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Earl Howe: My Lords, I am most grateful to the noble Lord, Lord Chalfont, for the welcome that he has given to this announcement, and particularly for the warmth of that welcome. He asked me specifically about defence collaboration. It would be no exaggeration to say that this is, in the world of defence procurement, the flavour of the month. As the noble Lord well knows, the rationalisation of the defence industry, particularly on the Continent, is a matter which is very much under the spotlight.

In this country whilst there may, for all I know, be further rationalisation yet to be seen, I think that the activity in that direction will be concentrated in the years ahead with our Continental neighbours across the water. The noble Lord referred to the CASOM missile, Storm Shadow. When we took the decision to purchase that weapon we took all relevant factors into account, including, of course, cost effectiveness, operational effectiveness, risk and defence industrial issues. As I said, it is estimated that the procurement of Storm Shadow will help directly to sustain around 1,600 jobs throughout the UK. Storm Shadow is based upon the Apache missile which has been developed by Matra of France. Apache currently forms the basis of a Franco-German collaborative project. The UK selection of Storm Shadow will enable the proposed joint venture between British Aerospace and Matra to proceed. I believe that is a welcome by-product of this announcement.

On a more general note, I am sure the noble Lord will be aware that what was initially conceived as a Franco-German defence procurement agency will now, as was announced recently, be a Franco-German, UK defence procurement agency. That is a development of which we have high hopes for the future. It is important that we combine forces with our allies in the European part of NATO as well as our United States allies. I believe that that is the start of some interesting things to come.

Baroness Seear: My Lords, will the Minister agree that the inappropriateness with which this matter has been handled is underlined by the fact that most of us heard about it on the "Today" programme, with the inevitable comments from those great experts on defence who run that programme?

Earl Howe: My Lords, this cannot be a unique occasion in that regard. I often wake up in the morning and listen to the radio. I hear things about which I am not aware even though I am supposed to be aware of them; and they turn out to be completely false. At other times there is some nugget of truth within them.

I believe that the time to assess these matters is when the Government actually announce them rather than when broadcasters or journalists speculate upon them.

Lord Kennet: My Lords, perhaps I may take the Minister back over some of the things he said in the Statement and in various answers about the internationality of the contracts. He told us that one contract was buying in American made instrumentation, I think for aircraft. We learned that there was to be a

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joint marketing arrangement between the British lead producer and a couple of American firms. In his original Statement the Minister said, if I remember aright, that in each case the British firm was to receive payment to the full contract value. Does that mean that in each case there will be a through payment from the British firm to American firms, and indeed French firms, whether for parts of the manufacture or for joint sales deals elsewhere in the world? It is a slightly complicated question. I apologise. But I believe that he knows what I mean.

Earl Howe: My Lords, it is a complex question. I say that because the precise details of how the financial arrangements are to be settled have yet to be decided. They are subject to contractual negotiation. In so far as I am able, I shall write to the noble Lord with those details.

I can only reiterate for the time being that the work to the full value of those contracts will be placed in the UK even though within the contracts there are collaborative joint ventures.

Lord Renton: My Lords, is my noble friend aware that Members of both Houses have been longing to get away from Parliament as early as possible this month because school holidays began some time ago? Whether or not Parliament is sitting, Government have to continue from day to day. Often important decisions have to be made during the long Recess.

As to this decision, is it not perfectly clear that no Statement could have been made even in Answer to a Written Question until all the negotiations had taken place, all the technical decisions taken as a result of them, and an opportunity given to the Cabinet, as it was yesterday, to decide the matter? Are we not fortunate that a copy of the Answer to a Written Question was given to the Leader of the Opposition in your Lordships' House? We should be grateful to him for drawing attention to the fact that it was an important matter; and grateful to my noble friend for having made the Statement.

Perhaps I may ask a few questions about the financial and economic features of the matter. The Minister has told us that there will be £4 billion of expenditure. Can the noble Earl say over what period that will be incurred, and give us a broad idea as to what will be the source of the funds? One hopes that it would not be from an increase in taxation nor much of an increase in the PSBR. However, if the Minister can give us an indication, it would allay the anxieties.

Further, there would surely be an advantage to the balance of payments for this country. Since the manufacturing will take place here to a great extent, we should benefit in that respect as well.

Earl Howe: My Lords, I am grateful to my noble friend who shows his long experience both in your Lordships' House and in government in expressing his views. I entirely agree with them. Procurement decisions of this kind are immensely complex. With orders approaching £4 billion, the Government naturally want to be certain that they can be afforded within the

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long-term programme for defence. As my right honourable friend the Secretary of State for Defence said, there was a small delay before we announced the orders, but for perfectly understandable reasons. It is fortunate that we have been able to make the announcement to Parliament and to your Lordships' House before the Summer Recess.

The short answer to my noble friend's question on the financial arrangements is that the programmes will be funded from the efficiency and savings measures that the Ministry of Defence has taken and planned for over the past few years in the support area, in the exercise known as Front Line First. When my noble friend the Lord Privy Seal had the responsibilities which I now hold, he announced the exercise to your Lordships' House two years ago. Although expensive, the programmes are affordable within the public expenditure settlement of the Ministry of Defence. I believe that the Government's emphasis on procuring modern equipment and ensuring that our Armed Forces are properly equipped for the tasks which we give them is the right one. The proportion of the Defence Budget that is allocated to equipment is higher now than it has been for many years. Furthermore, it is higher than that of many of our NATO allies. I believe that that fully vindicates the Government's approach. I repeat that it is welcome news to the RAF.

My noble friend also asked about the balance of payments. I endeavoured to cover the point earlier when I referred to the export opportunities that should accrue to British industry as a result of the Government's choice of equipment. It is early days, but we have found through experience that when we in this country order British equipment, the reverberations are not slow to echo through the world and export orders tend to flow. We hope that that will occur in this case.

Lord Elton: My Lords, so much has been said about the genesis of the order that I would like my noble friend to give us the comfort or confirmation of the following. The conduct of government consists of the balancing of the different needs of the British people involving expenditure of money and the different interests represented by various departments, each of which has to argue its case against the central body--the Treasury. As noble Lords opposite will discover, if ever they are successful in getting into office, that balancing always results in fiercely contended arguments. If they become acrimonious, it may have something to do with the fact that it is July. Sometimes that spreads to this House.

Noble Lords should be grateful to my noble friend for the considerable breadth of his knowledge of the subject, with the almost complete absence of messages from the Box to prompt that great knowledge. He displayed and deployed it in its fullness to the Benches opposite of which the noble Lord, Lord Williams, at one stage represented 50 per cent. of the occupants.

Earl Howe: My Lords, I can only express my appreciation to my noble friend for those very kind observations. As he will know, the Government's aim is

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to keep public expenditure under control, as is perfectly right and proper. That will always be a challenge. But these equipment orders are entirely separate from the annual public expenditure round, which will proceed as it normally does over the months ahead. To refer to the early remarks of the noble Lord, Lord Williams, all that is still to come.


3.40 p.m.

Lord Strathclyde: My Lords, I beg to move that the House do now adjourn.

It is the most pleasurable duty of the Government Chief Whip to move the Adjournment for the Summer Recess. This summer it is something to which I have been looking forward with great anticipation. Indeed, I came to the conclusion that July had started some time after Easter, given the torrid debates that we have had on a whole number of subjects between then and now. I was also hoping that the House could rise rather earlier this afternoon than it has done. However, I am sure that the whole House will have been very grateful to my noble friend Lord Howe for making a Statement which contained such very good news for the United Kingdom and which noble Lords obviously found of very great interest. In fact, I am sure that the noble Lord, Lord Graham of Edmonton, the Opposition Chief Whip, and whoever will reply from the Liberal Benches and the Convener will feel rather pleased that we are making this Statement with a rather more full House than is usually the case at this stage of the Session.

In moving this Motion, I take the traditional opportunity to thank the staff in all quarters of the House who serve us so admirably and to whom we owe so much. Their endeavours enable us to carry out our business. I am sure that I speak for all noble Lords in expressing our very great gratitude.

I also thank the noble Lord, Lord Graham of Edmonton, and the noble Lord, Lord Harris of Greenwich, for the friendly co-operation that we have enjoyed. From time to time usual channels relationships come under strain. I am glad to tell the House that our personal relations are, nevertheless, always cordial, and I am grateful for that.

This year my statement is tinged with a hint of sadness. It will be known to your Lordships that my private secretary, Mary Ollard, is leaving my office to return to the Clerks' Office. However, she is being replaced by the very able and capable Simon Burton, who I am sure will serve the interests of the whole House as expertly as his predecessor.

The Session is, of course, not yet over. There are three days to go when we return in October. I hope that all noble Lords will return with renewed vigour and excitement as we prepare for the final Session before the general election.

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I end by wishing all your Lordships and all our staff a very peaceful Summer Recess. I am sure that those of you who have not yet unpacked your buckets and spades will do so in the very near future.

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