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"In corporate life, no enterprise should persist with a 12 year old strategy without at least re-evaluating it fully on a regular basis. Few who would expect to prosper would even try to do so."
Yet what is the Government's response? First, to play catch-up with the Opposition. After 12 years we will get a Green Paper, perhaps eight weeks before Dissolution. What do they expect-gratitude that after 12 years the penny has finally dropped? We are to have regular defence reviews, too; the Opposition have proposed that for two years. And 10-year capital allocations; we proposed that, too.
When will the Secretary of State introduce his 10-year equipment budget plan? Will it be before the election, so that we can see it? He refers to improving the way the MOD costs projects using better and more sophisticated techniques. Can he tell us what he means? What practical measures will he take now to accelerate the improvement of key skills, including in cost forecasting and programme management, in the DE&S and the MOD head office?
The procurement process is broken and needs fundamental recasting. Many of its structures are upside down with cost control at the end and not the beginning. What does arm's length mean for DE&S and why are the Government ruling out the Government-owned contractor-operated option? Given the importance attached by Mr. Gray to research and development, why has the Secretary of State cut a further arbitrary £100 million from the defence research budget? Surely that one action stands in complete defiance of the core Gray analysis.
The Secretary of State tried the old cop-out that these problems have occurred for many decades. Of course, after the Government have been in office for 12 years, the problems are not really their fault at all. However, the report clearly points out that not only has it been quantitatively worse under this Government but that problems are growing-and at an accelerating rate.
The Secretary of State is right about perhaps just one thing-yes, there are skilled and dedicated people working in his Department in procurement. Some of them are my constituents. However, they are stuck in a Department where there have been four Secretaries of State in four years. No one is driving-no one is in control-yet the country is at war. What more damning conclusions could there be in any report to any Government?
Mr. Ainsworth: The hon. Gentleman is quite wrong on the issue of the report's handling. He cannot have his cake and eat it. I am not suggesting that the time was adequate, and I apologise to him and to the House for the fact that it was not, although it should have been, but he had the report for a lot more than an hour-
Mr. Ainsworth: He had the report for two hours- [ Interruption. ] I am not saying that that is long enough, so he does not need to gild the lily. He had the report for long enough for the Chairman of the Select Committee, his right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), to be able to say that there were changes to the report from the version that we had seen earlier, which was leaked to a newspaper. The hon. Gentleman cannot have it both ways. Either the report was finished months ago and it should have been available to the House months ago, or changes were made, but he cannot have it both ways. The draft that was available in the summer was a draft and we have continued to work with Bernard Gray. The hon. Gentleman would have been the first to complain if I had put this report out during the recess, having missed the opportunity to put it out because we had not finished the work in the summer. I sought to put it in the public domain at the first opportunity after the House had returned.
The hon. Gentleman referred to the defence procurement programme as a Santa's wish list, but why on earth does he not tell us what he thinks ought not to be in there? He is reluctant to tell us-
Dr. Fox: It is not about us-it is about your stewardship.
Mr. Ainsworth: Absolutely, but I am trying to cast a little light in his direction and to try to get a little bit of clarity. Again, he cannot have it both ways. If it is a Santa's wish list of unaffordable projects, he ought to be prepared to say what he thinks ought not to be in there if he wants to have any credit for the criticism that he is throwing at us.
The hon. Gentleman tries to suggest that this is a damning report that says that the system is broken. Bernard Gray says the quite reverse. He says in terms that
"this report dwells on areas where there are problems, not with the intention of saying that everything is broken or that the system as a whole is bad".
That is a direct quote from the Gray report. On the issue of whether the Department is as good as others, I am not going to try to say that the problems have been going on for decades, although I am certain that they have. What the report says, again in terms, is that all nations with advanced defence capabilities, and therefore acquisition processes, suffer from exactly the same difficulties. We know more than many countries, and indeed other countries look to our process as a beacon showing the way to reform.
On the details of taking the programme forward, that is exactly what Lord Drayson is doing, and we will report in the new year to put flesh on the bones and explain exactly how we are going to take forward acquisition reform. The hon. Gentleman talked about the carrier, and he claimed that there was no good reason for a delay to the reprofiling of the carrier programme, but he knows that it was delayed to make way for a higher priority requirement-the Lynx Mk 9 helicopter, which
is needed for current operations. These things will always happen. As things develop, and as military priorities emerge, from time to time, despite the fact that there is a cost involved-and I do not deny that there is a cost involved, which is why we commissioned the report-it makes sense to reprioritise, because other priorities become more important at a particular time.
Nick Harvey (North Devon) (LD): Listening to the silken prose of the Secretary of State as he read his statement, one could barely believe that what he was describing was the report that we have all seen, and that stands as a damning indictment of procurement processes. One would hardly recognise it. I congratulate his wordsmiths-I think that he has secured better value for money on that budget than he has on procurement.
What the report actually tells us about is a gaping £35 billion black hole; too many types of equipment being ordered for too large a range of tasks at too high a specification; average overruns of five years or 40 per cent. financially; and frictional costs to the Department of £1 billion to £2 billion a year. The Secretary of State may not have chosen to say that the problems go back for decades, but I will do so, because some of the things that are coming on stream now were signed off decades ago-in one instance, by John Nott, when he was Defence Secretary. I do not think that the present generation of Ministers are, in all fairness, to blame for all this. In fact, on urgent operational requirement procurements, some ministerial decisions in the past couple of years were brave and commendable.
We need a radical shake-up, and some of the solutions that we have heard in this statement sound altogether far too familiar, which is more than can be said of the explanation from the Secretary of State about the justification for delaying the carrier programme, as it bears absolutely no resemblance to what we were told at the time. I thought that the logic that was squeezed out at the time was to get the programme to dovetail with the availability of the joint strike fighter, and certainly nothing to do with helicopters.
If we are talking about a "Santa's wish list" model of procurement, not only must Ministers get on top of procurement, but so must the defence chiefs, because sometimes their unrealistic expectations of procurement cause the pursuit of something absolutely perfect to get in the way of the achievement of something that would really be very good. The armed forces themselves must be more realistic about their expectations in future.
In today's statement from the Secretary of State, there are references to transparency. If those can become a reality, that will be very welcome and not a moment too soon. One of the impediments to proper scrutiny of procurement processes in recent years has been the extraordinary extent to which those processes are opaque by comparison with anything that goes on in other countries. What is the time frame for the implementation of the changes that he spoke about today? I hope they will not all be put off to a strategic defence review. I understand that that is imperative, but how many of these changes can we look forward to in the forthcoming Green Paper?
Mr. Ainsworth:
The hon. Gentleman castigates us, but fails to mention the fact that we commissioned the report in the first place. We did that knowing that it
would not be a glowing exposition of a Department that got everything right. The reason for the report was that it was needed. I wonder whether any Liberal Democrat Government whom the country might ever have imposed upon it would dare to commission such a report.
The hon. Gentleman says that a £35 billion hole in the budget is exposed by the report. That is not true. That is not what the report says. From an extrapolation from some projects, the point being made is that there is the potential for a £35 billion growth from the original estimation to the final delivery, which is why forecasting is an absolute skill that needs to be upgraded within the Department. It is an extrapolation from a few samples and it does not try to say that there is such a gap in the budget. I think the hon. Gentleman has read that wrong.
However, I agree-the hon. Gentleman is right, and it is an issue that we have to grapple with-that in this area the best often becomes the enemy of the good. That is a major problem that we ought to tackle. It is far better dealt with in the urgent operational requirement process. Bernard Gray says that, although he did not look into the UOR process in any detail. Where there is urgency, for current operations, we get a better balance between what is needed, timeliness, and what is good enough to do the job that is badly needed by our armed forces.
On time scale, we will look to publish something in line with the Green Paper in January that brings forward a number of acquisition reform issues. We have not yet bottomed out a legislative process for dealing with the recommendation that a strategic defence review should be scheduled for the start of every Parliament. I should not have thought that that was beyond the wit of man. Working together, I think we could achieve it. We certainly could if there were cross-party agreement to do so.
Mr. Speaker: Order. May I emphasise, as usual, that I would like to accommodate as many right hon. and hon. Members who wish to contribute to these exchanges as possible, but there is important business to follow in the form of a full-length Opposition day debate, so I am looking for single, short supplementary questions and to the Secretary of State for pithy replies?
Frank Dobson (Holborn and St. Pancras) (Lab): I have been in the House for 30 years, and every time defence procurement has been discussed, we have described it as a shambles. Perhaps we ought to grow up and recognise that it is intrinsically very difficult to get defence procurement right and that it is always likely to go fairly wrong, for two or three simple reasons. The military, from experience in the field, ask for changes in the specification; technological change may bring about changes in the specification; and we have to try and buy British, even if the British are not necessarily the best suppliers.
Mr. Speaker: I am grateful. I think that is the question mark.
Mr. Ainsworth:
My right hon. Friend says a great deal that is true, but that is not to say that we cannot do better. There is the issue of always trying to get the best, and the issue of responding to changing military
requirements. Those must be balanced with time scale and getting what is good enough into being as quickly, as effectively and as cost effectively as possible.
Mr. James Arbuthnot (North-East Hampshire) (Con): This excellent report sets out a state of affairs that, as the Secretary of State rightly says, is not new, but it may have led to events such as the Nimrod crash of 2 September 2006. When will we see the report on that? Now that Bernard Gray's 10-year rolling budget has apparently become a 10-year indicative planning horizon, we should at least be thankful that the Secretary of State has said that there will be an annual assessment of the programme's affordability, but will it be subjected to an external audit by one of the large accounting firms, as Bernard Gray recommends?
Mr. Ainsworth: An annual and transparent reporting process, coupled with the 10-year indicative budget, is a big step in the right direction. On Nimrod, we are in the hands of Mr. Haddon-Cave QC, who I believe may be giving his report in the near future. However, I have no control over that process or time scale.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): Bernard Gray's report is eminently readable, and he should be congratulated on that. In looking at some of the success stories that he finds, such as urgent operational requirements, possibly through-life capability and contracting for capability, I note that he points us in a direction that needs urgent work. I hope that some of the work strands for the Green Paper will draw them out. Can my right hon. Friend confirm that they will?
Mr. Ainsworth: We commissioned the report, knowing that some of the findings would be painful, to try to address those issues, and now that we have it we have no intention of not learning the lessons that it identifies. Of course we will use the Green Paper process as part of bringing forward ideas on how we deal with those issues.
Mr. Crispin Blunt (Reigate) (Con): On the Secretary of State's answer to my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), the Chairman of the Select Committee on Defence, and on the Secretary of State's point when he said that "we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources," I must say that that is a great step back to the past. We used to do that in the mid-1990s. The long-term costings programme was fought over inside the Department and then reported on annually in the Defence White Paper, when the consequences of the scheme became clear. We would never end up in a situation where we had a £35 billion overrun, so when did we stop doing that second point exactly?
Mr. Ainsworth: We have never stopped having annual planning rounds; we still have them. Let me repeat what I said to the hon. Member for North Devon (Nick Harvey), the Liberal Democrat spokesman: Bernard Gray does not say that there is a £35 billion hole in the defence budget; he talks about the gap between the original estimates and extrapolates that across the whole programme to the final costs.
John Reid (Airdrie and Shotts) (Lab):
The issue is not just about changes in military requirements, is it? It is about technological advances, too. The military want
the latest and the best. The latest and the best, as the Secretary of State said, is at the leading edge of technology; and the leading edge of technology now changes every 18 months, not 18 years, therefore the military re-specify. May I suggest to the Secretary of State that it is good to distance the procurement process from immediate demands, to ask the military to shape and identify the final product that it wants and then to hand the product over to a contractual basis that is as separate from the Ministry of Defence as it possibly can be?
Mr. Ainsworth: That is Bernard Gray's proposal, and we are not taking it up, but we will explore whether we can put the appropriate distance between the different parts of the organisation, DE&S, the main building and the services themselves, by perhaps establishing a trading fund. That might be the way in which we can achieve the appropriate distance without losing effective control. That idea is being looked at as part of the process, and we will come back to the House.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): Sadly, service personnel whom I know, and, indeed, their families, will probably not be too surprised by the report's findings. Bernard Gray found that a staggering £2.2 billion a year is spent on managing delays and overruns. When our Territorial Army is suffering training cuts, do not we need an MOD that is focused on our soldiers on the front line?
Mr. Ainsworth: Again, the hon. Gentleman misreads the report. He has had the weekend, but perhaps he wants to take a little longer to look at it. On the TA, as I said the other day, I make no apologies for shifting the focus towards Afghanistan and making absolutely certain that, in every sense, support for Afghanistan is the main effort. Nobody in the TA will lose out on the training that is necessary for deployments to Afghanistan.
Patrick Mercer (Newark) (Con): The Secretary of State has seen this outstanding report, but it addresses merely equipment. Given the number of wounded coming back from Afghanistan, and the appalling nonsense in the training mechanisms to get the troops through the system, when is he going to produce a similar report on the awful state of recruiting, particularly to the combat arms?
Mr. Ainsworth: I have had conversations with the hon. Gentleman in the past, on and off the record, to try to capture his views on what we should be doing on training and recruitment. He knows that in the past year the Army has made huge steps in the right direction as regards recruiting, and I would have thought that he was happy with that. I do not see the same issues applying to recruitment as apply in DE&S. That is why the report was procured in the first place-to try to identify the lessons that we badly need to learn and address.
Willie Rennie (Dunfermline and West Fife) (LD): In the spirit of transparency referred to in the report, will the Secretary of State clear up the reason for the two-year delay to the carriers-was it the Lynx helicopter or the JSF? Can he guarantee that there will be no further delays to the carriers?
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