---

Lord Astor of Hever: My Lords, when I say that we on these Benches welcome the Statement, I use these words in more than the usual conventional sense. The subject matter is of the greatest importance to the Armed Forces: how best to provide them with the right equipment at the right price at the right time, a seemingly intractable combination of objectives. It is also of the greatest importance to the management of the defence budget and defence finances generally—issues to which the Opposition, in their role as a prospective government, have also given, and continue to give, considerable thought of their own.

I can say at once that we substantially agree with the Minister in his general analysis of the problems. The technology development cycle, however, moves forward considerably faster than do the cycles of design, development and installation which are required to incorporate those technological advances into working operating systems in the hands of the Armed Forces. Thus, we can all too easily find ourselves in a position where a system specified to what is at that stage state of the art is in fact obsolescent by the time it comes into service. Many would argue that the Eurofighter Typhoon is a classic example of that. We may well be confronted with similar problems in the case of Watchkeeper.

We welcome the creation of a partnership between Her Majesty's Government and industry. We hope that they really can work as a team. The Minister must be congratulated on this change of heart and particularly on ending the trench warfare between Her Majesty's Government and BAE, Britain's biggest defence contractor.

It will be easy to change attitudes in industry. The challenge for the Minister will be to drive these improved relations past his civil servants and the DPA. The Minister is to be congratulated on having set his timetable so that the Statement should be made before we rise for the Recess and on inducing his department to adhere to that timetable.

The Statement necessarily includes a number of substantial, complex and possibly controversial points. The Minister will understand that, therefore, I do not want to snap back at it today with detailed questions, careless endorsements or knee-jerk reactions; but rather to take it away, go through it carefully, compare it with our own ideas, discuss it with representatives of industry—who are, I know, standing by to examine the implications for them of these proposals in detail—and then come back for a prepared debate. I therefore ask the Minister if he will arrange for a convenient date, reasonably early next year, for a considered debate in government time on these proposals.
 
15 Dec 2005 : Column 1411
 

I am also grateful to the Minister for the letter I received yesterday on the Future Aircraft Carrier project. Can the Minister say anything about the progress of the talks with the French? Can he confirm that if the French join the project, it will in no way delay the in-service date of our two carriers? The Statement also touched briefly on the Joint Strike Fighter. Can the Minister reassure the House that any weight problems have been ironed out?

Finally, we welcome the agreement to jointly explore work on the continuation in service of the "Invincible" carriers. In the light of the fact that the two new carriers are likely to be delayed and the Minister's Written Answer to me last week that reversing HMS "Invincible" from a state of lower readiness would take nine months, has the noble Lord given any serious thought to calling a halt to any further work in removing equipment and eventually putting HMS "Invincible" back into service?

2.25 pm

Lord Garden: My Lords, I, too, thank the Minister for repeating the Statement; although, given that he is the architect of it all, perhaps the Secretary of State was repeating his Statement. I noticed when I listened in the other place that there was—rightly—an even more fulsome tribute given by the Defence Secretary to the noble Lord for the work that he has done. I would like to add to that.

I am also grateful for the early sight of the Statement. It is, as the noble Lord, Lord Astor of Hever, said, pretty complex, and I have not quite managed to finish reading the document itself since 1.20 pm.

From these Benches, we welcome what appears to be a strategy which offers the prospect of a more coherent approach to what is always a difficult problem: the prioritisation of defence procurement. The United Kingdom Government spend a large amount of money on defence procurement every year. For the most part, it is not constrained by the normal international competition rules that affect other industries. This makes the temptations of political shaping of procurement decisions very great indeed. The Minister may well have already experienced the pressures that result when Members in the other place have to look at procurement decisions in the light of their constituency interests. That will be a continuing feature regardless of the strategy.

I therefore welcome the strategy's clear set of priorities; number one: the operational capability and getting the technology to do the job; and number two: value for money. That is a virtuous circle, which prevents subsidies of inefficient production, which have in the past given rise to poor defence equipment, delays in delivery and fewer numbers as the costs rise. We must go for kit that can do the job at the best price. That makes our defence industries more competitive, and they can compete with others around the world.

Of course, the Minister is not the first to advocate these sorts of ideas. The noble Lord, Lord Levene of Portsoken, when he was chief of defence procurement,
 
15 Dec 2005 : Column 1412
 
implemented a different strategy aimed at the same sort of ideas. When he left, vested interests took over. The right honourable Alan Clark, when he was holding the Minister's post, had an innovative approach to stopping duplication in procurement through vested interests—I remember it well. Most of the projects which he cancelled were put back in place once he had gone. So I caution the Minister that he has a very difficult path ahead of him, and we wish him well as tries to get the right equipment at the right price delivered on time for the military. That must be the aim we are all after.

Yesterday, there were two Written Statements from the Minister. Both had some import towards today's Statement. One was the MoD's annual performance report, which is a very good document and I commend it to the House. I think it unfortunate that a single copy is placed in the Library, rather than it being available to your Lordships in the Printed Paper Office. I suggest that it needs wider distribution. Target 2 in that document assesses the UK's contribution to conflict prevention, and shows the range of activities in the 12 assessment areas we are now dealing with. Target 6 looks at equipment procurement achievements and reports that we are still in the amber light area; there is still slippage going on there.

The other Written Statement, referred to by the noble Lord, Lord Astor of Hever, on the way for the carrier industrial arrangements, was obviously necessary before today's Statement and the launch of the defence industrial strategy. On the alliance agreement, the six partners, BAe Systems, VT, Babcock, KBR, Thales and the MoD are stated to be sharing the risks and the rewards. In a way that is the first test of the Minister's new defence industrial strategy. Yet it carries real risks if one member starts playing off against another, as we have seen in the past. While I do not doubt that the Minister believes sincerely that he has sufficient incentives—sticks and carrots, if you like—in place to ensure co-operation, what happens if the alliance arrangement for the carrier does not succeed in the way he expects to it?

We will come back, I hope, to the strategy document after we have had time to study it, as the noble Lord, Lord Astor of Hever, suggested, by having a full debate in the new year, which we would all welcome. I would be interested in the Minister's views on three aspects of this strategy and how changes will affect it. The first is the changing strategic context. The changes in the world situation are much faster than the procurement cycle. We are still taking delivery of platforms that were designed in the Cold War. Since then we had the SDR in 1998, the rise of international terrorism and 9/11. So the situation changes very fast. How will the strategy react to those sorts of changes?

The second change is on the industrial scene. We get rationalisation, which, indeed, the strategy looks for. Industries react to the requirements of promoting shareholder value—a different agenda from the Minister of Defence. The Statement talks about industries as though we still have British national defence industries. We do not; we have international industries, some of which have their brass plates in
 
15 Dec 2005 : Column 1413
 
London and some of which have them elsewhere. They rationalise, merge and move overseas. We are subject in some cases, even with British industries, to the constraints put on us by other governments; and we have the problems of the United States Congress in terms of its great sensitivity to any technology transfer when it moves out of the United States to elsewhere. How will the strategy react to that?

The third question is the most difficult. I notice with some amusement that the front page of the Defence Industrial Strategy—I think for the first time in a defence document—has a picture of the Chief Secretary to the Treasury. I suppose, as we say, it is better to have him in the tent doing whatever he is going to do rather than outside. That of course does not guarantee that the Treasury will continue to provide adequate resources. One of the problems is that if we lock ourselves into a defence industrial strategy, the flexibility elsewhere in the defence programme is reduced if, in order to promote industrial interest, there is ring-fencing. How will that balance be achieved?

The Statement does not refer to Trident replacement, nor, I think, does the strategy. That aspect is quite important, and, doubtless, the Minister has given it some consideration. Perhaps he could let us know whether that is fed into the thinking.

I would like to deal rapidly with one aspect which it seems to me shows the difficulties of this approach. In the Statement there is a section on helicopters and in the Defence Industrial Strategy section B5 deals with helicopters. It is understandable that the Minister is looking for AgustaWestland partnership arrangements to give a sustained helicopter servicing capability into the future. That in turn means he must focus his helicopter money into things like Lynx and Merlin upgrades, which are, in the new descriptions used in this book, the attack and find capabilities, and not the third capability, which is the lift capability. We have previously had exchanges on the question of how we can provide that heavy-lift helicopter capacity for Iraq, Afghanistan, for UN operations, for conflict prevention and for humanitarian relief. We cannot provide it if we are putting all our money into attack and maritime helicopters in order to promote an industrial strategy. So what I see is that, even at this early stage, we are shaping the future of our operational requirements around an industrial strategy.

There is one other absence in the Statement which I must note. That is, there is no mention of work with the European Union; there is some with the United States. Given the development of the European Defence Agency, was the European Defence Agency consulted, is it happy with this document, or are we going to it as a fait accompli?

There are so many more questions that need to be answered, and I fully support the request of the noble Lord, Lord Hever, for a full debate in the new year. I think that it could be very valuable. This is not a party political issue; this is the way forward to get a good
 
15 Dec 2005 : Column 1414
 
defence capability. I end by again congratulating the Minister on an extraordinary piece of work in such a short time.

2.35 pm

---