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2.47 p.m.

Lord Strathclyde: My Lords, the House will be aware that my noble friend Lord Howe proposes to make a Statement on matters concerning defence. In view of the fact that he has been in this House replying to the debate just concluded, I hope that the House will

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feel it appropriate for there to be a short adjournment during pleasure so that he can prepare himself before making that Statement. Therefore, I beg to move that the House do now adjourn during pleasure until 3 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 2.48 until 3 p.m.]

Defence Contracts

Earl Howe: My Lords, with the leave of the House, I should like to make a Statement about three major defence equipment decisions for the RAF. The Statement is as follows:

    "To meet the Royal Air Force's requirement for a conventionally armed stand-off missile, the Government have decided, following the conclusion of a very successful competition, to buy Storm Shadow missiles from British Aerospace Dynamics, subject to the negotiation of satisfactory terms. This decision will provide the Royal Air Force with a highly capable stand-off missile able to mount precision attacks on high priority targets, the need for which was demonstrated in the Gulf War. This decision will give excellent value for money for the taxpayer. It will also cement the recently announced merger of the missile businesses of British Aerospace and Matra of France. This will strengthen British Aerospace's ability to play a leading role in a restructured European industry. The order will directly sustain some 1,600 jobs in our defence industry and work to the full value of the order will be placed with British companies.

    "The RAF also requires an advanced air-launched anti-armour weapon to defeat enemy battle tanks and other armoured vehicles and which can be deployed rapidly to and around the battlefield. The Government have decided that, subject to the negotiation of satisfactory contract terms, we will buy Brimstone from GEC Marconi Dynamics to meet this requirement. The company has won this tender in the face of fierce international competition, demonstrating that the UK is at the cutting edge of world missile seeker technology. We believe that the order will directly sustain some 700 jobs in our defence industry and, as with Storm Shadow, British companies will obtain work to the full value of the order.

    "The Royal Air Force's maritime patrol fleet provides a key part of the UK's anti-submarine and anti-surface warfare capability. It also contributes significantly to our ability safely to deploy and sustain contingency forces, including the Joint Rapid Deployment Force. In addition to their operations in the North Atlantic, Nimrod aircraft played vital roles in the Gulf War and more recently over the Adriatic, supporting operations in Bosnia. The Nimrod MR2 aircraft have been in service now for a quarter of a century; we need to replace them from the turn of the century.

    "The Government have decided to purchase 21 Nimrod 2000 aircraft from British Aerospace, subject to the satisfactory completion of contract

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    negotiations. As prime contractor, British Aerospace will be wholly responsible for systems integration and for the airframe. Rolls-Royce will supply the engine and Racal the radar, while key elements of the mission system will be provided through a strategic partnership between GEC and Boeing. The order will directly sustain around 2,600 UK jobs. Once again, work to the full value of the order will be placed with British companies.

    "These three orders have a combined value approaching £4 billion, and will sustain around 5,000 British jobs. They underline the Government's determination to deliver the benefits promised by Front Line First by sustaining and enhancing the fighting strength of our Armed Forces."

My Lords, that concludes the Statement.

3.4 p.m.

Lord Williams of Elvel: My Lords, I am grateful to the noble Earl for reading out the Written Answer that he gave to the noble Lord, Lord Peyton of Yeovil, the text of which was in our hands earlier today. Sometimes the Government seem to forget that this House is a House of Parliament. The announcement of expenditure of £4 billion should have been made in the form of a Statement to this House or preferably to both Houses before another place had risen for the Summer Recess.

Only on Tuesday, the Prime Minister said that the contracts were being carefully evaluated and that an announcement would be made in due course. The House of Commons Defence Committee said that it expected an announcement to be made before the Recess. But I am sure that all noble Lords are surprised by the early editions of the Evening Standard which carry this whole deal--if I may put it like that--in extensive detail. It appears that there was deadlock between the Ministry of Defence and the Treasury, which was keen to secure spending statements. It goes on:

    "The Defence Secretary rushed onto the airwaves today to hail the 'tremendous order' ahead of an official Government announcement, expected later in the day".

The report goes on to say, and I have no reason to believe that it is wrong:

    "Mr. Heseltine brokered the final deal in a meeting of Ministers in his Whitehall office yesterday, which began at 7 p.m. and finished by 8.30 p.m.".
Are we really to suppose that the defence and defence procurement of this country are subject to Cabinet Ministers briefing the press before Parliament has had an opportunity to discuss the matter?

I imagine, since the noble Viscount the Leader of the House was at the Cabinet meeting this morning, that he put up his hand and said, "By the way, the House of Lords is still in Session".

Lord Strathclyde: He was here. He made a speech.

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Lord Williams of Elvel: My Lords, he may have been here, as the noble Lord the Chief Whip seems to imply, but I imagine the view was put that Parliament was still in Session; that although the House of Commons had gone into Recess, the House of Lords had not gone into Recess. It would have been proper for the announcement to have been made by a Statement in this House. There have been many occasions when this House has been sitting and the other House has not been sitting and Statements have been made here. It seems to me absurd that we have been treated in this way.

Leaving aside the question of the position of this House--that is an important matter which your Lordships will wish to debate at some time in the future--there is no doubt that the contracts were needed urgently. Indeed, we have been pressing for an announcement on those contracts. If there had not been the dispute between Cabinet Ministers, which was apparently finally resolved by the Deputy Prime Minister yesterday evening, we should have had an announcement earlier. Indeed, in its report the House of Commons Defence Committee stated:

    "We understand that major announcements are due before the summer recess on four major procurement orders, as well as on the Bett report on Manpower, Career and Remuneration Structures".
I ask the Minister to confirm that before the House goes into Recess there will be a Statement on the Bett Report on Manpower, Career and Remuneration Structures. If not, it will again be slipped out by Written Answer during the Recess. We all know how government managers run their business.

I do not believe that that is the right way for Parliament to be treated. I do not believe that that is the right way for the UK's future defence requirements to be decided--in open battle, each side putting its own spin on its own arguments between various Ministers in the Cabinet.

Although we welcome these announcements in principle, will the Minister confirm that the RAF asked for 25 rather than 21 Nimrods? Will he then give the House an assurance that the RAF is satisfied that it can carry out its operational requirements with the 21 which appear to be the Treasury pound of flesh that has been cut away from the original requirement of 25?

Will the Minister also confirm that the price of those contracts has already been established? When he said in the Statement that the contracts were subject to satisfactory terms--the press release has somewhat different wording on the matter--will he confirm that the price has at least been agreed and that there is no question of the contracts in some way failing from negotiation of terms?

Finally, will the Minister agree that the Armed Forces have had their full measure of Treasury interference and that the report, which I quoted in our defence debate of 12th July, and to which the noble Earl failed to reply, that the Treasury is still asking the Ministry of Defence to cut its budget for next year by £400 million, is not

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the case and that if the Treasury is asking that, Mr. Portillo will resist it in the "victorious" way in which he has resisted the Treasury today?

Lord Wallace of Saltaire: My Lords, I welcome the announcement, which ends a period of uncertainty. I too express a certain amount of cynicism about the way in which it has been undertaken and about the undignified bargaining, to say the least, between the Treasury and the Ministry of Defence. Strong rumours have it that the sale of Ministry of Defence housing was used as part of the bartering between the MoD and the Treasury. That is another example of the way in which the Government are selling off long-term assets in order to buy shorter-term assets, or against income. That is most distressing.

I note that the announcement marks a further stage in the closer integration of a UK defence procurement industry with our West European partners in the proposed merger of British Aerospace with Matra. Of course, it is highly desirable that as equipment becomes more expensive and as the size of procurement shrinks we should, as far as possible, move towards common procurement with our closest allies and towards a restructured European industry. In that context, I wish to ask the Minister which other countries are expected to order the advanced air-launched anti-armour weapon and how far that will be a part of the inter-operable system with those of our allies with whom we are most likely to operate. How far will the new Nimrod system be fully inter-operable with those of our allies, in particular around the North Sea, who require and have similar equipment?

Given the inherent and structural inefficiency of the public service, military and civil, about which we have heard today, I am bound to ask the Minister how far further privatisation has been considered in the operation and maintenance of the equipment which is about to be procured. It occurred to me, for example, that the new generation Nimrod might possibly be contracted out to Iceland Air or Aer Lingus under a contract to maintain bases, subject to RAF monitoring. Air Singapore and Malaysian Airlines are, so the Financial Times tells us, the most efficient operators in this sector, but they may be a little far away to undertake such a contract.

Finally, I wish to ask the Minister how much further this takes us towards getting better value for money out of British defence by moving towards closer integration with that of our European partners, which seems to many of us the only effective way forward.

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