabinet Office) between August and December 2007. John Hutton and Digby Jones met senior industry representatives in August 2007 and there were a further five meetings involving departmental officials. The matter was also discussed at meetings of the National Defence Industries' Council in October and December 2007 and in a number of conversations which took place between individual companies and trade associations and officials from MOD and BERR in the normal course of business.

  This dialogue covered the following points:

    —    the Government's continued strong commitment to supporting defence exports and to the defence sector generally, as reflected in the Defence Industrial Strategy;

    —    the importance of defence exports to the UK economy, including the attractions of an effective DESO to inward investor companies;

    —    industry's concern about the perceived lack of consultation ahead of the decision and the implications for the defence sector;

    —    the particular requirements of defence export support where customers are overseas governments, rather than businesses;

    —    the continued need for defence export support for smaller companies, including availability of market data derived from information received from British Embassies/High Commissions;

    —    the role of defence exports in the MOD's objectives in the future;

    —    the role of Government Ministers in supporting defence exports in the future; and the working arrangements for this between relevant Government departments;

    —    how DESO would be resourced in future under UKTI and how strong links with the MOD could best be maintained. This included agreement that military staff would continue to serve in the new organisation on loan to UKTI and access to MOD Service and civilian manpower and equipment to support defence export campaigns; the terms on which such support might be provided; the retention of First Secretary Defence Supply posts overseas; and the need for personnel in the new organisation to maintain defence knowledge and experience;

    —    the importance of DESO providing "business as usual" to overseas customer governments;

    —    how support for defence exports could be delivered more effectively within UKTI;

    —    how DESO under UKTI would support major trade events such as the Farnborough International Air Show 2008;

    —    the DESO "brand" and how the new organisation should be named and promoted;

    —    the scope for the existing UKTI activity to combine better with defence exports in the future—for example on homeland security and offset/industrial participation;

    —    corporate governance issues: how the new organisation should be led and the constitution of the top level management structure; and

    —    how some negative public perceptions of the industry could be improved; how to build on the sector's work in producing a code setting out common standards of good business practice; and how UKTI could work together with the defence industry to promote strong standards of business conduct and corporate governance in the sector.

  The dialogue assisted the Government departments in developing the implementation plan, "Creating UK Trade & Investment Defence & Security Group—Implementation Plan" published in December 2007. The plan can be viewed at:

https://www.uktradeinvest.gov.uk/ukti/fileDownload/UKTIDESO ImplementationPlanFINALEXCROPS.pdf?cid=412665

  John Hutton also made a Ministerial statement on 11 December 2007 about the arrangements under which the transfer will take place, which also reflects some of the points covered in our dialogue with the defence industry. This can be viewed at:

https://www.uktradeinvest.gov.uk/ukti/ShowDoc/BEA+Repository/345/412664

  Further information was also contained in a Government press release on 11 December which can be viewed at: https://www.uktradeinvest.gov.uk/ukti/ShowDoc/BEA+Repository/345/412660

  As the implementation plan makes clear, further dialogue with the defence industry will take place up until the UKTI Defence and Security Group is launched in April. This will assist in designing and putting in place appropriate delivery mechanisms, a principal purpose of which will be to provide the highest standard of defence and security export support under the new organisational and Government arrangements which will come into force on 1 April 2008. This dialogue will also help scope out how best to build on existing work to further promote strong standards of business conduct and governance of the sector.

February 2008





 
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