Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Quesitons 140-159)


21 NOVEMBER 2007

  Q140  Mr Havard: Can I just say that one of the answers given to us, when we asked this question about the potential for research and development technology to be skewed towards the US rather than not vested in the UK, was that, in fact, the Treaty will help to avoid that, because at the moment the temptation is that people have to put their money into the US to do the research (one answer), and the other answer is that the Defence Industrial Strategy and all the plans to develop home-grown, as it were, capacity through that is another safeguard. You are also going to have a technology plan, as I understand it. Is your answer to all of this that all these things will actually avoid this problem? Is that the hope? Is that the test that I have to put on this Treaty, as to whether it will actually help to do that or whether it will actually not help?

  Baroness Taylor of Bolton: I think the tests that you put on this Treaty are long-term: whether we do improve interoperability and whether we do have a system where, when we have companies co-operating with the United States and asking for an export licence at present, which do take time, that system is speeded up, it would be to the advantage of British companies. In terms of research and development, I do not think that there is one answer to how we make sure that we maximise our effort on that. Part of it is resources, part of it is how those resources are organised, and part of it is getting co-operation. There is not one answer but there has to be determination and a commitment to make the most of our opportunities to develop the talent that is in this country.

  Q141  Mr Havard: Can I ask a cheeky question, which is: am I going to see the revision, then, of the next stage of the Defence Industrial Strategy and the Technology Plan together published on 12 December, before we go off for Christmas?

  Baroness Taylor of Bolton: I think the date that was previously suggested was 13th, and I have just written to you, Mr Chairman, to say that as I have come into this position I want to review the whole situation, so we will not be publishing anything on 13th. I think we need to make sure that anything we publish on the Defence Industrial Strategy dovetails in with decisions we are taking on the planning round. I think it would be foolish for me, having just come into this, to make statements on 13th in advance of other work that is going on.

  Q142  Chairman: Minister, you are aware of how highly regarded your predecessor was.

  Baroness Taylor of Bolton: I am.

  Q143  Chairman: One of his great attributes was not just his knowledge of industry but his ability to force things through the Ministry of Defence at a pace which was understandable to industry but quite astonishing to the Ministry of Defence. I look forward to receiving your letter but I am afraid I will receive it with sadness.

  Baroness Taylor of Bolton: I think that it would be wrong to get consideration of the second phase of the Defence Industrial Strategy out of kilter with the planning round. Certainly, from what I have seen, to simply reiterate what was said the first time round would not take us very much further forward, and to give indications to industry on a more specific basis outside the planning round might not be a wise thing to do. So I want to consider that further, not because I do not want things to happen, and not because I do not admire what my predecessor did in many respects. Some of the urgent, operational requirements that he managed to get moving very quickly, as you say, were probably a great shock to the MoD, but so far as DIS 2.0 is concerned I think it needs further consideration.

  Mr Jones: Can I just reiterate what the Chairman said, Minister? I just hope that you have not actually started wearing the grass skirt already and gone native within the first few weeks, because one thing I think industry is looking towards, which your predecessor did do, is not just to bring clarity to the decision-making process but, actually, give clear deadlines that industry can work to. I think that is important. So if it is going to be delayed, I hope that we can certainly have a date very quickly in the New Year and that you do not get sidetracked (which I always thought would happen, frankly, if your predecessor left) and that civil servants—I know they would be very brave to take the honourable Baroness on—do not make attempts to dilute the pace at which change has been happening over the last few years.

  Q144  Mr Havard: Can I ask a sub-question to what I asked earlier? Is the Technology Plan coming with it then? Are they going to come together?

  Baroness Taylor of Bolton: I do not want anything to get out of kilter; I want to be making sure that we have a comprehensive strategy overall which does not leave anything hanging and being added.

  Q145  Mr Havard: That is a yes, then, is it?

  Baroness Taylor of Bolton: I am not committing myself to any publications on any dates at this stage. I think it is two weeks today that I came into this job and, whilst I do appreciate deadlines and I do not like delaying things unnecessarily, I think it is important to get these decisions right. As I said, I do very much admire what my predecessor did; I said that in the House two weeks ago during my first debate, and I meant it. He has a lot of respect and, as you said, Mr Chairman, he probably was a bit of shock to MoD and got things moving there. I think that the impact of that will remain. I hope I have not yet got the grass skirt (perhaps I will get it when Mr Jones gets his) but I think we have got to have an absolutely comprehensive look at what we are doing. We have got an important planning round coming up and I think we have got to make sure that industry does not think we are doing things quickly just for the sake of it and then we make changes later. I want us to have a consistent approach and I think that is the way in which industry will have confidence in what we are telling them.

  Q146  Chairman: All of this, of course, is completely irrelevant to the UK/US Treaty, but you tempted us and we fell. Let us get back to enforcement of the Treaty. On the issue of enforcement, the UK and the US Governments will co-operate on enforcement if there are breaches of this Treaty. How will that work in practice? Will US law enforcement officers have any jurisdiction in the UK? Will UK law enforcement officers have any jurisdiction in the US?

  Mr Lincoln: There are a whole series of existing mechanisms which are in place between the UK and the US through existing treaties, all of which potentially will apply to enforcement matters on the Treaty itself. On the specific example you said—will we have US police, or whoever, coming over to the UK—only in such situations as we would currently envisage that happening now.

  Q147  Chairman: So no change?

  Mr Lincoln: So no change to the existing mechanisms in that respect. The primary mechanism for enforcement of the Treaty is using the MoD's industrial security service, which is already adept at compliance with companies for security matters. That is a system which has been in place for some time.

  Chairman: Thank you. Is this Treaty going to be ratified? Kevan Jones.

  Q148  Mr Jones: Obviously, we have attempted before to try and get ITAR. A lot of work was expended on it and, obviously, it came up against a problem in Congress. What steps, Minister, are you going to be taking to ensure this Treaty is ratified? For example, are you, yourself, going to visit the United States to lobby for it? Although I understand (there is a timetable in the memorandum that you sent us) that there is a brief window of opportunity before December, it is unlikely, frankly, with the way the Congress works. So what is the process of trying to put maximum lobbying on, for example, the Senate to ratify this? Also, if it does not get ratified, what is option B?

  Baroness Taylor of Bolton: You are quite right to say that this has been tried before but it has not been tried in this way before, and I think this new approach is what is giving some optimism that there might be a realistic opportunity to hear. As we mentioned earlier, we did have officials from the United States here last week. I did meet with the main official there and we want through quite a few of these issues that were outstanding that we were talking about earlier, in terms of the actual list of exclusions and things of that kind. So we have done that so far. My officials are going next week to follow up on those discussions in detail, both on the issue of nationality and making sure that our system of classification and vetting is fully understood, so that people can have more confidence in that. I, myself, am trying to get there in, possibly, a fortnight's time. You will appreciate that with Parliamentary responsibilities, especially in the Lords, and some of the other commitments that I have it is not easy, but we think we may have identified two dates. I have written to some of the main players in the Senate to express our view of the benefits that could accrue and, hopefully, that will be a part of highlighting the importance that we attach to this to the people who will be making that final decision. We do not yet know when Congress will rise for Christmas (the dates are not fixed quite as ours are); we know that they are coming back on 15 January, and we are hopeful that they will be responsive to the position that we are setting out. It is in the interests of the United States, in terms of their relationships with us; that they have an interest in interoperability as well, and so we are hoping that we can explain that fully.

  Q149  Mr Jones: Can I ask you all to consider (because Mr Rennie and I went last year to talk to Senators about issues around technology transfer) doing two things: one, use our report when it comes out as a lobbying document from our Parliament's position, in terms of the Hill? Can I also suggest that, possibly, the Ministry look at the British and American Parliamentary Association and individual Members of Parliament who have got contacts on the Hill to actually try, if they are visiting, and reinforce the message, but also possibly just write to their contacts on the Hill about how important this Treaty is?

  Baroness Taylor of Bolton: I think they are both suggestions that we would not be averse to. Obviously, we do want to ratify as quickly as possible ourselves, and that will also be good leverage, and that is where we have to be careful about the timings in terms of your report and other things which are happening. We will try to co-operate to make sure that we make the timeframe as tight as possible, but I think that using colleagues to try to emphasise the importance of this Treaty is no bad idea. I am not averse to that. Lord Drayson, some time ago, did write to some people within the House about this, but I think it is certainly something we will follow up. It is getting to a critical stage, so it might be appropriate to do something in the near future.

  Q150  Mr Jones: If you could actually ask, perhaps, individual Members of Parliament or Members of the Upper House who have got contacts to write on this too—because we all have friendships with individual Senators—it might also help the process.

  Baroness Taylor of Bolton: I think it might well.

  Q151  Chairman: Kevan Jones asked about a plan B.

  Baroness Taylor of Bolton: Plan B. We cannot make a plan B when we are hoping that plan A will work. It is not as if we cannot get the technology, it is the delay; it is not that we cannot get interoperability, it is just far more complex and causes delays. So, at the moment, we are absolutely concentrating on trying to deal with the two outstanding issues, which we do not think are insurmountable. We think that there are good reasons for thinking that we can convince those who are making decisions in the United States that the protections that we have on security and our vetting classification are very strong and very significant, and we think that by discussing the excluded list we can possibly get agreement on that. We are still hopeful.

  Q152  Chairman: So when you say you cannot make a plan B when you are working on plan A, there is no plan B.

  Baroness Taylor of Bolton: There is no plan B. We are very intent on making sure that this works. As colleagues have pointed out, this has been tried in the past and there have been difficulties, but this is a new approach to the problem, by getting this kind of agreement for transfer in this way. Hopefully, this new approach, with different mechanisms around security protection of material, will give confidence that it will work. So our efforts, I think, should be concentrated on explaining why we are adopting a new approach and how it is secure, because it is that bottom line—security—that probably has to be underlined as being critical to this working.

  Q153  Chairman: Minister, I think that concludes the questions that we want to ask about the UK/US Treaty. There are one or two questions which we would like to ask about the Defence Exports Services Organisation. Therefore, we are most grateful to Tony Pawson and Gloria Craig for coming here today. The decision to abolish DESO was obviously taken above all of our pay grades, yet it is one which has caused deep concern amongst industry. I, myself, having been in your position, or something like it, in the past, found DESO to be an exceptionally useful and valuable organisation for the Ministry of Defence, for the Government and for the country. Although you did not take this decision, you are now in a position where you need to be able to justify it. So how would you justify it?

  Baroness Taylor of Bolton: I think I would justify it by saying that UK Trade and Investment does take the lead on exports across the whole picture, and you could argue that the old system was actually an anomaly with defence exports out of that. If it was simply transferring the DESO role to new civil servants who had no experience of this in the past and were going to reinvent the wheel of how to do defence exports, I think I would be more concerned, but that is not what we are talking about; we are actually talking about a lot of people who have been working on defence exports for a very long time within MoD going to UKTI, and I think they will take with them their expertise and they will work in their situation with people who are working on exports across the board and will, therefore, gain their expertise as well.

  Q154  Chairman: However, what they will not take with them is constant contact with people from the military in uniform, which is one of the things that industry earlier on told us was one of their key concerns. Does that matter?

  Baroness Taylor of Bolton: It matters that they have contact and it matters that we have arrangements for people in the military to play their part in terms of talking about defence contracts that we have or those with other countries, where they can talk about how equipment works, or what equipment we need. The suggestion is that when people are transferred there should be not just a bock transfer and that is the end of it, but that there should be rotations of individuals so that some of that expertise is, in fact, maintained. I think that that would be helpful to those who are working in the new section, but it will also mean that the links are kept with MoD, and there will be new working arrangements to make sure that there is proper contact between the departments. It is envisaged, actually, that there will be service level agreements between the two departments setting out what each department will do for the other. I do not know, Tony, if you want to emphasise anything else within that.

  Mr Pawson: Clearly, DESO has got a great track record and I think it is a great place to work and will continue to be a good place to work, because what you are doing is contributing to both security and prosperity. That, in a sense, is a great motivator. For the new organisation to work, as the Minister has said, we do need the expertise transferred across. The plan is that the military personnel in the core of DESO will transfer across on the same sort of basis as now. There will be a mixed economy in relation to the civil servants—some will be on permanent transfer, some will be on loan—to ensure a sort of refreshment of that. UKTI is a large organisation, it does have a large number of people compared to DESO overseas, which we will be able to leverage for the future. Clearly, the defence branding is very important indeed. The plan, as you probably know, Chairman, is that there will be a separate element of UKTI that will deal with defence and security issues; that those links back to MoD, as the Minister has said, are planned to be maintained and, therefore, with the support of the MoD, support (of course, proportionate to what is under consideration) should, I understand, be fully forthcoming and therefore will go forward on that basis.

  Q155  Chairman: Will the MoD be a sponsoring department with the FCO and the Department of Business, Enterprise and Regulatory Reform?

  Baroness Taylor of Bolton: No. There was discussion about that but that was thought to make the situation more complex, and that is why there will be a service level agreement between the two departments about what each should be doing for the other. I understand (it was before my time) that the idea of it being a sponsoring department was considered but it was thought that that would make the situation even more complex.

  Mr Holloway: Forgive me, I do not understand. What was the reasoning behind this?

  Chairman: It was an anomaly.

  Q156  Mr Holloway: What was the reasoning behind this change -beyond that it was an anomaly?

  Baroness Taylor of Bolton: It was thought that by bringing all export potential together and expertise together that could maximise the effort. As I say, there was a great deal of experience within those two departments about trade and exports of this kind, and it was felt that the defence exports side of MoD could benefit from having that expertise with them and working with them on an ongoing basis.

  Mr Holloway: Does Mr Pawson think that was a good idea?

  Chairman: I do not think that is a fair question to ask.

  Q157  Mr Jenkin: Howard Wheeldon published an article in Jane's Defence Weekly, in which he pointed out the success of DESO, to which you referred; that we take 20% of the global defence exports market and, obviously, clearly thinks that this is a grave error that will undermine the success of these efforts. What measures is the Government putting in place to assess the success or failure of this change? If it turns out to be detrimental to the effectiveness of UK defence exports, would you at least leave the door open to possibly reversing the decision in order to restore what has been an extremely effective working relationship?

  Baroness Taylor of Bolton: I do not think that anybody would welcome that sort of ping-pong and decisions being made to move back quickly.

  Q158  Mr Jenkin: The criteria for success?

  Baroness Taylor of Bolton: In terms of the success, I think we will see defence exports in the future at a very high level. I think that the comments you made about the success of the past are very valid and one that those involved should be very pleased with, but I think the Committee should understand that the Government would not want us to take a step backwards in terms of our achievements there. Government Ministers would not make that decision without a genuine belief that this was one way of improving the situation in the future. That was part of the reasoning behind this decision: they thought that it was the right thing to do, and the Prime Minister made that decision. We are now working with everybody involved, working with the two sponsoring departments, working and having very careful discussions with industry to make sure that they feel involved and know what support MoD will give to defence exports, and we are hopeful that when we are able to finalise some of these arrangements (this is very early days) we will in fact have the confidence of industry that we will be offering the kind of support that will be helpful to them and maintain the success in this area.

  Q159  Mr Jenkin: But this does contradict what was in the Defence Industrial Strategy, and it, presumably, is one of the reasons why you wish to delay it.

  Baroness Taylor of Bolton: No, not at all.

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