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I suppose that I would be slightly sceptical at this slip from worship to spiritual, moral assembly. It seems that if you define worship in the broadest sense, it is about contemplating the mystery of life and the use of silence in a very noisy world. I find in liturgy that it is children who can be quiet and parents who cannot. This spiritual, moral assembly may become rather moralistic. We may have to come back to collective worship in a proper debate. Perhaps I may stick my neck out slightly and quote from a conversation that I had with the Secretary of State in the summer. We talked about collective worship and I gave him a gentle warning that if we do not grasp it, it runs the risk of becoming like the blasphemy law: enshrined in statute, seldom invoked and almost universally misunderstood.

To gently answer the noble Baroness, Lady Massey, yes, religion does not have exclusive rights on the grammar of values, but it is remarkably alive and kicking. To echo the words of my friend the right reverend Prelate the Bishop of Newcastle, I do not recognise the religious life of this country portrayed in much public discussion. According to the statistics of the 2001 census, more than 71 per cent of the population signed up to Christianity in the broad sense and the second-largest faith group are the Muslims at 3.9 per cent, which is not quite how it is often portrayed. I am not using those statistics in a triumphalistic way, but rather in a world where religion is back on the map and people want to study it at schools and in universities. The old secularist approach will not work any more.

I cannot quite believe that this debate began nearly three hours ago. I am sometimes accused of innocence and this began with a very innocent amendment on school improvement partners. Years ago, a group of us were swapping epitaphs and the eyes of the group turned to me. I said that I would like as my epitaph: be

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cunning as serpents, yet innocent as doves. The retired bishop said, “Well, Kenneth, you certainly passed the first test”.

Finally, therefore I welcome the reassurances given on school improvement partners. With all the humility that I can muster just before nine o’clock with a rumbling stomach, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Crawley: My Lords, I beg to move that consideration on Report be now adjourned. It has been agreed not to resume the Bill after the debate to be introduced by the noble Lord, Lord Truscott, which will, of course, have 90 minutes. Individual speakers may have up to 12 minutes should they wish to take it.

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

Defence Industrial Strategy

9 pm

Lord Truscott rose to ask Her Majesty’s Government what progress has been made on implementing the Ministry of Defence’s defence industrial strategy.

The noble Lord said: My Lords, I should like to declare an interest as an associate fellow of the Royal United Services Institute for Defence and Security Studies; however, I stress that I am of course not speaking on behalf of the institute or representing its views in any way. I touched on this subject during the Armed Forces debate in your Lordships’ House last June, initiated by the noble and gallant Lord, Lord Inge. Nevertheless I believe that the timing, if not the hour, of this Question is apposite, given that the anniversary of the publication of the defence industrial strategy (DIS) White Paper will soon be upon us. Much has happened since its publication last December, and I hope that my noble friend on the Front Bench will welcome this opportunity to update your Lordships on the progress made so far in implementing the strategy. He has rightly been widely lauded as its architect.

I do not wish to rehearse the points I made in the debate last June. The MoD’s defence industrial strategy and its subsequent implementation strategy have clearly set out a blueprint for delivering affordable defence capability which will at the same time secure the future for the UK’s defence industrial base. The DIS recognises not only the important role of the defence industry in delivering capability but also that industry must change to meet the evolving demands of our Armed Forces and the current£16 billion procurement budget. Britain’s forces face a multitude of challenges in today’s world and are doing their job magnificently, but Her Majesty’s Government must ensure they have the equipment and training to meet threats they may face in 20 to30 years’ time. It is a daunting and complex task.

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My noble friend on the Front Bench has made an impressive start with the DIS. The White Paper and his personal commitment to its speedy implementation have received warm praise from industry. As he said at Farnborough last July, there have already been concrete, practical results following on from the DIS. There has been the appointment of the MoD’s commercial director, which should enhance the ministry’s commercial awareness and understanding. The McKane review, Enabling Acquisition Change, looking at through-life capability management, has been adopted by Ministers. The DPA and DLO are to be merged to create one procurement and support organisation, which incidentally will save £200 million. Implementation teams have been established, and a £1 billion strategic partnering arrangement has been signed with Augusta Westland to produce the future Lynx helicopter. In the armoured fighting vehicles sector, a partnering agreement has been agreed with BAE Land Systems.

A “Team Complex Weapons” has been created, with a number of planned programmes in the pipeline. The upgraded Harrier GR9 aircraft has entered service with the Royal Navy, on cost and on time. The MoD has also signed a five-year support agreement with VT Shipbuilding to maintain HMS “Clyde”, the first ship to be built at Portsmouth’s naval base in nearly four decades.

These are all impressive achievements, but like my noble friend we are anxious to hear of yet more progress. The Minister has said that he hopes for a memorandum of understanding signature by the end of the year regarding the necessary transfer of technology before the purchase of the Joint Strike Fighter goes ahead. Can he update your Lordships’ House further on this point when he sums up the debate later?

Noble Lords will be aware of the concerns expressed of late that the DIS is perhaps overambitious in some respects, particularly in its implementation timetable, the necessary change in behaviour required on all sides and the question of affordability. I hope that the MoD will be able to allay these fears when the Minister responds. To be specific, I would like to refer to RUSI’s recently published report on industry responses to the DIS. Although the DIS is seen as a very positive initiative, there was some scepticism about whether the Treasury would make the necessary money available for the MoD’s desired capabilities and equipment plan. Her Majesty’s Government must ensure that the 2007 Comprehensive Spending Review supports the DIS’s aims, especially since through-life capability management requires the commitment of funds over long periods, allowing for future upgrades.

Retaining appropriate sovereignty in vital sectors of the defence industrial base may well involve a premium, and the MoD must be clear about what capabilities and knowledge will be preserved onshore. More worryingly, the Royal United Services Institute report identified that commitment to the implementation of the DIS is not embedded at all levels and across all organisations within the MoD.

There is a strong case for the development of closer working relationships between civil servants in the ministry and their industrial partners, for example by

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bringing industry and MoD IPT teams together at the beginning of a programme and through joint training and more staff exchanges.

Some disappointment has been expressed about the slow pace of industrial consolidation in the maritime sector and the development of the MoD’s maritime industrial strategy. Can the Minister comment on this—he has himself expressed disappointment—and on the CVF future carriers project, including how the maritime industrial strategy might impact on the Type 45 and future submarine programmes? I think we are entitled to know whether the MoD has a workable plan for safeguarding this country’s maritime capability. Some fears have been expressed that future hulls may be built abroad, a prospect alluded to in the DIS White Paper.

The issue of R&T spending has been raised in a number of quarters, including the Defence Select Committee in another place. The Minister was kind enough to tell me in last June’s debate that the MoD planned for the research budget to rise in line with inflation over the next four years. A recent study found that of 10 leading nations, the UK is second only to the US on the military equipment quality curve. But the fact remains that the MoD invested $4.7 billion on defence R&T in 2004 whereasthe United States research spending alone reached $77.6 billion in the same year. UK private sector aerospace and defence research investment has barely kept up with inflation.

Today we had the publication of a weighty document, the ministry’s defence technology strategy, which I have here—I can see it on the Benches opposite as well. It contains almost 200 pages of interesting material, together with a list of 200 technologies and 2,000 sub-technologies which the MoD wants to nurture. I think some questions arise from the publication of the strategy and, as we are discussing the defence industrial strategy, perhaps the DTS would require a debate of its own.

However, it will be interesting to quote from one section of the report. On page 162, which looks at the joint MoD and industry framework for investment, paragraph C4.2 states:

I think we are entitled to ask the Minister how the MoD in practice will achieve an increase in investment from industry in the defence technology strategy, and how the technologies outlined in the strategy will be developed. In short, where will the funding come from to achieve the aims in the strategy?

I look forward to the Minister’s response. I can assure him that I for one stand full-square behind the aims of the defence industrial strategy, which is designed to give our Armed Forces the best possible kit, on time and at reasonable cost to British taxpayers, while preserving appropriate technological sovereignty and a vital and thriving UK industrial base.

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9.09 pm

Lord Levene of Portsoken: My Lords, I am most grateful to the noble Lord, Lord Truscott, for providing the opportunity of this debate. I must declare an interest in this topic, apart from an historical one, in so far as I am chairman of General Dynamics UK and president of the Defence Manufacturers Association.

The defence industry has always been a crucial part of the UK industrial base, as well as serving as the source of much of the material used by the UK Armed Forces with great skill and success. The management and direction of the industry has, however, seen many twists and turns, some self-imposed, others imposed by the vagaries of successive Governments and the pressures of international affairs. Overlaid upon this is the way in which the industry has consolidated both domestically and internationally.

None of these elements can be properly considered or examined in isolation from the others. Nevertheless, we are looking at the defence industrial strategy, which needs to be considered primarily in a commercial manner. By commercial, I mean on both sides—by the Government as purchaser and the industry as vendor. For this reason, I believe that the appointment of the noble Lord, Lord Drayson, as a successful industrialist, with experience of comparable issues, has been a real success and the strategy which he has produced has the clear mark of understanding. His task and that of his department is not easy, but they must be allowed to carry it through without being diverted from their clearly stated objectives. Such an outcome would certainly benefit both the industry and the Government.

The UK industry has shrunk in recent years, both in absolute terms through decreased demand and in the number of large companies present. For this reason in particular, it is important to recognise that UK-based subsidiaries of non-UK parents—and here again I acknowledge an interest in this area—should be treated equally with purely domestic participants. We do not discriminate against foreign-owned car makers, which make up the majority of that industry in the UK. So, provided that proper security safeguards are in place, we should behave in the same way in the defence industry. In this way also, we can benefit by not having to reinvent some very expensive wheels and by optimising the use of available technology.

The Ministry of Defence has said that it is keen on partnering, but perhaps a word of caution is needed here. Care must be taken to ensure that its potential partnerships with a very small number of primes do not succeed in excluding the smaller companies from the supply chain. In this country, smaller companies have always played an important part in development and production and must not be frozen out. They keep down cost, encourage innovation and, by virtue of their size, can be much more nimble than the major players. Coupled to the defence industrial strategy, the Minister set out today his strategy for defence technology. A quick résumé of that looks promising. If we can end up with a UK-type DARPA, I hope that we can reap some of the benefits that the United States has done in that area.

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More than 20 years ago, I remember producing what I thought was a compelling case to combine the procurement and logistic functions. I have to say that at that time, the then Defence Secretary, the noble Lord, Lord Heseltine, and I found ourselves in a minority of two and unusually, I must admit, we were unable to proceed. I have always believed that thatis the correct solution—and so, again, I must congratulate the Minister on successfully launching this initiative.

Unhappily, today, much of what is in production is needed in action almost immediately. This is a phenomenon to which we have been unaccustomed for some years, so it makes it even more important that we get it right the first time. I believe that the approach of the Minister and his department gives us a good chance of achieving that goal and his efforts deserve our support. I look forward to hearing from him this evening on the further progress that has been made.

9.14 pm

Lord Jones: My Lords, I am grateful to my noble friend Lord Truscott for this timely debate and for his informed comments. I am glad to follow the noble Lord, Lord Levene of Portsoken, who carries to these subjects an immense authority that I cannot match.

The British economy needs the defence industrial strategy to succeed. There is not much manufacturing industry remaining in our country, not least those few manufacturing industries still awash with skills, training and leading-edge high-technological achievement. Moreover, if our defence industry prospers, then parallel, allied and dependent commercial industrial projects will remain viable. A case in point is EADS in Europe, a huge defence industry concern across Europe and the parent company of the Airbus business which has nationally important production centres in Britain, not least in my own country of Wales.

Will my noble friend the Minister indicate that the A400M military transport will go forward into production with the UK order of 25 aircraft? Where does the A400M stand now in EADS’s order of priority? I say that in the knowledge that Airbus UK has a big interest in that. Will my noble friend report on the prospects of EADS manufacturing the Future Strategic Tanker Aircraft? This will be the largest ever MoD PFI project should EADS carry the day with its Airbus A320 modified aircraft.

But tonight—I declare my interest—my great concern is for the workforce at the Welsh production centre in Broughton, north Wales. There in Flintshire there are 6,500 plane makers. Many have been engaged in making the wings of the A380 superjumbo. They are just about the finest aerospace workforce in the world. That is my belief although I am biased as I still live there. That workforce wants EADS to move in a direction where there is no political interference. They are not responsible for the delays in A380 production. They know that Britain is a multi-million-pound customer of EADS. They know that the British aerospace industry is Britain’s last remaining large-scale skills-based manufacturing industry, employing tens of thousands. Our industry earns annually billions of pounds for our

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nation through its exports. My own longstanding personal knowledge of the 6,500 strong Broughton workforce is that they have delivered on every challenge for EADS, BAE and Airbus. I want them to continue to produce high tech, world class wings free of the pressures of EADS boardroom crises. I want that for the prosperity of our nation and particularly for my own country of Wales.

In January 2005 I was present at the A380 superjumbo rollout in Toulouse. I saw the President of France, the Chancellor of Germany and the British and Spanish Prime Ministers. Each spoke with pride and passionate conviction about one of their biggest ever investments. That was a moment of European unity and supreme optimism before 4,000 aerospace engineers, technicians and managers. Those national European leaders hailed the most successful aircraft manufacturer in the world. But some 20 months later the company is in massive disarray and is apparently fighting, if not for its life, certainly for its credibility. Tens of thousands of employees throughout Europe, particularly in our country, have an interest in the situation getting better.

I ask my noble friend the Minister to work hard, as he always does, to dissipate the tensions between France and Germany and, as we are a big customer of EADS, to seek to develop better corporate governance so as to shore up its position in the heart of Europe as a global commercial and defence company.

Another look back; as long ago as 1973 I was present in Toulouse at the first rollout of the first Airbus and the first Concorde on the very same day. It was a magnificent and historic day in European aerospace history. The British Minister, who spoke under a cloudless sky in sight of the glistening snows of the Pyrenees, was the noble Lord, Lord Heseltine, who has already been referred to. He spoke effectively, and he represented all those hopes for aerospace and manufacturing in Europe. But now, I ask my noble friend to help to knock EADS into shape, to revitalise Airbus, and to give the Welsh wing-makers of Broughton in Flintshire fresh heart and some certain guarantees.

9.20 pm

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, thank my noble friend Lord Truscott for securing this debate this evening, on an issue that has had a lot of coverage over the past 12 months, including a report that attracted a lot of complimentary statements. The Minister has been complimented this evening already, and I will not add to that. I am sure that he is quite pleased at the response that he has had. I will just say that when we had the defence industrial strategy review last year, most of us recognised running through it the thread of a real hard-nosed commercial management approach, which was very welcome. It was a very important development in our strategy. It is true, as other noble Lords have said, that this sector has in it some of our most highly skilled workers. It is a sector that we are very good at, and which attracts good engineers and good skills of different types. I say to my noble friend

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Lord Jones that I have not been to Broughton, but I have been to Filton in Bristol and seen the work that people are doing there.

The aim of the industrial strategy was an engagement with the industrial base of this country to meet the Armed Forces equipment requirements on time and at best value. That is a laudable aim, which has never been captured over many years of seeking to do just that. I expect tonight, 10 months after the strategy was published, that the Minister will probably report varying progress. I would be amazed if there were not certain tensions in the MoD and frustrations at perhaps not making some of the progress that had been expected. That is life and that happens. The important thing is that we do not let go of the intentions of the industrial strategy.

One of the areas is the consolidation of the naval sector, including the important discussions that are taking place—although the decision has been taken—on the new carrier for the Navy. We still have not got to the gateway process on that. That is a very important step, and I am sure that causes as much frustration in the MoD as it does to those of us outside it who are following it very closely. I read in the press at the weekend about talks between BAE and VT about possibly coming together. It will be interesting to hear from the Minister if he has any details on that.

I gather that there is also some concern in the sector at the fragility of the nuclear-powered submarine industrial base. Where are we going on that and what is the future of it? The merger of the Defence Procurement Agency and the Defence Logistics Organisation has already been welcomed this evening, many years late though the noble Lord, Lord Levene, may feel it is. It is welcome, and it is the right thing to happen, but they are two very different organisations. They are culturally very different indeed. I seek an assurance from the Minister that we will not be faced with what I call decision blight in the period of the two organisations coming together. That is the worst thing that could happen.

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