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Lord Drayson: My Lords, I thank noble Lords for their expressions of support, for which I am grateful. It reflects that we have an opportunity to strive for consensus across the House. There are many aspects of defence industrial strategy upon which we agree. This is something which we can build on. I note the request for a full debate on this. I absolutely welcome the approach noble Lords are taking in their wish to go away and digest the document—it has 140 pages. I promised people a gritty document and every word that is in this piece of work is there for a reason. So I thank noble Lords for that. I fully understand their request for a debate. They will be aware that arranging a debate is a matter for the usual channels. I hope that the usual channels come together to arrange such a debate.

The noble Lord mentioned that Defence Industrial Strategy will require significant change within the Ministry of Defence. He is absolutely right. I am personally ensuring that that change takes place. Noble Lords will see in section 3, which focuses on driving forward the defence industrial strategy and its implementation, that we have committed by May of next year to have come up with a programme of action to take forward its implementation within the Ministry of Defence. I will ensure, as we go forward, that the department ensures that actions taken which are not be consistent with the defence industrial strategy will be raised up to ministerial level.

I turn to the aircraft carriers and some specific questions the noble Lord asked relating to the announcement made yesterday and the maritime aspects of the DIS today. With regard to French progress, it is clear—we reiterate what the Secretary of State has said many times—that the potential opportunity to work together with the French on the aircraft carriers will not delay the UK ships. We can see the way in which we made the Statement yesterday reflects that. Equally, we have an innovative approach to bringing the new aircraft carriers into service. We are linking that with the management of the existing carriers in service and are asking for a single deal from industry for both the through-life support of the existing carriers—we will dovetail that with the new carriers—and the through-life support of the new carriers, together with their acquisition. That gives us the opportunity to manage that overlap very well indeed. We do not see the need to make any changes to our present plans relating to the out-of-service dates or the plans which we have for the existing carriers. But we have put in place a commercial structure to manage this very well, to deliver us value for money and to align people's interest to give us what we want.

I welcome noble Lords' comments emphasising that the defence industrial strategy is about setting out that defence needs must come first—we owe no less to our Armed Forces—and that value for money must come next. As the noble Lord said, we can get into a virtuous
 
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circle with industry if we do this. We have a particular opportunity in this country because we use our kit, have a successful industry and are good at the collaboration. If industry is able to align itself to meet the UK's defence needs, it will have kit that will be highly exportable in the future. So this is both an opportunity for industry as well as delivering what we want in the Ministry of Defence.

I have taken on board the noble Lord's point about the wider distribution of the performance report yesterday. I will see what can be done about that. I have noted the point about the risk that alliance incurs. The alliance, and the other partnering arrangements that we are putting in place, are one tool in the toolbox for our contractual relationships. They will be no less robust. We will ensure that we have the necessary clauses within the contracts to manage where people fail to perform. Those partnership arrangements give us the opportunity to manage potential monopolies well, but in a robust, tough, businesslike way. That is the approach that I will be leading within the department.

The noble Lord asked for my views on three particular aspects. First, the changing strategic context is central to all of our thinking. The speed of change in terms of technology and globalisation of the industry and the nature of the threats—the emergence of new threats while having to meet more traditional threats—faces us with a significant challenge.

We are approaching that challenge by ensuring that we have more flexible and adaptable equipment and that the design of and thinking behind that equipment allows us to change its characteristics and what it can do as the threat changes. We are also changing our procurement processes. At one end, we are good—and the data show that we are good—at urgent operational requirements. We are less good at longer term projects. We need to bring the longer term projects closer to our performance on UORs. That means taking into account the need for faster upgrades and shorter product life cycles within the life of a platform. We need to encourage industry to be good at that. We need to be good at managing that within the MoD.

We regard the strength of the UK's pragmatic position in its international collaboration as something on which we need to build, but we need to learn from some things that have happened. We do not want to enter into any form of protectionism. We are relaxed about where the shareholders live; but we are not relaxed about where the intellectual property (IP) or the design authority is. It is the location of the IP and our access to that IP that allows us to ensure that we can maintain and upgrade our equipment in future. We need to make changes to how we manage our intellectual property. We need to encourage foreign-owned companies to invest, especially in system, engineering and upgrade skills and have clarity about the ownership of IP.

I am grateful to the noble Lord for pointing out the level of joined-up government that the White Paper represents. As my right honourable friend the Secretary of State said earlier, noble Lords will have
 
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noticed that the Chief Secretary to the Treasury was smiling in his photograph in the document. That is a good sign. However, we also recognise that the defence industrial strategy must, over time, work within the normal operation of government. We have set out in the document the process that we will use to do that. We recognise that it must go through the normal spending reviews and we have set out that process for industry. Again, we intend to give industry the clarity and transparency that it needs to make the investment decisions to give us the affordability that we want from equipment in future.

The document mentions Trident in the context of our nuclear deterrent and submarine build. It points out the importance for us of maintaining the capability through all aspects of submarine design, build and maintenance. It highlights the importance of frequency and drumbeat and the expectation that there will be a review of the replacement of Trident within this Parliament.

The example of helicopters is key. I recognise that there is an issue concerning the balance between heavy-lift and other helicopter capability. We recognise that we must address that within our overall rotor-craft strategy and we are doing so. We are making the extra investment to enable us to do so.

2.44 pm

Lord Luke: My Lords, following the remark of the noble Lord, Lord Garden, on American sensitivities, is the software issue with regard to the Joint Strike Fighter anywhere near being solved? For instance, are the Americans being more flexible? If not, what is our fallback position?

Lord Drayson: My Lords, we are clear that there are certain aspects relating to the code—the software—on the JSF that we will need to enable us to maintain and upgrade the aircraft's through-life. We are clear in the project when that information must reach us. The project is not being delayed at present. We are very much on the case to ensure that we receive that information and are working hard with the Americans to ensure that we do.

Lord Hoyle: My Lords, first, I join the thanks given to my noble friend for the defence industrial strategy. I know that he has consulted widely with both industry and the trade unions and has spent many nocturnal hours arriving at the strategy. I thank him very much indeed. He has laid the foundation for the programme. I repeat what has already been asked of him. Although the Chief Secretary to the Treasury may be smiling, has he agreed to the programme? So many programmes have failed since 1998 because they were underfunded when Treasury approval was not forthcoming.

Finally, on general munitions, why is BAe Systems, which is only four years into a 10-year programme, not fulfilling the programme for initiators and boxer caps.
 
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Those essential components will go overseas, which means the loss of many well established jobs at Royal Ordnance Factory in Chorley.

Lord Drayson: My Lords, I am grateful for my noble friend's comments and note the point that he makes about the Chief Secretary smiling in the document. However, he should note that the document has been produced through tremendous collaboration with other departments—both the Treasury and the Department of Trade and Industry—and, as my noble friend said, with the trade unions and industry. It must work with the rest of the machinery of government. We set out in the document how we will do that and how that will be managed within the spending review process. That gives industry clarity. Noble Lords will notice how the document sets out for each of the sectors our expected spend profile for the next 10 years, subject to spending reviews.

Our strategy for general munitions takes into account the reality of the global market and the need for the United Kingdom to maintain a sovereign capability. It also considers what aspects of the supply chain within general munitions are truly central to maintaining that capability and ensuring that we invest in those aspects. We must recognise that we can acquire some of those aspects from the wider global market and improve value for money in doing so. We need to put the defence needs first; ensure that we get value for money; and make our strategic decisions on that basis.

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