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Lynda Waltho (Stourbridge) (Lab): I must correct the hon. Member for Surrey Heath (Michael Gove), who speaks for the Opposition on this particular policy. On
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Wednesday, there was no working majority of Labour Committee members able to participate and neither was there a vote, so how the hon. Gentleman can say that this was the unanimous decision of the Committee fails me. However, will my right hon. Friend reassure me that he can rise above the macho posturing, albeit that it comes from the unlikely source of the hon. Member for Surrey Heath, and concentrate on what is important-what we who champion the rights of children are concerned about, which is to appoint an effective Children's Commissioner who will do the right thing for our children? That person is Maggie Atkinson.

Ed Balls: The transcript shows very clearly that my hon. Friend's judgment about the suitability of Maggie Atkinson for this post is the right one. I do not know the details of the proceedings and subsequent votes of the Select Committee, and it would be wrong for me to reveal conversations that took place in corridors. I looked in detail at the report, and I have no idea who on the Committee supported or did not support this appointment. As my hon. Friend has said, the matter was never put to the vote. I have considered the matter very carefully, and I have to put the public interest first. I decided that this was not about personality and politics, which is why I made the decision that I did.

Mr. John Redwood (Wokingham) (Con): Will the Secretary of State remind the House how many members of the so-called independent panel came from other Government Departments and quangos? Why does he think that it was more independent than a Select Committee of this House?

Ed Balls: The point is that we have the Nolan process, which was set up on the recommendation of Lord Nolan before 1997 and which operates in the normal way. There were 40 candidates, and they went through that normal process. There was one independent member of the panel, Sir Paul Ennals, who said that Maggie Atkinson was the most fiercely independent of all the candidates. I understand that there was also-as is completely normal-a civil servant from my Department and a civil servant from another Department in Whitehall. [Interruption.] If the Conservatives do not support the Nolan process as well as not supporting the Children's Commissioner, they ought to come clean rather than playing these games.

The fact is that we supported the Nolan process, and Maggie Atkinson was unanimously judged to be the best candidate for the job. Did I reject her? Did I go for person No. 2 or No. 3 on the list? Did I decide not to go for the most fiercely independent person? No, I did not; I did the right thing, which was to choose the strongest advocate for children and young people. That is what the Children's Commissioner is all about, and that is why the Conservative party is so fearful of the role.

Liz Blackman (Erewash) (Lab): As a former teacher and, indeed, a former parliamentary private secretary at the Department, I can tell my right hon. Friend that in my opinion his Department has placed the most relentless focus on raising standards for children and young people that I have ever observed. Along the way, he has made tough decisions without flinching. This is one of them; it is the correct one, and it will hugely benefit children in this country.

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Ed Balls: I am grateful to my hon. Friend, but I have to tell her that the evidence for the rightness of the decision is not my words or even the words of those involved in the independent selection process. It is the words of Barnardo's, 4Children, the National Children's Bureau, the Association of Directors of Children's Services and all the other organisations-including the children's and young people's panel itself-which concluded, independently of me, that Maggie Atkinson was the best person to do the job. That is why, whatever the politics, the right thing to do is the right thing, and that is what I am doing.

Mr. Rob Wilson (Reading, East) (Con): The Secretary of State said that he had read the views of the Labour-dominated Select Committee on this matter. Has he also read the excellent Select Committee report on bullying? If so, can he tell the House what he has learned from it?

Ed Balls: As I have said, I am not going to go into the details of who was and was not on the Committee, who had the majority, and who led what charge. I think that that would be unworthy of the House and unworthy of the Committee, and I am not going to descend to those levels.

As for the question that the hon. Gentleman has raised, we have been very strong advocates of the stamping out of that kind of behaviour in all our schools in the country. However, this is not about personality, it is not about politics, and it is not about Labour-dominated Committees. I think that the hon. Gentleman should raise his sights, raise his game and understand the public interest in these matters.

Mr. Denis MacShane (Rotherham) (Lab): My right hon. Friend is right to reject the synthetic anger on the Opposition Benches, particularly after last week's statement of policy about putting politicians in charge of a whole range of appointments to stuff public bodies with political placemen. May I gently say to him, however, that while everyone respects his probity and sincerity in this matter, we are trying to bring Parliament back to life? If every time a parliamentary Committee makes a recommendation it is simply brushed aside, I am afraid that the idea that Parliament exists to work for the public will lessen in people's minds rather than increasing.

Ed Balls: I completely understand the point that my right hon. Friend has made. That is why we must all be responsible in the way in which we approach the issue of pre-appointment hearings. This is not the first time that there has been such a hearing-there have been many before, all of which have asked tough questions-but this is the first time that a Select Committee has failed to endorse a candidate and has published its report at midnight.

The question for me was whether I should respond in a thorough way at that time, or whether I should stand back and allow an independent, highly respected figure to be impugned. I decided that the right thing to do was study the details of the report, then make my response, and that is what I did. Unfortunately, the impugning has continued from the Conservative party. That, I am afraid, is what happens when issues of public interest are reduced to party politics.

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Paul Holmes (Chesterfield) (LD): I regret very much the way in which, in his opening comments, the Secretary of State tried to suggest that this was all about the Opposition having a go at the Government, and the way in which the hon. Member for Surrey Heath (Michael Gove) tried to suggest that it was all about a Labour Government possibly appointing someone who might or might not be a Labour sympathiser. The Committee that sat on Wednesday morning consisted of four Labour members, two Liberal Democrat members and two Conservatives. There was no vote, because it was quite clear what the majority of the Committee felt, and that is in the recommendations. What is the point of pre-appointment hearings if the candidate is told that he or she has got the job before the hearing, and the Secretary of State simply ignores everything that the Select Committee says?

Ed Balls: As I have said, I am not going to go into the details of conversations in corridors or of how the Committee operated on that day-that is a matter for the Committee rather than for me. The hon. Gentleman raises a wider issue of importance, however. I was operating in accordance with the guidance, which had been discussed with Select Committee Chairs. I had to make a decision, and I did so on the basis of the Nolan process. I nominated my candidate, who was then to appear before the Select Committee for questioning. It is made very clear in the guidance that only in the most exceptional cases would the Committee not endorse the candidate, but it is also right to have proper scrutiny. It will be for others to judge, on the basis of the Committee report, the transcript and my report, whether this was an exceptional case. I have to say that that was not the view that I reached on the basis of my reading, and the fact that Maggie Atkinson is so widely supported by children's organisations around the country for her independence, strength and integrity leads me to believe that for me to have rejected the Nolan independent process, and the unanimous proposal from that process in respect of this job, would have been the wrong thing to do, but-

Mr. Speaker: Order. May I just say to the Secretary of State that we must make progress?

Mr. David Clelland (Tyne Bridge) (Lab): Gateshead council has a proud history of appointing good officers. Indeed, over the years many of its officers have advised Governments. In fact, it was a Gateshead housing officer who advised a previous Conservative Government on the sale of council houses, so the idea that Gateshead officers are tied to a particular political party is nonsense. I know Maggie Atkinson-of course, I know a lot of people but that does not necessarily mean they are good candidates for the position we are discussing. I know about the work that she has done in Gateshead, and I know about the educational achievements and health improvements among children that we have had in Gateshead under her leadership. I know of her firm interest in the interests and rights of children, and I know that she is a strong character who believes in what she is doing. The idea that she would be bullied by anyone, let alone the Secretary of State, is nonsense.

Ed Balls: I am trying to make progress today, Mr. Speaker, for children and young people. I fully accept the points about the lady's track record in Gateshead. In answer to
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the question from the Opposition Benches about her party political affiliation or past post or roles, I must say that the whole point of the Nolan process is to take the politics out of this and to have an independent process. Therefore, it is not for me to start making political judgments at the end of the process. I accepted the unanimous recommendation at the end of this process. That was the right thing to do, and I would have thought that it would be a good idea to keep to Nolan processes rather than to believe that, or to brief newspapers that, the point of being in power is to put our place-people into positions. That is not the right way to go, even if that is what the Opposition want to do.

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Defence Acquisition (Independent Review)

3.57 pm

The Secretary of State for Defence (Mr. Bob Ainsworth): In December 2008, my predecessor asked Bernard Gray to undertake a review to identify improvements that we could make in the acquisition of defence equipment. On Thursday, I published Mr. Gray's report and placed a copy in the Library of the House in advance of our defence policy debate. I said then, and I repeat now, that I apologise that Members did not have longer to read and digest a report that is both lengthy and complex, and I therefore welcome the opportunity that you have provided today, Mr. Speaker, for a further discussion to take place on its contents. Indeed, I suspect that today will not mark the end of the conversation.

Mr. Gray's recommendations are far-reaching. We accept most of them and work is in hand, as part of a wider defence acquisition reform strategy, to implement the changes we agree are needed. Mr. Gray's report has got the debate well and truly started, which I warmly welcome. This is an important subject, which we very much wanted to surface. That is why we commissioned the report in the first place. I am very grateful to Bernard Gray for the effort he has devoted to this, the analysis he has produced, and his support in developing with the Department proposals to implement many of the recommendations.

This is not a new issue. As Bernard Gray's report highlights, all countries with significant defence capabilities face the same inherent complexities of military acquisition and have, over many decades, had to deal with cost and time overruns. Indeed, as the report says, many of our allies are complimentary about the UK's efforts to drive reform in this area and model their systems on ours. In the past 12 years, we have implemented a succession of initiatives to improve acquisition processes, including smart acquisition, the defence industrial strategy and, more recently, the defence acquisition change programme. These have had a significant impact on performance, as the National Audit Office has recognised in successive reports. At its best, the Ministry of Defence's project management is very good indeed. As the report observes, there are dedicated people at all levels in the MOD and among our suppliers, with a strong commitment to ensuring that the services have the equipment they need to deliver success on current operations and in the future.

The system works best when the need is most urgent. We have successfully provided £4.1 billion-worth of equipment to theatre in Iraq and Afghanistan through the urgent operational requirements system since those operations began. Our people, military and civilian, can be proud of that achievement, and the service chiefs have made it clear that our service personnel are never asked to undertake missions unless they are fully satisfied that they have the right equipment to do the job.

However, the Gray report also brings out, through analysis of a sample of individual projects, the problems that still persist. These include not only the tendency for programmes to cost more and to take longer to deliver than was initially estimated, but the further cost growth to which this gives rise and the pressure it places on limited resources-even in a period when the defence budget as a whole has grown substantially in real terms.
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It points to remaining skills gaps and to shortcomings in the existing arrangements for managing the equipment programme, and it argues for regular defence reviews to provide a strategic context for decisions on the equipment programme.

To some extent, the difficulties we and others face in estimating the cost and time to deliver projects reflect the fact that much modern defence equipment is at the leading edge of technology and is constantly having to adapt to meet evolving military requirements. Providing our armed forces with the best involves a degree of technical risk and uncertainty, but there are steps we can and must take in the light of the Gray report to build on earlier reform and to deliver a radical improvement in performance.

First, I have already announced that we will undertake a strategic defence review immediately after the general election. Preparatory work is already under way, and I intend to publish a Green Paper early in the new year. We will also examine legislative frameworks for implementing Bernard Gray's recommendation that a strategic defence review be conducted early in each new Parliament.

Secondly, we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources through the current planning round and, in due course, the strategic defence review. Thirdly, we will plan equipment expenditure to a longer time frame, with a 10-year indicative planning horizon for equipment spending agreed with the Treasury; and we will increase transparency by publishing that planning horizon and an annual assessment of the affordability of our programme.

Fourthly, we have already strengthened board-level governance within the MOD by establishing a new sub-committee of the defence board, as recommended by Mr. Gray. It is chaired by the permanent secretary as accounting officer and charged with determining, for agreement by the board and Ministers, an equipment plan that is aligned with strategy and is affordable and realistic.

Fifthly, we will improve the way we cost projects in the equipment plan, using better and more sophisticated techniques applied more consistently, and ensuring that investment decisions are based on the most reliable available forecasts. We will also improve the management of risk across the programme. Sixthly, we will introduce stronger controls over the entry of new projects into the equipment programme, and over changes in performance, cost and timing of individual projects.

Seventhly, we will sharpen the business relationship between the Ministry of Defence head office and the Defence Equipment and Support organisation, and the service commands, by further clarifying roles and responsibilities, and by establishing new arrangements to provide greater visibility of project management and costs in the DE&S to the capability sponsor in head office. Finally, we will accelerate the improvement of key skills, including in cost forecasting and programme management, in the DE&S and the Ministry of Defence head office.

All those changes are consistent with Bernard Gray's main recommendations. I do not intend to take up his suggestion to establish the DE&S as a Government-owned,
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contractor-operated entity, and to put it more at arm's length from the rest of the Ministry of Defence. The Government have thought about this carefully, but we are not convinced that such a change would ultimately lead to better outcomes for the armed forces or for defence generally. Having the DE&S as fully part of defence ensures a close working relationship with the military.

Equipment acquisition is core business for the Department, and we have to get it right. Based on these proposals, I intend to publish a wider, more detailed strategy for acquisition reform in the new year, to contribute to the work of the strategic defence review. I am delighted that Bernard Gray has agreed to work with us on this, and we look forward to pressing ahead and to making the changes that are needed.

Dr. Liam Fox (Woodspring) (Con): I am grateful to the Secretary of State for his statement and for early sight of it. The handling of this report reflects much of the content of the report itself, in that there has been unnecessary delay, incompetence and an attempt to avoid responsibility. We could have had this report months ago. We could have given it time and thought over the summer recess. What did we get instead? Its publication barely an hour before the defence debate last week, with some poor excuses about how it had to be reviewed. Media management was about the only management skill that new Labour ever had, but now even that seems to have deserted it.

I, too, wish to thank Bernard Gray and his team for their hard work and for a job well done with this very substantial piece of work. To the credit of the Ministry of Defence, it is widely understood that it wanted to publish the report earlier, but No. 10 blocked that-we can see why it was blocked. It is because when he was Chancellor of the Exchequer, the current Prime Minister took little interest in defence, and we are now paying the price.

It is now clear that the Government have increasingly announced, and started, procurement programmes without ever considering whether any money would ever be made available. Children write letters to Santa Claus with comparable understanding between desirability and affordability. The procurement programme under Labour is becoming a wish list. The Secretary of State's statement today was a poor, undetailed and superficial response to this complex report. Perhaps the Government will hold a proper debate in Government time to give the whole House more time to discuss it.

Having read the report, I do not think I have ever seen such a damning set of indictments: average time overruns are five years; average cost overruns are 40 per cent. more than the original cost; the total overrun is £35 billion, when we only have a defence budget of £37 billion and an equipment budget of £16 billion. In fact, expected cost overruns in the next 10 years alone amount to £16 billion, which is roughly £4.4 million per day of unfunded liability. Those sums are so large, and the report is so damning, that the shock value has almost diminished. In the words of Bernard Gray, the equipment programme

We have too many types of equipment being ordered. There is a too large a range of tasks being covered by equipment. Equipment is being procured at too high a
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specification and with a built-in, sometimes purposeful, underestimation of likely cost. For example, the two-year delay to the future carriers-done on grounds that we can most charitably call utterly spurious by the unpaid Minister for procurement-will add £1 billion to the cost of the project, so to maintain the political fantasy that they are procuring the greatest amount of equipment in recent history, they stick £1 billion on to the taxpayers' bill for the future and cut funding elsewhere, such as through the brutal cuts to the Territorial Army. How perfectly consistent for a Government under whom the interest on our national debt next year will be greater than the defence budget.

The fact that we have not had a strategic defence review in almost 12 years is a big part of the problem, but the problem also lies in the fact that the Prime Minister, as Chancellor, was never willing fully to fund Tony Blair's wars. The consequence of both is that defence planning is not conducted in tandem with costings-perhaps the most devastating indictment of all. Again, in the words of Bernard Gray:

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