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In the light of what I have said, and bearing in mind the communication that we have already received from the interim Ofqual, I hope noble Lords will consider not pressing their amendments.

Baroness Walmsley: My Lords, I am most grateful to the Minister for her reply. She is right that I do not really expect her to accept these amendments, which are probing. I am aware, of course, that the chair of Ofqual will be listening and taking note of our debates in this Committee about her powers and duties. My intention was to highlight the sorts of things that we expect to hear in reports from Ofqual and the sort of accountability and transparency that Parliament expects.

The Minister asks that we trust Parliament. To a very great extent, I do, but it has to be said that, today, Ministers have struck a blow against the powers of Parliament. The very first time that the Select Committee has tried to use its power to have a confirmation hearing about a public appointment, the Secretary of State has totally ignored it; so the Minister cannot be

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surprised when we seek to put into legislation what we might otherwise have expected Parliament to be able to deal with.

However, unless the Minister wishes to make another comment, I beg leave to withdraw the amendment.

Amendment 244 withdrawn.

Amendment 244A had been withdrawn from the Marshalled List.

Clause 126 agreed.

Clauses 127 and 128 agreed.

Clause 129 : Recognition

Amendment 245 not moved.

Clause 129 agreed.

Clause 130 : Criteria for recognition

Amendment 246 not moved.

Clause 130 agreed.

Clause 131 : General conditions of recognition

Amendment 247 not moved.

Clause 131 agreed.

Clause 132 : Other conditions of recognition

Amendments 248 to 250 not moved.

Clause 132 agreed.

Clause 133 : Fee capping conditions: supplementary

Amendment 251 not moved.

Clause 133 agreed.

Amendment 251A not moved.

Clause 134 agreed.

Clause 135 : Qualifications subject to the accreditation requirement

Debate on whether Clause 135 should stand part of the Bill.

Lord Lucas: I should be grateful for a brief illustration of how the Government expect Ofqual to use this clause. In practice, what sort of qualifications will become victim of this clause and what sort will avoid it?

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Baroness Morgan of Drefelin: I shall do my best to give the noble Lord some comfort and I will await inspiration, should that come too. Ofqual will be a risk-based regulator, which will intervene only where it judges it necessary to do so to achieve its objectives. If Ofqual is confident that a recognised awarding body can be trusted to develop qualifications without them being checked individually, it can regulate on that basis. Therefore, qualifications run by those awarding bodies would not need to be individually checked by Ofqual. It will then rely on its ongoing monitoring to ensure that standards are up to scratch, which is a major change, of which I believe that the noble Lord is aware, from the current regime under which every qualification must be checked individually. It will go from an individual qualification check to an organisational check, which is why we are saying that it will be more light touch.

However, Ofqual still has the discretion to insist on accreditation for a qualification if it decides that that is necessary. If an accreditation requirement is imposed, it means that, for example, a new qualification has to be checked or accredited before it can be awarded. This is a crucial power for Ofqual to impose extra quality control when this is needed to protect standards. For example, Ofqual could require that all A-levels are subject to the accreditation requirement, given the detailed requirements that A-levels have to meet. It could also require that all IT qualifications from "Fictional Award Body Limited" are subject to the accreditation requirement-perhaps because it had picked up concerns about the body's IT qualifications or just because it was a new market.

This clause provides for Ofqual to decide when a qualification needs to be accredited. It also builds in consultation requirements, procedures that Ofqual must follow, before it can insist on accreditation. It is a necessary part of a necessary power. I hope that with that explanation, the noble Lord will be satisfied.

Lord Lucas: I am grateful for that explanation. I am sorry if the noble Baroness did not know that this was coming. I see that she is nodding to indicate that she did know. In other words, she expects the power to be used rarely and cannot think of any qualifications to which it will apply at the moment. With that I am content.

Clause 135 agreed.

Clause 136 : Accreditation

Amendment 252 not moved.

Clause 136 agreed.

Clause 137 : Criteria for accreditation

Amendments 253 and 254 not moved.

Clause 137 agreed.

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Clause 138 : Power of Secretary of State to determine minimum requirements

Amendments 255 to 257 not moved.

Clause 138 agreed.

3.30 pm

Clause 139 : Assignment of number of hours of guided learning

Debate on whether Clause 139 should stand part of the Bill.

Lord Lucas: I have a couple of brief questions on this clause. First, how are guided learning hours to be policed? It is all very well to have this number sitting there, but as the noble Baroness will remember, one successful state school has been pioneering GCSEs in a term and successfully getting the qualification based on apparently a much reduced number of learning hours. Is the number of guided learning hours to be enforced or applied in schools, and if not, what is the point of them? Secondly, what is subsection (12) all about?

Baroness Morgan of Drefelin: I shall respond briefly to the noble Lord's question about guided learning hours. I would expect schools, colleges and providers of courses of study leading to a qualification to ensure that the guided study hours are fulfilled. On the appropriate number of hours to be attached to a given qualification, I see the decision on that as very much part of the role of Ofqual. Indeed, I expect that to be a key contribution for it to make.

Subsection (12) means that Ofqual does not need to apply guided learning hours to the award of credits simply because credits are combined to make full qualifications, and for these purposes it is full qualifications that we are interested in. I assume that the "we" refers to Ofqual. It may be helpful if I write to the noble Lord further on this if I have not given him the clarification he is looking for.

Lord Lucas: I thank the Minister. A letter would be very helpful.

Clause 139 agreed.

Clause 140 : Criteria for assignment of number of hours of guided learning

Amendment 258 not moved.

Clause 140 agreed.

Clauses 141 and 142 agreed.

Clause 143 : Review of activities of recognised bodies

Amendment 258A had been withdrawn from the Marshalled List.

Amendment 259 not moved.

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Clause 143 agreed.

Clause 144 agreed.

Clause 145 : Power to give directions

Amendment 260 not moved.

Clause 145 agreed.

Clause 146 : Power to withdraw recognition

Debate on whether Clause 146 should stand part of the Bill.

Lord Lucas: I want to ask a question about the powers of the appeal tribunal that is to be set up under subsection (8) covering the arrangements for a review. Is this to be an internal review or something that will have a degree of independence about it?

Baroness Morgan of Drefelin: I thank the noble Lord for that question, which gives me an opportunity to put my remarks on the record. The noble Lord asked particularly about subsection (8). It requires Ofqual to put in place review arrangements of any decision to withdraw recognition, which is obviously a key part of the regulator's role. More detail about those arrangements is set out in subsection (9).

Like any regulator, Ofqual needs to have a range of sanctions and powers to allow it to step in and nip problems in the bud. We hope that Ofqual will not have to use these powers very often but it is crucial that they are there if needed. As I am sure noble Lords will agree, Ofqual must not be a toothless tiger.

The Bill provides a number of sanctioning powers to enable Ofqual to act in a proportionate way to safeguard standards and protect the learner. The ultimate sanction must be available to Ofqual, even though it would hope never or rarely to use it: that power is to withdraw from a body recognition to award some or all qualifications so that those qualifications are no longer regulated.

Clause 146 makes it explicit that Ofqual has the power to make such a sanction and, at the same time, ensures that it can be used only in limited circumstances and that there are effective checks on that power so that it can be used only when circumstances demand it. What are those limited circumstances? The power can be used only where the body has breached a condition of recognition and that breach is prejudicial. What are the safeguards? The clause sets out the steps that Ofqual must take before withdrawing recognition, including giving notice of its intention to do so, setting out the reasons for taking such action and taking account of any representations from the awarding body; that must be key. Ofqual must make arrangements for review of withdrawal decisions where requested to do so by the awarding body. My note does not say whether that is an external arrangement, but the fact that Ofqual must make the arrangements suggests that they are in Ofqual's gift.

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Finally, if qualifications are coming off the market, we need to ensure that existing learners are protected, as noble Lords would expect. I am advised that the appeal could be either external or internal, which suggests to me that the noble Lord would like to have a letter clarifying this with perhaps more certainty.

Lord Lucas: My Lords, I am grateful for that explanation. Yes, I would like a letter. Certainly if it is an entirely internal matter, I would wish, perhaps, to bring it back on Report.

Clause 146 agreed.

Clauses 147 to 150 agreed.

House resumed.

Defence Acquisition


3.38 pm

The Minister of State, Department for Business, Innovation and Skills and Ministry of Defence (Lord Drayson): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Defence Secretary. The Statement is as follows:

"With permission, Mr Speaker, I wish to make a Statement on defence acquisition. In December 2008, my predecessor asked Bernard Gray to undertake a review to identify improvements that we could make in the acquisition of defence equipment. On Thursday, I published Mr Gray's report and placed a copy in the Library of the House in advance of our defence policy debate. I said then, and I repeat now, that I apologise that honourable Members did not have longer to read and digest a report that is both lengthy and complex. I therefore welcome the opportunity that you have provided today, Mr Speaker, for a further discussion to take place on its content. Indeed, I suspect that today will not be the end of the conversation.

Mr Gray's recommendations are far-reaching. We accept most of them and work is in hand, as part of a wider acquisition reform strategy, to implement the changes that we agree are needed. Mr Gray's report has got the debate well and truly started, which is something that I warmly welcome. It is an important subject and one that we very much wanted to surface. That is why we commissioned this report.

I am very grateful to Bernard Gray for the effort that he has devoted to this, the analysis that he has produced and his support in developing proposals with my department to implement many of his recommendations.

This is not a new issue. As Bernard Gray's report highlights, all countries with significant defence capabilities face the same inherent complexities of military acquisition and, over many decades, have had to deal with cost and time overruns. Indeed, as the report says, many of our allies are complimentary about the UK's efforts to drive reform in this area and model their systems on ours.

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In the past 12 years, we have implemented a succession of initiatives to improve acquisition processes, including 'smart acquisition', the defence industrial strategy and, more recently, the defence acquisition change programme. These have had a significant impact on performance, as the National Audit Office has recognised in successive reports. At its best, my department's project management is very good indeed. As the report observes, there are dedicated people at all levels in the Ministry of Defence and among our suppliers, with a strong commitment to ensure that the services have the equipment that they need to deliver success on current operations and in the future.

The system works best when the need is most urgent. We have successfully provided £4.1 billion-worth of equipment to theatre in Iraq and Afghanistan through urgent operational requirements since operations began. Our people, military and civilian, can be proud of that achievement. The service chiefs have made it clear that our service personnel are never asked to undertake missions unless we are fully satisfied that they have the right equipment to do the job.

However, the Gray report also brings out, through analysis of a sample of individual projects, the problems that still persist. These include not only the tendency of programmes to cost more and take longer to deliver than was initially estimated but the further cost growth to which this gives rise and the pressure that it places on limited resources, even in a period when the defence budget as a whole has grown substantially in real terms. The report points to remaining skills gaps and to shortcomings in the existing arrangements for managing the equipment programme and it argues for regular defence reviews to provide a strategic context for decisions on the equipment programme.

To some extent, the difficulties that we and others face in estimating the cost and time to deliver projects reflect the fact that much modern defence equipment is at the leading edge of technology and is constantly having to adapt to meet evolving military requirements. Providing our Armed Forces with the best involves a degree of technological risk and uncertainty, but there are steps that we can and must take, in the light of the Gray report, to build on earlier reform and deliver a radical improvement in performance.

First, I have already announced that we will undertake a Strategic Defence Review immediately after the general election. Preparatory work is already under way and I intend to publish a Green Paper early in the new year. We will also examine legislative frameworks for implementing Bernard Gray's recommendation that a Strategic Defence Review be conducted early in the term of each new Parliament.

Secondly, we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources through the current planning round and, in due course, the Strategic Defence Review.

Thirdly, we will plan equipment expenditure to a longer timeframe, with a 10-year indicative planning horizon for equipment spending agreed with the Treasury. We will increase transparency by publishing that planning horizon and an annual assessment of the affordability of our programme.

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Fourthly, as recommended by Mr Gray, we have already strengthened board-level governance within the Ministry of Defence by establishing a new sub-committee of the Defence Board, chaired by the Permanent Secretary as accounting officer and charged with determining, for agreement by the board and Ministers, an equipment plan that is aligned with strategy, affordable and realistic.

Fifthly, we will improve the way in which we cost projects in the equipment plan, using better and more sophisticated techniques applied more consistently and ensuring that investment decisions are based on the most reliable available forecasts. We will also improve the management of risk across the programme.

Sixthly, we will introduce stronger controls over the entry of new projects into the equipment programme and over changes in performance, cost and timing of individual projects.

Seventhly, we will sharpen the business relationship between the Ministry of Defence head office, the Defence Equipment and Support organisation and the service commands by further clarifying roles and responsibilities and by establishing new arrangements to provide greater visibility of project management costs in DE&S to the capability sponsor in head office.

Finally, we will accelerate the improvement of key skills, including in cost forecasting and programme management, in DE&S and the Ministry of Defence head office.

All these changes are consistent with Bernard Gray's main recommendations. I do not intend to take up his suggestion to establish DE&S as a government-owned, contractor-operated entity to put it more at arm's length from the rest of the Ministry of Defence. The Government have thought about this carefully, but we are not convinced that such a change would ultimately lead to better outcomes for the Armed Forces or defence generally.

Having DE&S as fully part of defence ensures a close working relationship with the military. Equipment acquisition is core business for my department and we have to get it right. I intend to publish a wider, more detailed strategy for acquisition reform based on these proposals in the new year to contribute to work on the Strategic Defence Review. I am delighted that Bernard Gray has agreed to work with us on this and we look forward to pressing ahead to make the changes that are needed".

3.48 pm

Lord Astor of Hever: My Lords, I thank the Minister for repeating the Statement. We welcome this report; it has been long awaited. We are also delighted that Bernard Gray has agreed to help the MoD to implement many of his recommendations.

At a time when we are at war, the findings of the Gray report reveal more than just financial mismanagement. The leadership vacuum created by this Government is on display for the entire world to see. Our brave troops in Afghanistan are suffering the worst consequences.

The report expresses what many observers of the defence procurement process have long believed: the procurement system is dysfunctional. The net result

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has been to damage the efficiency of the Armed Forces, as they do not receive the equipment that they need when they need it.

All those involved in the defence procurement process will welcome both clarity and predictability in the way in which the Government engage with industry, the MoD and the Armed Forces. Our service men and women surely deserve the best equipment that we can give them, just as British taxpayers deserve the best value for their taxes.

Some of the most troubling facts revealed by the Gray report are that the average procurement programme overruns by 80 per cent, increases by an average of £300 million and creates a host of additional costs to the MoD. As the report states, the MoD equipment programme is,

or spend profile. Too many types of equipment are being ordered for too large a range of tasks and at too high a specification. As the report observes, defence planning is not conducted in tandem with the costing of options. The Government's poor financial planning allows them to promise more defence capabilities than the MoD can afford.

The Minister gave a pledge, reported in the Financial Times on Friday 16 October, to,

Can the Minister reassure the House that this will be the case and that this report will not suffer the same fate as the Government's defence industrial strategy, of which the Minister was the chief proponent?

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