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15 Dec 2009 : Column 800

The Chief Secretary to the Treasury (Mr. Liam Byrne): Over the past few years, we have moved something like 24,000 jobs out of London and the south-east. Just before the pre-Budget report, we said that we would seek to move another 13,000 out over the next few years. I would be very happy to sit down with my hon. Friend and other colleagues from Stoke-on-Trent to talk about how we can maximise Stoke-on-Trent's chances of getting a big share of those new jobs.

T9. [306874] Mr. Henry Bellingham (North-West Norfolk) (Con): Can the Chancellor tell the House how much his Government will be paying in interest on our national debt in the current financial year, and what his estimate is of the interest that will be paid in the next financial year?

Mr. Darling: It is understandable that the hon. Gentleman is concerned about debt, and I can tell him that the debt would have been very much higher had we not taken the action that we did to support our economy and to ensure that we got through the recession. Otherwise, the amount of borrowing and debt would have been far greater.

David Taylor (North-West Leicestershire) (Lab/Co-op): Despite the cheaper pound and rising house prices, stalled industrial output is still holding the economy back. Will the Chancellor tell the House what progress has been made on his plan to diversify the economy away from the financial services sector?

Mr. Darling: In the pre-Budget report last week, I set out a number of measures to encourage low-carbon industries and to encourage business generally. It is important that we have a diverse economy. The research and development tax credits and the reduced rate of corporation tax for firms that patent discoveries in this country and then develop them here are part of a range of measures all designed to make sure that we have a more diverse economy in the future. In the 1980s, rather too many firms went under and rather too many sectors were badly damaged: we cannot afford to repeat that mistake.

Peter Luff (Mid-Worcestershire) (Con): At some stage in the relatively near future, the Chancellor will receive a welcome windfall from the auction of the spectrum release by the digital dividend process, so will he honour the pledge given to users of radio microphones in the "Digital Britain" White Paper and earmark at least a small proportion of those significant revenues fully to compensate those users for their unwelcome eviction from the spectrum?

Mr. Timms: The Government are in discussion, as I think the hon. Gentleman knows, with those who represent that particular interest. We recognise the importance of it and we are looking to see what we can do to help.

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Future Defence Programme

3.30 pm

The Secretary of State for Defence (Mr. Bob Ainsworth): I am announcing today changes to the defence programme, which will enhance the support to our personnel on operations in Afghanistan, worth £900 million over the next three years, and reductions elsewhere to make these enhancements affordable and to match our expenditure against available resources. In doing so, I have made every effort to ensure that we balance the priority of supporting our forces in Afghanistan with our commitment to maintaining the capabilities necessary for the future, and that we do not take decisions on major changes that should properly be made in next year's defence review.

As I have said repeatedly to the House, support for our operations in Afghanistan is our main effort. I saw for myself last week the contribution being made by our forces across Afghanistan-taking on the Taliban and beginning to train and partner with the Afghan national army. I pay tribute to their bravery, their professionalism and their dedication.

The defence budget has had the longest period of sustained real growth since the 1980s: it is now £35.4 billion-over 10 per cent. more in real terms than in 1997. As the Chancellor confirmed at the pre-Budget report last week, not a single penny is being cut from the defence budget in 2010-11, but despite this significant investment, acute cost pressures remain. There are a number of reasons for this, including rising fuel and utility costs, increases in pay and pensions and, above all, cost growth in the equipment programme. A number of major projects, while providing superb military capability, have cost more than twice their initial estimate in real terms.

All of this presents us with a significant challenge both in this financial year and as we look forward. The National Audit Office's "Ministry of Defence: Major Projects Report 2009", published today, describes the result of these pressures. Going forward, I am determined that we take action to deal with these pressures and to address the challenges head on. That is why we commissioned the hard-hitting Bernard Gray report, why we are taking steps now to implement his report and why we are reforming defence acquisition better to match our priorities to our spending. Getting this right is critical; tough choices are required. We will be publishing in the new year the strategy that will provide a planning and management framework to produce an affordable equipment plan.

I am determined to ensure that those who put themselves in harm's way on our behalf remain properly supported and resourced. Our priorities in Afghanistan are to provide the best levels of personal equipment and protection to meet the fast-changing threat and to increase investment in key capabilities, including helicopter capability and our strategic air bridge.

I am therefore pleased to announce a number of capability enhancements to support the mission in Afghanistan. They are in addition to the operational costs paid for from the reserve, which continues to increase year on year and has risen from £738 million in 2006-07, when we deployed to Helmand, to over £3.7 billion this year. By the end of 2009-10, the reserve will have
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contributed over £14 billion to operations in Iraq and Afghanistan, including some £5.2 billion on urgent operational requirements.

My decision to fund these enhancements from the core defence programme reflects our determination to ensure that the Ministry of Defence is supporting the current campaign, and our belief that we expect such capabilities to feature in a range of future conflicts that our forces may face. The enhancements total £900 million over three years. They include an improved dismounted close combat equipment package, making equipment such as state-of-the-art body armour and night vision goggles available to 50 per cent. more troops so they can train with it not only before deploying to Afghanistan but before they embark on pre-deployment training; more Bowman tactical radios and patrol satellite systems to improve communications between troops and commanders; an additional £80 million for communications facilities for special forces; increased funding for our intelligence, surveillance, target acquisition and reconnaissance capabilities; and a doubling of Reaper capability.

As the Prime Minister announced yesterday, there will be further improvements in our counter-IED capabilities, particularly intelligence and analytical capability to target the networks that are doing so much damage to our troops and to Afghan civilians. There will be an additional C-17 aircraft to strengthen the air bridge, and improvements to defensive aids suites and support arrangements for the Hercules C130J fleet so that we can maximise their deployability and use. There will be 22 new Chinook helicopters, with the first 10 arriving during 2012-13, as set out in the future rotary wing strategy which I also announced today.

In addition to that package, the Treasury has signed off the latest funding from the reserve-over £280 million-to support a range of additional equipment for Afghanistan. It will include more new vehicles-for instance, there will be a 31 per cent. increase in the number of Husky tactical support vehicles and a 40 per cent. increase in the number of Jackal fire support vehicles for deployment in Afghanistan-and additional equipment to combat the threat of improvised explosive devices, including over 400 hand-held mine detectors, robots, and other items of kit. That one-off package is in addition to the resources already allocated for urgent operational requirements for the current financial year, and in addition to the protected mobility package that has already been announced.

The pressure on the public finances means that we need to prioritise carefully within our resources. We need to make reductions in lower priority areas to fund these enhancements, and to better match the defence programme to available resources. That has meant stopping or slowing spending in other areas, and pushing down hard on headquarters costs and overheads. Inevitably these measures will have an impact on some capabilities, but we judge that it will be manageable.

We will continue to reduce the number of civilians working in the Ministry of Defence. We recognise the importance of the civilian work force and the critical outputs that they deliver. That is why in the pre-Budget report we announced an independent study of the shape and size of the civilian work force, including the distribution of tasks between civilian and military personnel. This study will be undertaken by Gerry Grimstone and will inform the defence review. Without prejudicing its outcome,
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we would expect to be able to continue reducing the overall size of the civilian work force, above the 45,000 reduction already made since 1997. This is not just about doing more with less; we will need to make some hard decisions about what we can stop doing altogether, and about how we can bear down on other costs.

The other key adjustments we are making to the current programme are as follows. In line with our current aspirations to reduce to two fast jet types-the Typhoon and joint strike fighter-we will pursue without delay the Typhoon future capability programme phase 2. This is fundamental to the development of its multi-role capability and integration with the latest weapons. We will reduce now the size of our Harrier fast jet force by one squadron, close RAF Cottesmore and consolidate the Harrier force at RAF Wittering. This will maintain our joint carrier-based combat air capability. We plan to reduce our Tornado and Harrier force by a further one or two squadrons; decisions on the make-up of our future force will be taken in the defence review.

We intend to withdraw the Nimrod MR2 force 12 months early and slow the introduction of the MRA4. This will have an impact on our use of RAF Kinloss, but there is no change to our assumptions on the future basing of the MRA4 at this stage. The decision to withdraw the MR2 has been taken for financial reasons and is unconnected to the report by Mr. Haddon-Cave on the circumstances that led to the tragic loss of the Nimrod XV230 in Afghanistan. Mr. Haddon-Cave was very clear in his report that the aircraft remains safe to fly. I will make a further statement on Mr. Haddon-Cave's report in the House tomorrow.

We intend temporarily to reduce some aspects of Army training that are not required for current operations. We will also take one survey ship and one minehunter out of service early, and cancel the current competition for unprotected utility vehicles and defer the programme for two years. We will bring forward the planned reduction in some of the older maritime Lynx and Merlin Mk 1 aircraft prior to the transition to the more capable Wildcat and Merlin Mk 2. We will spend less next year than previously planned on the wider defence estate but will continue to prioritise investment in both service family accommodation and single living accommodation.

The measures I have set out will also have implications for service personnel numbers. The details have not yet been finalised, but the emphasis will be on prioritising our manpower for operations in Afghanistan. Changes will be targeted so as to avoid affecting personnel involved in current operations. Reductions in service personnel numbers will mainly be managed by slowing recruitment and releasing some personnel, in accordance with their contracts. I appreciate that these changes will be difficult for many service and civilian personnel, their families and the communities in which they are based. I am fully aware of the consequences, and we will support those affected.

In making these choices, I have had to consider that the Government and the Opposition parties are committed to carrying out a defence review after the next election. A Green Paper explaining the Government's vision of what that review should encompass will be published early in the new year. The measures reflect our stated priority of support for the Afghan campaign, and continued investment in new capabilities with enduring military
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benefit. This is a difficult balance to strike, but I am confident that we have got that balance right, and that that will be demonstrated where it matters most: on the front line, where our brave servicemen and women, supported by MOD civilians, are fighting for the future of Afghanistan and the security of our own country.

Dr. Liam Fox (Woodspring) (Con): I am grateful to the Secretary of State for his statement and for prior sight of it, although we read much of it this morning in the media. It is hard not to feel some sympathy for the Secretary of State, whom I know to be personally very committed to our armed forces. However, despite the sweeteners, making cuts to our wider defence capability when we are fighting a war in Afghanistan only strengthens the perception that we have a Government who do not give a high priority to the armed forces.

The Government who were willing to waste £12.4 billion on a pointless VAT cut when they had to salvage their own reputation do not seem to have the same resolve when it comes to the country's national security. The Ministry of Defence's internal instructions were clear: allow for standing military tasks and do not prejudge the strategic defence review; and there is to be no capability removal but some shaving off. In other words, this is about numbers not fleets.

What will be the effect of the pre-Budget report on the MOD's core budget, given that the Institute for Fiscal Studies says that non-protected Departments in the settlement will have to bear cuts of 16 per cent. over three years? By how much does it increase the £6 billion black hole highlighted in the Gray report? Is it true that the new Chinook aircraft will be funded from the cancellation of the future medium capability helicopter programme, not from savings arising from cuts in the RAF's Tornado and Harrier fleets? If so, where has the £1 billion of savings from those cuts gone? What impact will the reduction in Tornado and Harrier squadrons have on the RAF force elements readiness strategy? What does the Secretary of State mean when he says that decisions on the make-up of our future forces will be taken later? Does the Treasury intend further cuts? Although more Chinooks will be welcome, we have to accept that we will not get them until 2013-12 years after we went to Afghanistan. Does that not indicate the sheer stupidity of the Government's decision to cut the helicopter budget by £1.4 billion in 2004? When we get the new Chinooks, will they have a standard US army fit or will they incorporate the Thales Julius cockpit upgrade being applied to current RAF aircraft?

How will our submarines be protected following the withdrawal of the Nimrod MR2 next spring? How will the requirement for long-range rescue and maritime reconnaissance be provided once the Nimrods are gone? What aspects of Army training does the Secretary of State intend to reduce? Will he be specific about that? What implications does his statement have for the defence training review and RAF St. Athan?

Why are we cutting minehunter capacity when tension in the Gulf is rising? The Secretary of State is well aware that our minehunter capability is one of the capabilities most valued by our US army allies. We need to ensure that we maintain that capacity at a time when there are rising fears and tensions about what Iran intends to do. There is a real possibility of the Gulf being mined, so will he think again about removing a
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minehunter at an extremely sensitive time? In particular, will he consider the impact that that will have on the confidence of our allies?

There are many questions to be answered. The Secretary of State says nothing about the current carrier status and the possible downgrading of our facilities in Cyprus-again, that has been widely trailed in the media. The important thing for the House to consider is why cuts are being made to our defences at all. This is not about reprioritising spending for Afghanistan. He told us on television at the weekend that the Treasury reserve is paying, mostly, for the extra costs in Afghanistan. The Government say that they have maintained defence spending at about 2.5 per cent. of gross domestic product during their time in office, but that is only if spending in Iraq and Afghanistan is included. In other words, by their own definition, they are trying to fight wars on a peacetime budget. Our defences are being cut not as a response to a diminished threat-if anything, the threat is going up out there-or to a reassessment of our strategic needs, or in order to reshape our armed forces. A Government who have had four Defence Secretaries in four years, one of whom was part-time, and no defence review for 11 years are now cutting the capability because of their own catastrophic economic management.

Overspent and over-borrowed, in a worse economic mess than most of our competitors, last out of recession and with a shrinking wealth creation sector, the Prime Minister in his bunker is still living out the fantasy of what a great Chancellor he was, while all the time his Secretaries of State are having to make real cuts to their departmental budgets. This is the end-the final pathetic chapter in the new Labour project. After 12 wasted years, in debt up to our eyeballs, barely able to finance the Government's borrowing and worried about our credit status, we are now having our national security cut as a consequence. Who is paying for the Government's incompetence? Our brave armed forces, at least until we get a general election, when the real culprits will pay.

Mr. Ainsworth: I did explain to the hon. Gentleman-he knows the true facts-that no cuts in our budget are proposed this year. None whatsoever. We have enjoyed a steady rise in the defence budget that has made it 10 per cent. higher in real terms. He says repeatedly-I have heard it before-that we are fighting wars on a peacetime budget, but the Opposition supported our operations in Iraq and in Afghanistan and do not offer a single penny more for defence. He can go round all he likes trying to undo the public statements of the shadow Chancellor by ringing up members of the defence industry and saying, "It won't really apply," but the Opposition have to tell one story in public and the same story in private. The hon. Member for Woodspring (Dr. Fox) does not offer a single penny more for defence, despite his allegations.

On the withdrawal of Nimrod, I do not take these decisions without consulting the Chief of the Air Staff and the First Sea Lord. Other platforms are capable of providing the maritime patrol responsibilities. They have done so before-they are Merlin and Hercules, and we can meet our obligations with those other platforms. We will continue to support the cost of current operations through the reserve, but it is quite ridiculous of the hon. Gentleman to suggest that the only thing that ought to pay for anything that is usable in current operations is the reserve. Of course we need Chinook in theatre in
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Afghanistan, but we will use Chinook elsewhere. Chinook is a considerable uplift in our helicopter capability not only for Afghanistan but for elsewhere, too.

The hon. Gentleman has nothing to complain about. He offers no additional money for defence and he really should stop pretending that he does.

Nick Harvey (North Devon) (LD): I thank the Defence Secretary for his statement and for advance sight of it. Nobody will argue against the new equipment that will go to our front-line troops in Afghanistan and the additional capability that it will give them, but one must inevitably ask some questions about the details. The most eye-catching is the order for 22 new Chinook helicopters, of which the first will arrive in 2012-13. But how many will really arrive in 2013, when will the others get there and how does that fit in with President Obama's timeline of beginning the withdrawal from July 2011? Would it not have helped if this decision had been taken a good deal earlier? Does this not prove the folly of the 2004 cuts in the helicopter budget?

We will all feel sorry for the Secretary of State because the Treasury has made him come here today, raiding core defence budgets to pay for these additional orders. What sense does it make for these decisions to be taken outwith the strategic context of the strategic defence review, which everybody is signed up to after the election? What will be the additional cost to the long-term defence budgets, and what will be the diminution of our core capability?

In 2001, we entered Afghanistan, and in 2003 we entered Iraq. The fact of the matter is that the fighting has been done on the cheap ever since. It is true that the Treasury has supplied UORs, but the fact of the matter is that the core defence budget has been creaking under the strain of these engagements ever since they began. The Secretary of State and the Ministry have tried to put off painful decisions until after the general election, but today harsh reality has caught up with them.

Mr. Ainsworth: As I said in my statement, 10 of the 22 Chinooks will become available in the financial year 2012-13. It is all right for Opposition Members to talk about it being too late, but they know that we have doubled the helicopter hours available to our troops in Afghanistan and that there are 79 per cent. more helicopters. We have just put the Merlin into theatre, and the new Chinook capability not only will be greatly welcomed, but will come on top of all the enhancements that we have managed to achieve in the current fleet.

The hon. Gentleman talks about us cutting core capability, but how is providing twice as much Reaper capability in theatre, as we have at present, and providing additional Chinooks cutting core capability? Yes, these decisions are being taken ahead of a strategic defence review, but can he tell me what sensible person believes that ISTAR, unmanned aerial vehicles, helicopter lift in theatre and the kind of strategic airlift capability provided by C-17 are not what will be needed in the future? I do not believe that any of these decisions are cutting across decisions that will quite properly be made as part of a strategic defence review.

Several hon. Members rose -

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